siheld of hedge - ekovitrin · siheld of hedge nergİz ‘‘firms that take a hedge position...

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FEBRUARY | 2017/02 | ISSUE:203

MONTHLY ECONOMICS MAGAZINE Global

AYHAN INCEK

exclusive interview

SIHELD OF HEDGE

NERGİZ‘‘Firms that take a hedge position proceed on their ways without being affected by the wild rise of US Dollar and those who would not safeguard themselves shall have difficulty in managing their risks.’’

Alper

Pick the stars of 2016

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Pick the stars of 2016

LICENSE HOLDERUluslararası Yeni Haber Ajansı UHA A.Ş.

CHAIRMAN OF THE BOARDKamuran Abacıoğlu

VICE CHAIRMANŞeref Özata

EDITOR IN CHIEF Bilal Koçak

HEADQUARTERSFabrikalar Cad. No:1 Beşyol-Florya/İstanbulTel: (0212) 426 88 00 (Pbx) - Faks: (0212) 426 88 09

WEB [email protected]

MONTHLY ECONOMY MAGAZINE

Ekovitrin’s annually organized, traditional “Stars of the Year” survey

has begun. The most successful names, institutions and brands of the year have

been nominated by our Jury and will be elected by your votes. The 2016 Star awards will be awarded with a splendid

ceremony.

Turkey’s only, international monthly economics magazine Ekovitrin is in

its 17th year. Our magazine will actu-alize the traditional annual “Stars of

the Year” survey, through our readers’ contribution. Short information on the candidates nominated by the Ekovitrin jury and the “Stars of 2016” survey will be available with our February edition. For each category 3 candidates have been nominated. Our readers will be able to vote for one candidate from

each category.

‘ ‘Stars of t he Year’ ’candidates

The Ekovitrin Juryhas nominated the

Ekovitrin Chairman of the Board

Representative of Ekovitrin USA

Pro Group’s Charirman of the Board

Ekovitrin Editor in Chief

Chairman of Azerbaijan- TurkishBusinessman Association

Chairman of Communications Consultacy Agency

EkovitrinVice Chairman

Former President of Romania -Turkish Businessman

Vice President of KONUTDER

Ekovitrin News Editor

Professor of international relationships and political scientist

Kocaeli University Faculty Member

Kamuran ABACIOĞLU

VahapYAZAROĞLU

Doç. Dr. SalimÇAM

Bilal KOÇAK

Cemal YANGIN

Burçak ILIMAN

Şe ref ÖZA TA

Dr. DursunALTINIŞIK

Hasan RAHVALI

Cesur ÇAÇA

PROF. DR. BenerKARAKARTAL

Tümay MERCAN


INTERVIEW TEMEL KOTİL

•The Turkish Lira has been the most depreciated currency in the world, melting by 20.50 percent against the US Dollar since early 2016. Excessive exchange rate volatility particularly hits the companies that have debts in foreign currency. The total gross debt of the private sector has approached approximately 300 billion US Dollars. Market analysts warn. The companies that would not be able to manage the exchange rate exposure shall collapse!

HOW WOULD THE REAL SECTOR PROTECT ITSELF AGAINST EXCHANGE RATE RISK?

INTERVIEW FILE EXCHANGE RATE PRESSURE


ARZU

ALPER

TOKTAY

NERGİZ

BESTE NAZKÖKSAL

MURATTUFAN

KENANÇINAR

Research Director XTB Stock Exchange

General Manager GCM Securities Exchange

Research Specialist Integral Stock Exchange

Research Director Destek Investment Stock Exchange

Research Director ALB Forex

•How could the exchange rate that has gone wild be restrained? Market analysts have analyzed for Ekovitrin the ways in which the real sector could manage the exchange rate risk.


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The real sector must transform its risk into a manageable state by minimizing the risk by means of “Hedge” in order to come through the historical rise in the exchange rate. Firms that take a hedge position proceed on their ways without being affected by the wild rise of US Dollar and those who would not safeguard themselves shall have difficulty in managing their risks.

The “Dollar’s Peak” is-sue, which has made its mark on last year, is one of the topics

mostly talked about in 2017 as well. Especially the exporters and importers who are indebted in fo-reign currency are on tenterhooks. Questions such as “How long the US Dollar’s escalation would con-tinue? How would the real sector, which has debts in foreign curren-cy, be affected? How could the real sector protect itself against this pressure? How could the exchange rate risk be managed?” are on the top of the topics which the busi-

Shield of Hedge against the Threat of Foreign Exchange

PRIVATE [email protected]

Cesur ÇAÇA

INTERVIEW ALPER NERGİZ

ness world is mostly curious about. Responding to the hottest qu-

estions of the agenda, Alper Ner-giz, the General Manager of GCM Securities Exchange, has exclusi-vely commented for Ekovitrin on the reasons behind the escalation of exchange rate and its probable consequences. Nergiz suggests that the real sector, which is indeb-ted in US Dollar, should move to the “Hedge” position in order not to be affected by the rise in the exchan-ge rate and says, “The companies which would not take the hedge position although they have been indebted in US Dollars shall have

The General Manager of GCM Securities Exchange explains the real sector the ways to escape the pressure of US Dollar and says that the Forex market extends the companies having debts in US Dollars a lifesaver

by means of “Hedge.”

ALPER NERGİZ

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INTERVIEW ALPER NERGİZ

difficulties to manage their risks. Even bankruptcies might become a current issue.”

What were the elements triggering the escalation of the US Dollar?

We have to interpret the rise in the foreign currency beginning from last year. Depreciation of the Turkish Lira against the US Dollar must be analyzed under two diffe-rent headings; developments abro-ad and speculative attack. While talking about the determinants of the escalation of the US Dollar, we have to begin with the influence of Trump, who was elected to the US Presidency on November 08, 2016 by misleading the election polls. Growth expectations under the inf-luence of Trump, and also uptrend of US Bond yields, and expectati-ons on possible fiscal policy related interest rate hikes due to probably more hawkish attitude of FED has strengthened the US Dollar. Ac-

cordingly, weak pricing in the cur-rencies of the developing countries against the US Dollar has eventua-ted. In this basket, the Turkish Lira was the most negatively affected currency. At US Dollar/Turkish Lira parity, the main determinant factor in reaching the level of 3.50 from 3.10 was the foreign dynamics. But then the exchange rate has not sta-bilized. The picture that has resulted in unhealthy price formations in our currency in the form of an “attack” on our currency, which could not be explained by macroeconomic dyna-mics, could not be based on rational reasons, and rising of the exchange rate by shallow liquidity conditions have escalated the US Dollar to re-cord levels of 3.94.

