TURKEY'S ECONOMY MARCH 5 COB

UNCLAS ANKARA 001421 SIPDIS SENSITIVE STATE FOR E, P, EUR/SE AND EB TREASURY FOR U/S TAYLOR AND OASIA - MILLS NSC FOR QUANRUD AND BRYZA E.O. 12958: N/A TAGS: ECON PREL TU SUBJECT: TURKEY'S ECONOMY MARCH 5 COB REF: ANKARA 1406 Sensitive but unclassified, and not for internet distribution. Market - Rally Continuing -------------- ¶1. (U) All Turkish markets continued to strengthen in afternoon trading on March 5, with expectations of the rallies continuing into March 6. -- The lira appreciated over 2 percent, to close at TL 1,609,000. According to several market participants (Yapi Kredi Treasurer Imece, JP Morgan/Chase Treasurer Gumisdis), Turks switching their lira back into dollars was the main cause of the lira movement. -- The benchmark lira-denominated T-bill (March 3, 2004 maturity) strengthened 4.5 percentage points to 58 percent compounded, with trades at tomorrow settlement lower still at 56.5 percent compounded. -- The Istanbul Stock Exchange 100 index closed up 2 percent on the day, in moderate trading volume of TL 486 trillion (about $300 million). Comment -------------- ¶2. (SBU) Both Turkish banks and London-based investment banks tell us their investors are relying on a second parliamentary resolution, which they see as unlocking a very generous U.S. package. These investors see confirmation of this scenario in the AK Chairman Erdogan and TGS Chief of Staff Ozkok statements (reftel). There is an additional element motivating Turkish investors, per the bankers who serve them: Turks are already invested, want to be optimistic to protect their own investments, and are likely to stay in. Some foreign hedge funds are likely to sell on the good news of the U.S. package's approval, should that happen. PEARSON