Turkish shares rise on foreign buying but investors still worry

ISTANBUL – Turkish shares rose on foreign buying yesterday but bonds and the lira eased as investors worried over if and when the country would get fresh billions in loans from international lenders, and how much. Shares on the main Istanbul National-100 index closed the day up 1.73 percent at 8,577.10 points, as traders expected the government would secure foreign monies from Western governments, G7 nations or the IMF. The lira closed the day at 1,605,000 to the dollar on the central bank-brokered spot market, weaker than Friday’s 1,590,000 lira, while the busiest March 6, 2002 bonds fell slightly to 87.38 percent from Friday’s 87.07 percent. A central bank $20 million daily auction brought average trades of 1,609,900 lira to the dollar. Bankers said no serious movements in bond yields were expected prior to the auctions of foreign exchange and lira debt planned for today and tomorrow to meet redemptions due this week. A dollar-denominated discount bond auction today will precede a 182-day sale of lira debt tomorrow offering a compound yield of 87.69 percent. Turkey must service 1,079 trillion lira ($671 million) in domestic debt and $197.8 million in foreign debt this week. Turkey says it needs $13 billion in fresh loans to plug a 2002 financing gap as it seeks to implement an International Monetary Fund rescue pact that offers no easy remedies for an economy torn by crisis. IMF director Horst Koehler told Reuters on Friday Turkey could not expect any immediate injection of fresh cash from the fund as it seeks to pass an IMF-approved 2002 budget and reforms to its banking sector. Analysts said Turkish markets were now highly sensitive to any news on additional funding from international lenders. The share market also welcomed Economy Minister Kemal Dervis’s remarks that a set of legislative measures to help the manufacturing sector would pass by the end of October. But longer-term movements in Turkey’s fragile markets would depend on whether Turkey can legislate and implement a 2002 budget requiring strict financial discipline and commitment to a swathe of economic measures, from banking sector reform to public spending cuts. The budget is due in Parliament this week. The arrival of new money is completely tied to budgetary performance. Either taxes have to be raised or public spending cut to achieve a planned 6.5-percent primary surplus. It appears that taxes cannot go up, but that the government appears intent on reducing public expenditure, said Mehmet Muderrisoglu of Taib Investment in Istanbul. Turkish Finance Minister Sumer Oral said yesterday Turkey had surpassed 2001 budget targets backed by the IMF. Turkey’s consolidated budget deficit for the first nine months of the year was 18,434 trillion lira ($11.46 billion) against a year-end deficit target of 29,699 trillion lira, the minister said. The primary surplus stood at 11,081 trillion compared to a 11,568 trillion target for 2001.

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