A LIFESAVER FOR THE REAL SECTOR

How would the real sector, which is indebted in foreign cur-rency, be protected from exchan-ge rate pressures?

The real sector, which has debts in US Dollar, needs to take a Hed-ge position to be protected against the escalation in the rate of exc-hange. Medium to long-term risk potential for the companies that do not protect themselves by hed-ge is high. Exporting and importing companies are sensitive to exchan-ge rate. Severe movements in the exchange rate due to economic and political developments pose the risk of dragging those who are indebted in foreign currency into fi-nancial difficulties.

Forex market, which provides an important advantage for the real sector to protect itself from the danger in question, offers a hed-ging opportunity in order to keep the exchange rate risk at a ma-nageable stage. One of the most important advantages of hedging on the Forex market is this: Sin-ce the Forex market is a market where leveraged transactions are carried out, the collateral required

to create a hedging position could be obtained at a percentage as low as 1 percent of the total position. In order to be able to sustain your position, taking into account the parity exchange ratios you must hold collateral that could withstand the market variations.

In particular, exporting and im-porting companies should be hed-ging foreign currency equal to the amount of their total receivables or payables in order to safeguard themselves against exchange rate risks and focus only on their busi-nesses without getting stressed thinking whether the exchange rate should go down or up. Ot-herwise, it would be impossible not to be affected by sudden and hard rise and falls. In this sense, the real sector could achieve successful re-sults by hedging the exchange rate risk on the spot market in Forex market with low collateral thanks to leverage on the spot market and by managing the risk at an optimal level.

Could you explain hedge of-fered in the Forex market by a concrete example?

If you wish, let us illustrate how the real sector activities could be combined with the hedging me-chanism through Forex market: Let us say you have exported USD 1,000,000 worth of goods and the price of your products shall be paid in two or three months. Let us assume that the US Dollar/Turkish Lira parity was 3.00 when you have quoted the price. Your total product cost was realized at 2,700,000 Turkish Liras. Since the cash money in the amount of USD 1,000,000 which shall go in your

Since the Forex market is a market where leveraged transa-ctions are carried out, the collateral required to creating a hedging position could be obtained at a percentage as low as 1 percent of the total position. In order to be able to sus-tain your position, taking into account the parity exchange

ratios you must hold collateral that could withstand the market variations.

cashbox shall have the value of 3,000,000 Turkish Liras, you target a profit of 300,000 Turkish Liras. In other words, you work on 10% profit margin. Accordingly, if the US Dollar/Turkish Lira parity falls as of the day when you have made the cost calculation until the day when the money goes into your cashbox, your profit margin falls as well and you lose money.

One of the steps to be taken in a probable scenario is to hedge the US Dollar asset that corresponds to the total amount of your receivab-le when making a sales contract. If the downside movement of the US Dollar/Turkish Lira parity poses a risk for us, the only thing we need to do is to draw up a contract that would enable you to profit in the Forex market when the exchange rate drops. In a reverse scenario, if you have purchased or going to purchase products from abroad and you are going to pay the price of the products in a few months out of your cashbox, and the up-side movement of the exchange rate entails a risk, then you must be in possession of a contract to hedge the US Dollar assets on bu-ying which corresponds to the total amount of your payment.

When the positions you keep open in the Forex market are car-ried forward to the next day, your overnight carrying cost or payment called swap is reflected on your account. As in our example, in the US Dollar/Turkish Lira sales positi-on, you would get a swap income every day during the carry forward. This, of course, is calculated not over your guarantee but over the total extent of the contract. On the other hand, if you open a US Dollar/

Turkish Lira buying position, you have to pay the overnight carrying cost.

WOULD THE FEVER OF THE US DOLLAR GO DOWN?

How would you evaluate the rise in the exchange rate and the measures taken?

Economy administration and the Central Bank of the Republic of Turkey endeavor to take steps against speculative attacks on the local currency by adopting proac-tive measures to ensure that the environment of confidence does not deteriorate. The speculative attacks on the exchange rate could be minimized by the fact that the tightening measures taken by the Central Bank of the Republic of Turkey regarding the liquidity of the Turkish Lira come in one by one. The markets regard the fe-verish rise of the US Dollar to be temporary. Nevertheless, despite the precautionary measures, if the US Dollar rises again by speculati-ve attacks, the Central Bank of the Republic of Turkey might engage its other instruments much more energetically.

Could the issues that might arise in the redemption of the debts lead to bankruptcies and a new crisis?

The Turkish economy is robust in terms of growth dynamics and fis-cal discipline. Our banking system is strong. While the Central Bank is taking effective steps to reduce the volatility in the US Dollar, the economy administration facilitates

accessing to the financing support needed by considering the inde-btedness of the real sector. As a result of all these proactive appro-aches, relief of the real sector is aimed. In Turkey, which has survi-ved the global crises with the least damage, it is anticipated that the atmosphere of confidence, invest-ment and stability to be continuing. For this reason, there are no expe-ctations of bankruptcies and a new economic crisis prevalent to shake the market.

GROWTH AND STABILITY CONTINUES

How would you project the Turkish economy in 2017?

Despite a series of events that would have caused severe trauma on the markets, such as slowing growth in global markets, conflicts in our region and the July 15th fai-led coup attempt, Turkey continues to grow with its young population and investments. Osman Gazi and Yavuz Sultan Selim Bridges, whi-ch are the world’s greatest sus-pension bridges, have come into use successively. Eurasia Tunnel,

which the vehicles go through a submerged tube tunnel under the Marmara Sea, has been opened. Construction of the world’s largest airport is in progress in cooperation between private sector and public sector. Countdown for laying the foundations of Çanakkale Bridge and Channel Istanbul continues.

