REPRESENTATIVE OFFICE JANUARY 13 TH , 2009

Sema Buldanlioglu + 90 212 293 00 32 e-mail: [email protected] ECONOMY & MARKET MARKETS

At Monday’s close, market situation was:

O/N for ISE Repo market TRY/USD US$0.6bn. 12 mth rolling C/A deficit declined & TLR Interbank market to US$44bn from US$46.9bn. 15% 1.5987 Most actively traded T-Bills Date Maturity C/Rate External Debt Stock rose by US$4.5bn to 15/12/08 23/06/10 16.36% US$289.3bn in Q308 from US$284.8bn in IE-100 index ISE- 100 Ref $ Q208. As of end-Sept 08, 67.8% of the total 25.709 16.4 foreign debt is owed by private sector (both financial and non-financial) while remaining Auctions: Treasury will re-offer the 5-year 27.2% is owed by public sector and 5% by the FRN (maturing on Nov 20, 2013), and issue a Central Bank. new 22-month TRL zero coupon benchmark bond (maturing on Nov 3, 2010). 6-month 2008 year-end inflation CPI declined by 0.4% reference T-bill auction details are below: in December bringing y/y figure to 10% and PPI declined by 3.5% bringing y/y figure to Issue Mat. Bid Sales Net Avr 8.1% from 12.3%. TRL TRL sales Comp mn mn Yield 12.01.09 15.07.09 3.025 1.069 992.1 16.18% Industrial production (Nov) index fell to 109.5, posting a 14% y/y decline; the sharpest Eurobond issue : US$1bn worth of bonds was decline since Nov01. Main declines in autos (- sold with 7.5% yield, 501 bp above UT in the 41.2%) and basic metals (-25.7%). issue with a maturity of 2017. The mandate was given to HSBC and Citigroup. Capacity Utilization Dec. CU was at 64.7%, an all time low level. Private sector CU came in The Cash Budget recorded a primary deficit at 65%, retreating to 94 and 01 crises levels. of TRL6.1bn (US$4bn) in Dec. against the The most drastic falls are seen in automotive, official TRL3.2bn (US$2.1bn) cash primary basic metal and refined petroleum production. deficit projection due to a slippage in revenues Public sector performance is at record low linked to the economic slow-down as well as a level with 62%. sharp jump in public spending ahead of the forthcoming local elections scheduled for the New Turkish Lira (YTL) replaced with new spring. The overall cash deficit surged to TL banknotes and coins known as Turkish Lira 7.45bn (US$4.9bn) in Dec. (TL) on 1 Jan. 2009. YTL will be completely phased out by the end of 2009. Foreign Trade Deficit dropped by 49% to US$2.7bn in Nov; Jan-Nov08 trade deficit is TOBB (Union of Chambers and US$66.3bn with 18% y/y increase. Commodity Exchanges) announced that total number of companies, cooperatives and C/A deficit contracted 85% y/y (lowest commercial enterprises that closed down or deficit figure since Sep05) in Nov. to liquidated in 2008 reached 64.292, 25.6% rise y/y.

POLITIC , DOMESTIC & INTERNATIONAL AFFAIRS

IMF team arrived to complete negotiations on compromise fiscal discipline but indirectly the new deal in Feb to meet ’s financing support the real sector. Gov’t was asked to need of around US$15-30bn. Program will further cut transfers to local administrations

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REPRESENTATIVE OFFICE ISTANBUL JANUARY 13 TH , 2009 and to rationalize municipal expenditures Ergenekon investigations Tension between starting from Q209 and to introduce an the army generals and the Gov’t due to additional fiscal cut of TL1.2bn for detainments. Ergenekon case was filed against municipalities. Both sides are currently seeking more than 80 people on the charge of forming a compromise on the timing of the cuts due to an illegal organization to provoke a series of the Municipality elections in March 29 th . events that would pave the way for a military coup.

SECTOR NEWS & PRIVATISATION

Automotive: exports fell by 50% y/y in Dec Turkish Armed Forces and the Coal Mining to 35.5K units. 2008 total reached US$22.9bn Company (TKI) are on the list of future with a 14.3% y/y improvement thanks to privatization projects . US$4.1bn in revenue is strong performance in 1H08. Major export targeted in 2009 as the handover and destinations in 2008 were Germany, France, finalization process of the tenders conducted in Italy, the UK and Russia. 2008 complete.

