S&P Proves Once More How It Is Directed

We all remem­ber what S&P did to the American econ­o­my dur­ing the 2008 finan­cial cri­sis. On June 2nd, 2008, the crooked cred­it rat­ing agency had cut the cred­it rat­ings of the belea­guered major banks of United States, send­ing shocks on the mar­ket that even­tu­al­ly led to the bank­rupt­cy of Lehman Brothers.

The same agency cut the cred­it rat­ing of United States of America for the first time in its his­to­ry in 2011, from AAA to AA+, cit­ing the debt ceil­ing stale­mate in the U.S. Government. The cut was announced eight days after the debt ceil­ing agree­ment in par­lia­ment solved the stale­mate. The same event led to an inves­ti­ga­tion by U.S. into S&P for its role in 2008 cri­sis which even­tu­al­ly led S&P’s CEO to step down, a mere 18 days after cred­it rat­ing cut.

Credit rat­ing busi­ness has trans­formed from a finan­cial to polit­i­cal one”

Since then, S&P kept per­form­ing its busi­ness as usu­al. Its busi­ness basi­cal­ly trans­formed from a finan­cial to polit­i­cal one. It raised the cred­it rat­ing of polit­i­cal allies of what­ev­er U.S. Government is in place and cut the rat­ing of what­ev­er annoys U.S. Moreover, S&P takes its action at the most vul­ner­a­ble sit­u­a­tions of what­ev­er coun­try it tar­gets. Just as they did against Turkey yes­ter­day.

The chart above is a repeat­ing, but tem­po­rary mem­o­ry. External par­ties search out and iden­ti­fy vul­ner­a­ble sit­u­a­tions in Turkish econ­o­my and act to take advan­tage of it. Interestingly, this time it places Turkish equi­ty mar­kets in a bet­ter spot to invest.

Lira To Stabilize, Borsa Istanbul to Rally After Elections

S&P’s cred­it rat­ing down­grade of Turkey is not sig­nif­i­cant as it doesn’t move the coun­try from “investible” to “junk”. The tim­ing is sig­nif­i­cant though as it comes a few days after Abdullah Gül, the pre­vi­ous President of Turkey and the strongest poten­tial can­di­date against Erdoğan, with­drew his bid from the pres­i­den­tial elec­tions on June 24th.

Economic analy­sis shows some fragili­ty against Dollar as the con­glom­er­ates in Turkey are using their cred­its in for­eign cur­ren­cy and infla­tion is above 10%. On the oth­er side, the only rea­son infla­tion is high is Turkey’s 2017 push for aggres­sive growth. Turkish Central Bank has been keep­ing its rates flat for the past six months for this pur­pose and it’s on the move to inter­vene now. The graph below shows CBRT’s first inter­ven­tion last week. More inter­ven­tions will come after elec­tions to soft­en the volatil­i­ty in its cur­ren­cy.

Finally, peo­ple famil­iar with elec­tion sea­son in Turkey would know that these sit­u­a­tions are tem­po­rary and the coun­try, along with its cur­ren­cy, gets val­ued after such elec­tions. Second half of 2018 will be the time to invest for any­one that looks for a good return on invest­ment.

About MaQasid

MaQasid is the first full-fledged inde­pen­dent port­fo­lio man­age­ment com­pa­ny in Turkey that is aligned with eth­i­cal and inter­est-free finan­cial prin­ci­ples. MaQasid in its new shape as a licensed port­fo­lio man­age­ment firm, reg­u­lat­ed by the Turkish Capital Market Board (CMB) rules and reg­u­la­tions, is man­ag­ing to scale its oper­a­tions and expand local­ly and inter­na­tion­al­ly.

For addi­tion­al infor­ma­tion, ques­tions and requests, please feel free to con­tact us direct­ly.

MaQasid Portfolio Management pub­li­ca­tions are pro­duced by MaQasid Portföy Yönetimi A.Ş., a Turkey based port­fo­lio man­age­ment com­pa­ny reg­is­tered with the Capital Markets Board of Turkey. The infor­ma­tion and opin­ions here­in are for gen­er­al infor­ma­tion use only. MaQasid Portföy Yönetimi A.Ş. does not guar­an­tee their accu­ra­cy or com­plete­ness, nor does MaQasid Portföy Yönetimi A.Ş. assume any lia­bil­i­ty for any loss that may result from the reliance by any per­son upon any such infor­ma­tion or opin­ions. Such infor­ma­tion and opin­ions are sub­ject to change with­out notice, are for gen­er­al infor­ma­tion only and are not intend­ed as an offer or solic­i­ta­tion with respect to the pur­chase or sales of any secu­ri­ty or as per­son­al­ized invest­ment advice.