The foundations of the Istanbul Financial Center’s service buildings have been laid. Turkey continues its structural reforms in line with its 2023 objectives, adding new inno-vations to mega projects. We have full faith in Turkish economy. For this reason, as GCM, we shall be opening new offices in the year of 2017 and continue to contribute to investment, growth and stability. All of these aspects are impetus for an economic growth. Despite all the difficulties, Turkey continu-es to take firm steps in its course. Financial discipline is maintained. The banking system is powerful. Progress is being made in terms of becoming an energy transit base and a trade center. New market re-searches in the field of exports are continued.

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How far the rise in US Dollar would reach?

The anticipation with respect to three interest rate hikes by the Federal Reserve (FED) in 2017, and the disclosure of the new president of the United States of America, Donald Trump on economic stimu-lation has been instrumental in the US Dollar to gain strength on global basis.

The start of the new constitutio-nal talks in the country and the ex-pectation of a possible referendum were monitored. After the US Dollar has reached the levels of 3.94 in the month of January, we have seen that the Central Bank of the Repub-lic of Turkey has taken measures. The Central Bank of the Republic of Turkey has not initiated repo aucti-ons, thus had a rising impact on the interest rates applied to the banks and ensured the appreciation of the Turkish Lira. The measures taken by the Central Bank of the Republic of Turkey being helpful, and the antici-pation that the Central Bank of the Republic of Turkey shall take further precautions might support assets in Turkish Lira.

In this context, we might not encounter new record levels in the short-term and medium-term. With Trump’s statements and the steps to be taken by the FED, we could see that the Turkish Lira finds

an equilibrium point. In the short-term and medium-term, the ban-dwidth we shall follow for the US Dollar and Turkish Lira parity shall be 3.00 - 4.00.

How the real sector would be affected by the rise of US Dollar in the short, medium and long-term?

Our companies, which have found the opportunity to easily bor-row money at low costs on foreign currency basis as of 2009, have inflated their debit items in foreign currency on their balance sheets with somewhat an aggressive at-titude.

In this sense, companies that have turned a blind eye to the reali-ties of the developing countries like

Murat TufanResearch Director Destek Investment Stock [email protected]

We might not encounter new record levels in the short-term and medium-term. With Trump’s statements and the steps to be taken by the FED, we could see that the Turkish Lira finds an equilibrium point. In the short-term and medium-term, the bandwidth we shall follow for the US

New records are not expected in US Dollar

Turkey, which are highly dependent on the fund flow from abroad, might be the first ones that would be ne-gatively affected from the exchange rate movements. In particular, along with unbalanced balance sheet growth, sector members who do not use the hedge instruments ef-fectively could live the short-term in a low profit environment.

Our real sector, which has fo-reign currency deficit, will have to write off foreign exchange on their balance sheets in this period. In the medium and long-term, the foreign exchange positions as well as the fields of activity of the companies shall come into prominence. Bu-siness segments whose costs are predominantly in foreign currency might have bad days due to upwar-

ds exchange rate movements. A negative picture could also de-

velop in the net profitability of the companies that are going to expe-rience possible decreases in their main operating profitability over cost item. As a result, although the real sector could likely suffer from the globally strong USD Dollar in the short run, by means of further measures that would be taken for long term, severer damages could be avoided beforehand.

THE CENTRAL BANK OF THE REPUBLIC OF TURKEY SHALL GUIDE FOR HEDGE

How would you appraise the precautions taken by the Central Bank of the Republic of Turkey?

INTERVIEW MURAT TUFAN

Forex, Options, Forward, and Futures are on the way. It

would be very important to use these methods to reduce the foreign exchange risk of the companies. At the same

time, using the capitals in an effective way could become prominent. Positions to be

deliberatively opened at low costs in Forex markets could

also increase the resistance of the companies’ balance she-ets against foreign currency

movements.

The Central Bank of the Republic of Turkey has not remained insen-sitive to the increasing liabilities of the companies in foreign currency. The Central Bank of the Repub-lic of Turkey plans to impose the companies the obligation to post them a notice in new foreign cur-rency borrowings in the next peri-od. Along with the step to be taken, the Central Bank of the Republic of Turkey shall be able to request the companies to hedge their liabilities in foreign currency at a certain ex-tent in option markets.

Do you expect bankruptcies and consequently a crisis?

Following the escalations en-countered in foreign currency, the short-term foreign exchange assets of the companies have become sig-nificant. According to the datum of the Central Bank of the Republic of Turkey, we see that the real sector is indebted in the amount of 38.7 billion US Dollars with less than one year maturity. Total debt is at the le-vel of 102 billion US Dollars. The to-tal of long-term loans appears to be at the level of 207 billion US Dollars. We could say that the likelihood of the companies not being able to re-pay their debts is low. Many compa-nies are taking measures to in order to be able to pay these debts of the-irs and trying to make capital regu-lations. However, companies tend towards buying foreign currency in order to be able to pay these debts, and this leads to rising volatility of the currencies. When we look at the current situation, we could say that there is no picture that would lead to economic depression in general terms. But it is rather important for the companies to be able to control their capital and cash management.

FOREX, OPTION, FORWARD, FUTURES

What kind of proposals would you make to real sector for hed-ging?

One of the most important de-velopments which the companies need to control today is the exc-hange rate risk. The volatility en-countered in the prices could reveal the necessity for the companies indebted in foreign currency of ma-naging the exchange rate risk much more efficiently. It is important for the companies of the real sector to use hedge products to be pro-tected against exchange rate risks. The primary products of hedging are Forex, Options, Forward, and Futures. It would be very important to use these methods to reduce the foreign exchange risk of the com-panies. At the same time, using the capitals in an effective way could become prominent. Positions to be deliberatively opened at low costs in Forex markets could also increa-se the resistance of the companies’ balance sheets against foreign cur-rency movements.

SHALL THE PRESSURE ON TUR-KISH LIRA BE RELIEVED?

What would you say about US Dollar/Turkish Lira exchange rate?

The Federal Reserve (FED), which is approaching the inflati-on and employment figures it has targeted, started to gradually inc-rease interest rates as of Decem-ber 2015. Together with the tight monetary policy of the Federal Reserve, the expansionary mone-tary policies that Donald Trump is expected to put into practice, have led the US Dollar’s appreciation against nearly all currencies in the recent months.