Privatisation - National Lottery (annual Steel products import duties increased by up turnover of US$1.3bn): deadline extended to 8% on coated and uncoated strip mill from Jan 15th to Feb 16 th for preliminary products with effect from 1 Jan 2009. HRC qualification and from Feb 27th to Apr 15 th to (hot rolled coil) import duty is now 13%, up submit applications. Interested parties are from the previous 5%; CRC (cold rolled coil) OPAP, Lottomatica, Ocean Trade, Intralot, goes up from 6% to 14%; prepainted is 15%, Trustfield and Turkish conglomerates Koc, up from the previous 12%; and for hot-dip Dogus Holding, Fiba Holding, Alarko and galvanized the duty rises to 15% from 14%. Cukurova. The HRC import duty for re-rollers is 5%, up - TEDAS (State Electricity Distribution from the previous 3%. The only major Company) Baskent and Sakarya region integrated flat steel producer in Turkey is transfers are expected to be finalized by end with 30% of domestic market whi le Feb09 and new auction process for the other the rest is supplied by importers. state-owned distribution companies to be launched in 1Q09. (in 15 regions with an Istanbul Stock Exchange (ISE) Institutional estimated value of US$6bn) investors bought for US$162mn on the ISE - EUAS (State Electricity Generation during Dec. Total outflow in 2008 reached Company): Tender shall be launched to US$3bn. Foreign investors placed US$1.9bn appoint a new advisor for its privatization in buy orders vs. U$1.7bn sell orders last month. February following the collapse of Lehman December trading volume was the lowest in Brothers which had been appointed with Mc 2008. Kinsey. – Highways and bridges: Tender process shall M&A’s (excl. privatisations) declined 30% y/y begin and be finalized this year if the legal in 2008, 172 M&As totalling US$18.4bn of problems are resolved (State of Council had which foreign investors completed 108, 75% issued an injunction decision in mid-Aug) and share. Turkish retail market chain, sold BOTAS, the state’s oil pipeline corporation, to BC Partners-DeA-Turkven consortium for Mechanical and Chemical Industry US$3.1bn was the most expensive transaction. Corporation (MKE), which manufactures and supplies ammunition, rockets, explosives, powders and pyrotechnic products for the COMPANY NEWS Eximbank to extend an additional US$12.9bn in 2009) It plans to raise an additional (US$6.9bn in cash loans and US$6bn in non- US$1.7bn of which US$900mn will be through cash loans) to support 11.5% of Turkey's the CBT discount window (with 120-days forecasted exports (earnings of US$109 billion maturity at L+0.75), US$200mn through the

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REPRESENTATIVE OFFICE ISTANBUL JANUARY 13 TH , 2009 World Bank and European Investment Bank €220mn. TAV would also consider any plan loan facility, US$400mn through syndication regarding Havas, its ground handling company loans, and US$ 150mn through local bank FX including a stake sale or foreign partnership. credits. POAS The General directorate of petroleum obtained €20mn loan from KfW affairs (GDPA) granted permission for the under the terms of SELP II (Small Enterprises transfer of a 26.75% stake of the 36.75% share Loan Programme) with four years of maturity. in the eight exploration licences (Akcakoca natural gas project) owned by the local Tekstilbank announced that the sales process subsidiary of the US-based Toreador to POAS still continues and their consultant JPMorgan for $80.25mn. Parties agreed to continue conducts meetings with the interested parties. discussions with a deadline of January 19.

Koc Holding is close to secure a US$774mn announced 294,000 subscribers credit from a consortium of 14 banks. The loan ported their numbers to Turkcell through the will be in two tranches, US$320mn (1-year number portability scheme in 2008 meaning maturity with Libor+3.75) and €339mn (3-year 0.8% addition to their 3Q8-end subscriber base maturity). of 36.3mn. Avea Turk Telekom’s subsidiary announced 2008 passenger number 106.000 subscribers ported their numbers to increased by 16% to 23mn and revenues Avea. exceeded US$4.5bn. The Court of Appeals ruled to ban mobile base TAV Airports Holding considering all stations from being erected in residential areas. alternatives incl. refinancing plan or a strategic The decision will be taken to a higher court. partnership to roll over its short term debt. BOD of TAV recently decided on a 50% rights issue; its short term financial debt amounts to I

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