Prospect of loan, better relations with USA cheer Turkish markets

ISTANBUL (Reuters) – Turkish stocks and debt firmed yesterday amid optimism for better relations with the United States and a Merrill Lynch upgrade of Turkey’s shares in its emerging market portfolios, brokers said. The lira weakened slightly ahead of a hefty treasury debt redemption today, which might ease the tight lira liquidity that helped firm the currency to year highs against the dollar in recent weeks. Turkey’s main stock index closed up 1.2 percent at 11,169.2 points, helped by a 4.5-percent rise in the share price of leading private bank Akbank. The lira fell to 1,415,000 to the dollar from Monday’s 1,414,000. «It appears relations with the United States will improve. Foreign banks and institutions have begun to reflect this thesis in their reports,» said Umit Sener at Yatirim Financing in Istanbul. Foreign Ministry Undersecretary Ugur Ziyal told reporters on Monday he expected talks to begin this week on a $1-billion grant, convertible into $8.5 billion in loan guarantees, that the United States pledged ahead of the war in Iraq. Parliament’s decision in March to reject a US request to attack neighboring Iraq from Turkish soil dealt a blow to relations between Ankara and Washington, traditional strategic allies in the region. US officials say the financing is tied to belated IMF-backed economic reforms and Turkish support for Washington’s postwar planning in Iraq, which Ankara worries could ignite Kurdish separatism across its borders. The busiest July 7, 2004 domestic debt firmed to yields of 48.06 percent from a previous 49.03 after two auctions yesterday meant the treasury would have little problem meeting a Wednesday debt redemption. It sold a net total of 1,314 trillion lira ($930 million) in 140-day lira debt and reissued two-year floating rate notes at yields lower than predictions in a Reuters poll. The auctions, plus similar sales last week and yesterday, mean the treasury has almost covered the 6,477 trillion lira redemption, most of which is to the market. Analysts are also awaiting progress on EU-inspired reforms designed to win candidate Turkey membership talks with Brussels. Foreign Minister Abdullah Gul said yesterday Parliament would pass a latest package of measures this week. Turkish officials have said the assembly may also approve IMF-backed laws on social security and bankruptcy later this week, key to the disbursal of the latest $500-million loan tranche under Turkey’s $16-billion economic program. Ankara has labeled the IMF loans «symbolic» and says it does not see the need for further IMF borrowing beyond 2004. Many analysts consider that overly optimistic, citing future IMF loan repayments. Merrill Lynch, pointing to the possibility of a more stable outlook for Turkey’s debt load, said in a Monday report that Turkish banks could benefit in the case of a market rally in stocks.

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