While the powerful US Dol-lar environment runs to become the new normal in global sense; country-specific developments could also leave a mark on the ex-change rates. When we take a look at the Developing Markets, while the constitutional negotiations, the expectations regarding the deci-sions of the credit rating agencies and the liquidity moves made by the Central Bank of the Republic of Turkey specific to Turkish Lira are being closely monitored lately; Trump’s statements which support the rigid customs policies are being influential on the Mexican Peso.

For the upcoming periods, the biggest supporter of the Turkish Lira, which shall probably be un-der pressure due to developments abroad, shall be the political and economic developments in the

country. The positive effects of the recent liquidity moves of the Cent-ral Bank of the Republic of Turkey has once again reminded of the prominence of this institution over Turkish Lira. Next monetary moves of the Central Bank of the Republic of Turkey, as well as the evaluations of the credit rating agencies shall lead the way in the events that are influential on the exchange ra-tes. The reconciliation atmosphere that would be created in the wake of constitutional negotiations that would be completed in a positive climate and the referendum plan-ned to be held in a short time might lead to further easing of the exc-hange rate.


INTERVIEW BESTE NAZ

How far the escalation in the exchange rate would reach?

The exchange rate for USD Dollar – Turkish Lira has tested 3.94 levels and it has negatively disintegrated Aand for this reason, most likely a period in which the Turkish Lira would be looking for equilibrium awaits us.

We know that in the recent peri-od the value of the Turkish Lira has risen by means of a disguised inte-rest rate hike through repo moves, which has affected the supply of Turkish Lira, made by the Central Bank of the Republic of Turkey. But this is not a sustainable situation. In particular, despite the use of the late liquidity window (10%) to be used as a policy interest tool is not appropriate to the practices, it mi-ght also lead to expectations that the Central Bank of the Republic of Turkey would raise the upper band interest rate after a while.

Although the Turkish Lira’s status is on the value gaining side for so-metime, according to our scenario, 2017 shall be a difficult year for the Turkish economy. We do not expect the Turkish Lira to be disintegrated by the course of the economy and also we do not expect the Turkish Lira to remain valuable for a long time. If we briefly refer to the year of 2017, it might be a year in which the inflation rate might be around 8.5-9%, growth rate might be limi-

ted to 3%, and the amount of our current account deficit might incre-ase due to reasons such as energy prices and revenue loss in tourism. Therefore, 2017 might be a year which the exchange rate of the US Dollar against the currencies of the developing countries including Tur-key shall be powerful. It is rather difficult to give an upper limit here, but from time to time we could see courses near and above the record

level.

How would the real sector be affected by the escalation of the US Dollar?

According to the datum of the first 10 months of 2016, the private sector’s total net foreign currency debts have decreased from 212.9 billion dollars to 212.6 billion dol-lars. We see that many companies have not adopted any methods of

protection against their present foreign currency debts and they are individually confront with an exchange rate risk. The amount of short-term debts of up to 1 year maturity is 102.5 billion US Dollars and it corresponds to 48% of the to-tal debt.

In the short-term and medi-um-term this situation might appe-ar as a financing expenditure on the income statement of the company balance sheet and could have a ne-gative effect on the net profit. In the best-case scenario, the company shall use its short-term assets to meet its obligations, as indicated in Table 2. If this happens, the private sector shall be able to overcome its debt burden in 2017 thanks to its assets. However, it shall become much more fragile in terms of 2018 and 2019. In the long run, I think that, rather than the excessive ef-fects of the rise of foreign currency, the effect shall diminish and that this damage arising from the finan-cing item shall be compensated.

Do you anticipate any issues in the redemption of the debts and a new crisis?

Majority of the private sector is not protected against exchange rate risk. Therefore, instead of pa-ying their debts over figures such as 3.30 yesterday, today they would be paying them at an exchange rate exceeding 3.70, and this means an additional burden of 12%.

While some companies could not even improve their annual net pro-fit this much, this shall have some consequences. I do not think that the number of private companies that could go into bankruptcy is a figure that could threaten the eco-nomy or cause worries. In any case, a possible bankruptcy situation

Beste Naz KöksalResearch Specialist Integral Stock [email protected]

Us Dollar/Turkish Lira Shall Find The Balance We do not expect the Turkish Lira to be disintegrated by the course of the economy and also we do not expect the Turkish Lira to

remain valuable for a long time. If we briefly refer to the year of

2017, it might be a year in which the inflation rate might be around

8.5-9%, growth rate might be limited to 3%, and the amount of our current account deficit might increase due to reasons such as

energy prices and revenue loss in tourism.

shall be caused by the circumstan-ces such as not taking precautions or nonprofessional managing at the companies rather than the course of the economy.

The exchange rate risk might cause stagnation rather than an economic crisis. Because the exc-hange rate risk is not a violent si-tuation that could not be prevented or predicted. The Central Bank of the Republic of Turkey continues to work in this respect. From now on, private institutions that would like to borrow money from abroad will have to report this situation to the Central Bank of the Republic of Turkey. Public supervision shall fo-cus on whether any measures have been taken against the exchange rate risk.

What kind of proposals would you make to real sector for hed-ging?

Exporting and importing compa-nies should never underestimate the exchange rate risk. The current foreign exchange rate on the date of loan use or the on the date of order placed must be fixed on Turkish Lira basis. While defensive companies hedge that entire amount, some companies hedge only 60% to 80% of that amount. No company that does not have hard currency inco-me should get into debt in foreign currency.

What would you say about the US Dollar/Turkish Lira exc-hange rate?

Performance of the Turkish Lira

The escalation in the US Dollar/Turkish Lira exchange rate has not come to an end yet. If we consider that the United States of America’s interest rate hikes might be accelerated this year, a difficult test is waiting for the Turkish Lira.

during last year and this year is pretty weak. While the rising inf-lation is re-pricing the Turkish Lira, the weakening of the growth story leads to outwards fund flow cont-rary to the inwards flow. Return of the US bonds has risen to the levels of 2.6%. As long as an investor who wants to make an investment ta-king the risks in developing count-ries does not make a good profit, then while investing they prefer the geographies, which provide an actual rate of return like the Uni-ted States of America, and that we define as the homeland of money. For this reason, the Turkish Lira and other Turkish assets also perform poorly when there is no fund entry to the country.

