+------------------------------------------------------------------------------+
BFW 01/09 07:31 *TURKEY LIRA BONDS 'REMAIN VULNERABLE,' MORGAN STANLEY SAYS BFW 01/09 07:30 *MORGAN STANLEY: TURKEY RISKS 'STILL NOT IN THE PRICE' BFW 01/09 07:30 *MORGAN STANLEY INCREASES UNDERWEIGHT STANCE ON TURKEY CREDIT BFW 01/09 07:30 *MORGAN STANLEY SEES TURKISH LIRA WEAKENING TO 2.3 PER USD IN 2Q
+------------------------------------------------------------------------------+
Morgan Stanley Says Turkey’s Risks Still Not Reflected in Prices 2014-01-09 07:53:58.690 GMT
By Benjamin Harvey Jan. 9 (Bloomberg) -- Morgan Stanley increases underweight stance on Turkey sovereign credit, cuts lira forecast and reviews growth, according to report today by analysts and economists including Tevfik Aksoy, James Lord, Meena Bassily, Mihail Bozinov, Simon Waever, Vanessa Barrett, Kristina Obrtacova and Ronan Carr. * On sovereign credit, “spreads will need to trade wider to account for the existing macro risks and now greater political risks,” report says. “Political developments will drive Turkey’s macro and asset markets in 2014” * Lira seen weakening to 2.3 per dollar in 2Q, then “moderate recovery” to 2.22 in 2H “assuming clarity on politics, improved carry, and rate hikes” * "Local currency bonds remain vulnerable, and we expect a 50bp rise in 5y bond by the middle of the year, but with yields already high, price declines will be covered by interest payments’’ * In corporate credit, remains underweight Turkish banks, also underweight Turkish equities, saying while valuations cheap, less so relative to rest of EM asset class * Says it’s reviewing 3.9% growth forecast amid “significant downside risks” * On corporate credit, sees “debt servicing capabilities of the Turkish corporate sector to come under pressure” and lira weaknes is the “key risk to the Turkish banks in the short term” * "In the scenario of any relief rally, we would take the opportunity to reduce Turkish bank exposure and maintain a selective allocation to high quality Turkish corporates with dollar revenues and limited potential exposure to the risk of political investigations’’ * On stocks, Turkish equities reached “highly oversold” levels end-2013 and have potential for tactical rallies; underweight maintained, however, given “continued negative fundamental risk/reward” and relative value vs other EMs; triggers to upside may be: thawing of political tensions, correction in oil prices, or shift in CB policy to more orthodox monetary tightening
For Related News and Information: First Word scrolling panel: {FIRST<GO>} First Word newswire: {NH BFW<GO>}
To contact the editor responsible for this story: Benjamin Harvey at +90-212-317-3901 or bharvey11@bloomberg.net