Baku, Azerbaijan, Aug. 22
By Azad Hasanli - Trend:
The fall of the national currency of Turkey will create conditions for increasing the profitability of the country's securities market, Chairman of Managerial Board of Association of Azerbaijani Stock Market Participants (AASMP) Jeyhun Ibrahimov said.
The process of cheapening of the Turkish lira began two weeks ago against the backdrop of worsening relations with the United States. As a result, the USD/TRY rate has fallen by almost 40 percent since the beginning of the year. On August 13, the exchange rate of lira reached a historic low of seven liras, although it subsequently strengthened slightly and now varies within six liras per US dollar.
In an interview with Trend, Ibrahimov noted that the sharp depreciation of the Turkish lira has a political nature, so it will be temporary. In his opinion, the processes going on in Turkey will lead to a decrease in the yield of securities for foreign investors, but will bring positive results subsequently.
Thus, in the future, the cheapening of the lira will have a positive impact on many sectors of the economy and create conditions for increasing the profitability of the securities market, he said.
"In turn, in the long term, this will lead to an increase in foreign investors' interest in the Turkish stock market," the source added.
Against the backdrop of the aggravation of relations between Ankara and Washington, US President Donald Trump has authorized a two-fold increase in customs duties imposed on aluminum and steel imported from Turkey — to 20 and 50 percent, respectively. This decision led to a sharp collapse of the Turkish lira. In response to the US steps, Turkey has significantly increased customs duties on more than 20 types of American goods, including cars, fruits, tobacco, alcohol and others.
In addition, in order to support the economy, Turkey has announced new economic reforms, and the country's Central Bank reduced the rate of mandatory reserve for banks and raised the effective interest rate by 150 basis points by attracting liquidity on a daily loan of 19.25 percent.
However, some international experts and organizations believe that such steps will not be sufficient. In particular, the Fitch rating agency noted in a recent report that in order to stabilize the situation, Turkey must adhere to a firm monetary policy and continue to increase the interest rate, as well as to eliminate macroeconomic and financial imbalances.
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