The escalation in the US Dollar/

Turkish Lira exchange rate has not come to an end yet. If we consider that the United States of America’s interest rate hikes might be acce-lerated this year, a difficult test is waiting for the Turkish Lira.

During the year of 2017, efforts to recover our economy shall con-tinue. The conditions that force the Central Bank of the Republic of Turkey to raise interest rates might continue for another while. The Central Bank of the Republic of Turkey does not have the ground for making a harsh intervention due to the economic constriction of -1.8%. For this reason, although I do not foresee that the exchange rate could be permanently kept low in the short run, I think the main cour-se is on the ascending side.


INTERVIEW AYHAN SİNCEK

Together with automa-tic PPS, at first stage, employees younger than 45 years old in

business places having more than 1.000 employees are included Au-tomatic PPS. Within this frame, bu-siness places which has got more than 1.000 employees are going to be included in PPS on January 1, business places having 250 and more employees on April 1, having 100 and more employees on July 1, having 50 and more employees on January 1, 2018, having more than 10 employees on July 1, 2018 and business places having more than 5 employees on January 1, 2019 in Automatic PPS. Gradual chan-geover is necessary for both tech-nically and performing the briefing studies. While these stages conti-nue, on the other hand works will be carried out to develop the saving culture. Katılım Emeklilik General

Being Katılım Emeklilik we have concluded first Automatic PPS contract with Kuwait Turk having 5 thousand 500 employees. We are assertive in Interest-free insurance and Automatic PPS.

Manager Ayhan Sincek answered our questions about automatic PPS:

You have started fast to Automatic Participation which starts by 2017 .I wanted to start our talking first with this current affair. How do you carry out transfer of corporations into Automatic PPS?

In Automatic Participation com-menced by 2017, we took pride in making a significant contract and technically achieving a transacti-on procedure covering thousands of people. We have successfully completed Automatic Participati-on transactions of all Kuwait Turk employees. We have carried out and completed our technical and infrastructural preparations in the entire year 2016 round. Now, we reap the first fruits of this. Katılım Emeklilik actualizing such a big size

participation in one goes, set the pace to the sector. For sure, these corporate participations will incre-asingly continue.

Well, what is the expectation of Katılım Emeklilik from Automatic Participation?

With the software infrastructu-re which provides Automatic Par-ticipation with a single click, the company manager who preferred us is able to manage their Automa-tic Participation quickly and easily with a short control process and digital confirmation. For all kinds of questions and support requi-rements, on the other hand, can promptly access to Corporate Ser-vices Representative responsible with their corporation with a single telephone. We give emphasize also one to one communication for both employers’ and employee’s com-prehending and understanding of

private pension and asset manage-ment system.

Commencement Date Should Be Put To Good Use

The advantages of PPS should be well explained to employees as well as to the institutions in this period of time. Automatic Participation is a very important step for PPS. We have to communicate well the im-portance of planning a future based on savings at this step. In Automatic Participation, the commencement date is the most important factor as it is in other retirement steps too. To participate while the system starts, and to pay the contributions regularly, in future, will provide too much gains to the participant in po-sitive respect. With this investment which is not affected by seasonal economic fluctuations and under state guarantee, we have to explain to our people that very long runs are

we started fast to automatic participation

Katılım Emeklilik General Manager Ayhan Sincek:

How far the rise in US Dollar would reach?

Having seen the highest level of 3.9415 during the session on Janu-ary 11, the US Dollar/Turkish Lira parity might have peaked in the short-term, but in the short-term it might not have the strength to rea-ch over 4,000 which is the psycho-logical resistance level. We could explain the rapid depreciation of the Turkish lira against the US Dollar in October under a few titles.

>> US Dollar (DXY) Index that has gained value in global markets,

>> Expectations in terms of Fe-deral Reserve Bank of America’s (FED) interest rate hike for 2017,

>> Deterioration in macroecono-mic indicators inland.

The primary factor which poses a risk for the Turkish economy and Turkish Lira in the month of January shall be the sovereign rating which Fitch shall be making on January 27.

In the pricing which the market has made during the first half of January, Fitch’s possible credit note reduction was substantially priced. On the other hand, although it se-ems surprising at this point, the credit rating agency might maintain its investible country rating at this meeting. At this point, although we foresee that the Turkish Lira shall depreciate throughout the year of 2017, we do not anticipate the parity to exceed 3.9500 during the first quarter.

How would the real sector be affected by the escalation of US Dollar?

Maintaining the existing levels in 2017 and the depreciation of the Turkish Lira would mean that the real sector shall be negatively affected in the medium and long-term. While the borrowing cost ri-ses, it would be inevitable the weak links in the sector to break during the debt rollover stage. When the reflection of the rising costs of the banks’ syndication loans on the real sector inside through “credits” and the increased cost of imported go-ods is added to that, the resulting table shall not please anyone.

As a consequence, what is ex-pected after the rapid escalation is the foreign exchange rate to seek for balance at a lower level than of today.

Do you anticipate any issues with respect to redemption of debts; do you have any crisis ex-pectations?

Problems that might arise in re-demption of debts in the real sec-tor could lead to bankruptcies and a crisis in the general sense. In this period, the Central Banks of the developed countries, especially the

FED, stepping out of easy mone-tary policies also makes the things in the Turkish economy difficult. On the other hand, we predict that the trend shall be reversed by virtue of good economic policies before co-ming to that point; and even if the year 2017 shall be compelling, the problems of the real economy shall be left behind in 2018.

What kind of measures should the real sector take in order to avoid exchange rate risk?

Institutional and large companies are on the go in order to fix their li-abilities against exchange rate risk and interest rate risk and safeguard themselves and they are also aware of this obligation.

However, small and medium-si-zed importer firms leave their liabi-lities in foreign currency to chance, and in some way they speculate in their businesses.

Awareness of these institutional and large companies should be ri-sen of what they could do using the financial markets against the esca-lation of foreign exchange rates and depreciation of the Turkish Lira. In recent months, as the most autho-ritative institution, the support ef-forts of the Central Bank of the Re-

public of Turkey extended to the real sector have been positive. However, in the forthcoming periods, these companies should individualistical-ly struggle too. The main purpose of establishment of the futures and options market in the financial markets is to allow the commercial establishments to transfer the exc-hange rate risk in parities and com-modities to the market. The Deriva-tives Exchange (VIOB) in Turkey and Derivative Markets abroad offer the investors various alternatives for hedging the foreign currency risks. Within the structure of all compa-nies from corporate companies to medium sized companies, there must be an active risk management unit. The visions of the companies might not be able to understand the importance of the matter, but since the cost shall eventually be on the back of the entire economy of the country, the economy administra-tion might design a clarification and briefing project in this regard.

What would you say about US Dollar/Turkish Lira parity?

In some periods the pricing might have gone to extremes due to com-bination of more than one negative factor in the markets. Nevertheless, we have total confidence that with rational policies, the Turkish eco-nomy shall survive this challenging period and get out of the difficulties. The Turkish Lira, which has been depreciating the US Dollar since 2013 might be in a reverse trend starting from 2017.

Arzu ToktayResearch Director XTB Stock Exchange – XTB [email protected]

be a difficult year 2017 shallPricings might have been gone to extremes by the combination of more than one negative factor in some periods in the mar-kets. Nevertheless, we have full confidence that the Turkish economy shall get over this challenging period and get out of the difficulties by the implementation of rational policies.

INTERVIEW ARZU TOKTAY


being planned. We newly at the first step of Automatic Participation, yet, the success in the first step will affect the coming steps too. The-refore, we should well use of this opportunity by working hard. For increasing our savings ratio, I belie-ve that we have to make good use of this momentum.

Let’s review Automatic Par-ticipation in technical details a little bit. How much savings over the salaries will actualize for Automatic Participation?

Within the scope of PPS, the amount of employee contribution which will be deducted by emp-loyer over the salary of employee shall be calculated as 3 percent of earning taken as basic to premium according to relevance. The amount corresponding to 3 percent of ear-ning taken as basic to premium will be directed to savings as contributi-

ons in each month. For example, the contribution of the people receiving monthly 1.777 TRL salary minimum wage earning will be 53.3 TRL. From a worker whose earning taken as basic to premium is 2 thousand 500 TRL, 75 TRL contribution will be col-lected. Employees who aim to reach a higher pension premium may de-mand to pay a higher contribution.

Will 25 percent government contribution take place also for the participants of Automatic Participation?

Yes. 25 percent government contribution advantage taking place in Present Pension System will be reflected to the contributions paid by employees.

What kind of other advanta-ges Automatic Participation will have?

Besides the government cont-

ribution, for the employees, at the participation into the system, for once only, 1.000 TRL amount addi-tional government contributions will be provided. This advantage which will be used for the employees do not use their withdrawal right at the end of 2 months withdrawal period, will subject to the government cont-ribution entitlement and payment conditions specified at the law. Furt-hermore, in case of using pension right, those who prefer to receive the savings in their accounts as a regular income for at least 10 years within the scope of annual income insuran-ce, again an amount corresponding 5 percent of their savings, an addi-tional government contribution pay-ment will be rendered.

How will be withdrawal from PPS, whether there is retract from system after withdrawal period?

One of the most concerned issu-es of the employees whose carry many question marks in their minds about Automatic PPS system beca-me the right of withdrawal. Accor-ding to the Individual Retirement Law; the first contribution that has been made by deducting from the wage of the employee will be no-tified to the employee by means of mail or secure electronic com-munication means, by the com-pany they have been involved in its pension plans, on the first business day contribution deposited into the corporation’s accounts. Employee will be able to withdraw from Au-tomatic PPS within two months without any loss. Withdrawal claim will be notified either to employer or to the corporation by the employee by means of mail or secure electro-nic communication means in accor-dance with the provisions of rele-vant pension contract. To be able to

INTERVIEW AYHAN SİNCEK

retract from Automatic PPS, within about 10 days as of the notificati-on received, the paid contributions, if exists the investment earnings in their accounts will be returned to the employee. The amount of contributions will be paid in the system will be calculated over the basic monthly salary taken as the base for pension contribution and it will not be possible to make cont-ribution payments less than this amount. After the withdrawal pe-riod, employee will be able to ret-ract from the system at any time they wish.

Is it necessary to open a new account for those who already have accounts in Private Pensi-on System?

For the employees under 45 ye-ars old and already have got indi-vidual retirement accounts, within the extent of Automatic Participa-tion, a new private pension account will be opened.

In case of employees busi-ness place change, what will happen to their accounts ope-ned in pension company within the scope of Automatic Partici-pation?

In case of employee’s business place changes, if there is a pension plan in the new business place wit-hin the scope of automatic partici-pation, the savings of the emplo-yee and the period they obtained in the system for the basis of retire-ment are transferred to retirement period in their new business place. In case of there is no pension plan in the new business place, if emp-loyee claims, they may continue to pay contributions within the scope

of contract drawn up in former bu-siness place, or if they do not cla-im, they can terminate the pension contract.

Where is the place of Katılım Emeklilik in the sector? Is it possible to be informed about the market share and number of contracts? How did you close the last year?

At first, I would like to say that since its establishment Katılım Emeklilik is growing higher than the sector and with Automatic PPS, this speed is increasingly continues. We are the pioneering establishment of interest-free in-surance business. Katılım Emeklilik is seen with countenance by our people and institutions. In 2016, we have actualized our growth target by exceeding 200 thousand

contracts. Katılım Emeklilik with its size of funds exceeding 620 million TRL showed its difference with the investments it made in interest-free areas and technological innovations. On the Life and personal accident insurance, we have reached 130 thousand policy contracts. We have exceeded our 60 thousand new po-licy target for 2016. While the whole sector’s fund size increase was 23 percent for PPS, fund size increase of Katılım Emeklilik actualized 161 percent. Among interest-free pen-sion funds we have reached a high market share such as 20 percent. We have got off to a running start to 2017 by concluding contracts with important brands.

Could you please mention about your 2017 targets in ge-neral?

In 2017, we are targeting to keep our high growth rate by achieving 250 thousand new contracts in PPS and Automatic Participation in total. 2017 will be a year that win-win logic is the predominant with respect to all PPS Companies and par-ticipants who want to assure their retirements. Together with Automatic Participation, while the sector experiences a deve-lopment and transformation process, Turkey will win. As Ka-tılım Emeklilik, we are working hard to have a productive year. We want to maintain our record growth rates in 2017. For sure, it is not sufficient the growth of a single company looking from our own perspective, it is necessary that sector should expand and the mind of saving should settle as a culture.


INTERVIEW AHMET ARSLANSÖYLEŞİ ZİYA ALP GÜLAN

WE ARE HONORING OUR DUTY OF LOYALTY TO TURKEY BY INVESTMENTSWe feel ourselves feel indebted and responsible towards Turkey. We want to honor our duty of loyalty by providing contributions to investments, employment and exports. We rely on the future of Turkey and continue our investments without easing down.

ZİYA ALP GÜLAN

Gülan: “We are establishing Otostat in Anatolian Side of Istanbul with 200 million TRL investments. Instead of apartment ground floor 2nd hand sales, gathering the actors of automotive trade under one roof will empower the specialization in the sector.”

The Boss of Gülan Şirketler Grubu (Gülan Group of Companies) Alp Ziya Gülan gave an interview to Ekovitrin:

Z iya Alp Gülan who has got investments in automotive, cons-truction, tourism,

education and real estate sectors is one of the visionary businessmen Turkey nurtured… While starting interview with Gülan, the famous 7 advice on the table attracts attenti-on. Internalizing the words of Rumi who says “…Either seem as you are or be as you seem…” as philosophy of life, Gülan has drawn his targets about life clearly with the sense of civil engineer m. sc. He has got more than one hat. Besides managing

Gülan group of companies doing business in many areas, being the Chairman of OYDER, Ziya Alp Gü-lan is a drumbeater fan of Beşiktaş. So far as possible, he watches the matches from the lodge without missing ant of the matches. Pre-viously he has carried out Erzin-canspor Club Chairmanship. We have talked about his last invest-ment project OTOSTAT he is const-ructing in Anatolian Side with Gülan who is interested in soccer as much as he is interested in economy. Saying “The heart of automotive sector will beat in Otostat”, Gülan

answered our questions about the investment which will provide spe-cialization in the sector.

How did the idea of putting

into practice Otostat project rise? Until recent times 2nd hand au-

tomotive trade was carried out non-institutionally and disorga-nized. To carry automotive trade in shops placed ground floors of apartments, by occupying the pave-ments which belong to the pedest-rians were causing chaotic environ-ments. Taking actions to change this picture, the government sup-

ported specialization in vehicle sa-les by legislating. As the result of all these, while some brands initiate sales concept in plazas, in some cer-tain points of Turkey, it was started to take some steps in line with spe-cialization for centralized sales. Be-ing one of the actors of automotive sector, for empowering the specia-lization trend in the sector we have decided to materialize our OTOSTAT project which will serve to the aut-horized dealers of pioneering brands, companies rendering services in 2nd hand, car dealers, car suppliers and customers under one roof.

Second hand ve hicle sales will be specialized

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INTERVIEW ZİYA ALP GÜLAN

“For the commercial vehicles, Special Consumption Tax became useful. But, as the registered automotive industry,

we expect tax reductions such as VAT’s discount from 18 percent to 8

percent in construction sector.”

Could you please provide in-formation about the location and cost of the project?

OTOSTAT project which will gat-her everything you may need re-levant to brand new and second hand car sales, under one roof will cost 200 million TRL. In Istanbul Anatolian Side, uprising on TEM

where 2.500.000 vehicles passages OTOSTAT takes place in Sancakte-pe. Being close to Istanbul Finance Center and subway lines, our pro-ject is uprising in automotive zone of development where many giant brands such as Mercedes, BMW, Hyundai, Ford, Renault take place. The first phase of our project that consists of three phases will be completed at the end of 2017, and entire of the project will be comple-ted in 2018.

FROM EXPERTISE TO BANKS, FROM NOTARY PUBLIC TO HOTEL EVERTHING IS HERE

What are there in your con-cept?

Having 130.000 square meter closed construction area, the pro-ject consists of 344 detached sec-tions. Having a special architectu-

ral design, in Otostat there will be notary public, insurance, financial advisor and accounting offices, ex-pertise services rendered by global brands with special prices, spare part, accessory and tuning shops, audio, imagery and VIP auto deco-ration services, test drive, vehicle storage areas, vehicle body (hood), car painting, mechanic and tire - wheel alignment and balancing services, rent a car and auto detail shops, 7 days 24 hours with came-ras and physical security system, professional photography studio with turntable, by means of Otos-tat software, there is a possibility to display the 2nd hand vehicle sto-cks of other business places in the complex. In Otostat that has been designed with living space with its cafes and restaurants, besides bank branch offices there is a hotel for those coming from other cities.

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What kinds of pluses specializa-tion contributes to economy?

Increasing tax revenues by recor-ding the trade, specialization, on the other hand, positively affects the economy by increasing the qualities of sales and services in the sector. 1.400.000 each of vehicle-house change ratio before 2010 climbed to 6.000.700 in 2016 with the cont-ribution of specialization.

THERE IS NO UNPLEASANT SURPRISE TO CUSTOMER

What kinds of advantages will be provided to customers?

Customer will take a chance of choice with alternatives. By corpo-rate sales, since there will be a com-petition, there will be advantages in prices too. Performing the expertise of the vehicle preferred at the same

“ENVIRONMENT POLLUTER VEHICLES SHOULD BE

DISQUALIFIED FROM TRAFFIC”There are about 32.000 heavy

damaged vehicles which have been disqualified from traffic in Turkey. Annually only 980 of them go to

recycling centers, the rest continue to pollute the environment by

hitting the roads.

place at international standards, rapidly carry on the banking and notary public transactions will be possible. In specialization oriented Otostat, there will not be unplea-sant surprise for the customers. Institutional services will be provi-ded in the highest degree professi-onal and transparent.

ATTRACTING INVESTMENT OPPORTUNITY FROM OTOSTAT

What about the demand for Otostat project?

We are receiving pretty good de-mand. The return of investment in residents is in the range of 30-40 years. However the period for return of investment in trading shops is 12 years in average. Being highly att-ractive with respect to investment

as well, OTOSTAT start to attract investors as of the construction procedure.

TRESHOLD OF 1 MILLION IN AUTOMOTIVE EXPORTS HAS BEEN OVERPASSED

How do you evaluate auto-motive sales in Turkey?

Despite the global risks and contraction in economy Turkey shattered a record in automotive exports and overpassed the th-reshold of 1 million. Carrying the qualification of being locomotive, automotive sector by itself achie-ved to actualize 17 percent of total exports of Turkey actualized. When it is considered that there are 21 million vehicles which 11 million of them passenger cars in 80 million populated Turkey, there are 142

vehicles quota per 1000 people. However in Bulgaria 300 vehicles quota per 1000 people, in Gree-ce 420, in Germany, on the other hand, 670 vehicles quota per 1000 people. In the light of this informa-tion, if there is no such a big decre-ase in our Gross National Product, we can say that passenger car sales in Turkey will continue. Consi-dering cars are not luxury instead a need indicates that the market will grow.

What do you expect in 2017? In 2016 the biggest R&D invest-

ments were made in automotive sector. We have completed the last year with a record despite the contraction in the last quarter. In case of geopolitical risks resolved, we are hopeful about 2017.


CHANCE FOR DOMESTIC ELECTRIC PASSENGER CAR BECOMES HIGH

What are your ideas and ex-pectations about domestic car?

We are waiting the domestic car of Turkey excitedly. But, in conven-tional production system, chance for domestic car of Turkey becomes difficult. It is because, there are big brands. Except establishing factory and producing car, marketing is a high cost effort. In this sense, Tur-key should take its chance in hybrid systems and electric cars instead of conventional system.

TURKEY IS THE COUNTRY OF CARS

What should be made to inc-

rease automotive investments and exports?

We have altogether seen the call of fresh US President Trump for the companies performing car sales in America to make investments. For the growth of automotive sector, these investments are important. Turkey also should increase the number of the brands like Ford that is making production in Gölcük and provide contributions to exports of the country. Being a country of car, in Turkey the rate of withdraw be-cause of malfunction is the lowest all over the world. Our human re-sources, qualified engineer staff and productive work force make new automotive investments pos-sible.

While Z. Alp Gülan Chairman of the Board of OYDER – Automotive Authorized Dealers

Association evaluating the latest developments in the sector in the meeting Automotive Retailors in

Erzurum and East Anatolia Region participated, he presented a plate to Chairman of the Board of Ford Otosan and Deputy Chairman of the Board of Koç Holding Ali Koç for his contributions to the sector.


INTERVIEW ZİYA ALP GÜLAN NEWS FIRAT KURUCA

What is Private Pension System? What are the advantages of PPS provides?

PPS is a retirement rension sys-tem which has been composed as a supplementary for the existing public social security systems for the indi-viduals keep their substantial living standards during their retirement periods. For our country where the individual saving deficits are high, PPS is an important opportunity. As our retirement period saving deficit survey also indicates, to keep their living standards of employees in their retirement periods the best method is PPS. When we review the last 10 years period, we calculate that, our sector provides its participants 43 points higher than the average inf-lation.

What kind of an effect becoming compulsory of PPS will create? How government’s 25 percent contribu-tion affect PPS?

To define the Automatic Partici-pation Administration with “compul-

sory” notion is not so true approach. All work force younger than the age of 45 and those who will work will automatically participate PPS but, since within 2 months right of wit-hdrawal has been vested, it is much better to define the administration as “automatic” instead of “com-pulsory”. In 2013, bringing 25% go-vernment contribution to personal retirement system was a significant reform in these works. In the sector, during the last 5 years, the average annual growth rate realized 34 per-cent on the basis of managed size of assets. In this growth the role of 25 percent government contributi-on is great. On the other hand Auto-matic Participation Administration is in the quality of a second reform on the name of driving up the sa-vings ratio in our country. Automatic participation will be the new energy source of the sector. In the kong rub, the savings of country will start to increase. With new administration this year 6.5 million and gradually in total 14 million peoples participati-

Personal Retirement Insurance will be the new energy source of insurance sector

AvivaSA Private Pension and Life CEO Fırat Kuruca:

on is expected. With this regulation, it is esteemed to generate 90 billion TRL savings in a 10 years period. In Automatic Participation Administ-ration also 25 percent government contribution is in the topic. Further-more, for once only 1.000 TRL addi-tional government contribution and in case of purchasing an annual in-come insurance, additional gover-nment contribution of 5 percent of the savings should be kept in mind.

AVİVASA, WILL HOLD ITS LEADERSHIP IN AUTOMATIC PARTICIPATION AS WELLBeing AvivaSA, in which services you become different in PPS?

Being AvivaSA, according to the latest data of Pension Monitoring Center in 2016 we have achieved 28 percent growth in total net as-set value of funds and 6 percent growth in number of participants. In accordance with the January 13 data of PMC, including government contribution in total net asset va-lue of funds we amounted 12 bil-

lion TRL and 900 thousand for the number of participants. In private pension sector where 18 companies doing business in total, we are at the leader position with 19.4 percent in managed size of assets. In other words, we become different from our competitors with our fund ma-nagement success. And, there is an institutional dimention of the issue as well. In Turkey, more than 2000 establishments prefer us in PPS. We have the largest nationwide corporate sales team. We have the unique multiple distribution chan-nel and the largest direct sales staff in our sector. Our shareholders’ the reassurance of Sabancı Holding and our English partner Aviva’s automa-tic participation experiences gained in England makes us stronger. The most important evidence of our power might be that, in Automatic Participation Administration, in spite of only 16 days it starts, 124 com-panies including aslo giant holdings of our country have already prefer-red us.

siheld of hedge - ekovitrin · siheld of hedge nergİz ‘‘firms that take a hedge position...

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