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EMERGING MARKETS-Halkbank in Turkish spotlight; South African assets weaken on political concerns
March 29, 2017 / 10:24 AM / in 4 months

EMERGING MARKETS-Halkbank in Turkish spotlight; South African assets weaken on political concerns

5 Min Read

LONDON, March 29 (Reuters) - The Turkey stock market spotlight was on Halkbank on Wednesday, with its shares set for their biggest one-day fall after the arrest of the company's deputy CEO, while South African assets weakened further on political concerns.

Halkbank deputy CEO Mehmet Hakan Atilla was arrested in New York, accused of conspiring to conduct illegal transactions through U.S. banks on behalf of Iran's government and other entities

Shares in Halkbank dropped 14.3 percent -- the biggest daily fall in percentage terms since it was listed in 2007. The broader Istanbul index lost 1.3 percent and Turkey's banking index shed 2.8 percent.

Halkbank dollar bonds also fell, with issues maturing 2021 and 2020 down by more than 0.7 cent in the dollar, according to Tradeweb data, hitting six-week lows. The 2019 issue slipped by 0.66 cents.

Turkish credit default swaps inched to a one-week high of 240 basis points, IHS Markit said.

"The arrest is undeniably highly contentious, given that Halkbank is a majority state-owned bank," analysts at MUFG Securities said.

South African assets, meanwhile, extended losses as the rand and government bond prices fell for a third straight day. The rand was down 0.7 percent, bringing this week's losses against the dollar to 5 percent after the sudden recall of Finance Minister Pravin Gordhan from a London investor roadshow.

This has reignited fears that his long-running power struggle between Gordhan -- seen by investors as a guarantor of fiscal prudence and South Africa's investment grade rating -- and President Jacob Zuma is coming to a head.

"Fair to say that if Zuma manages to successfully remove Gordhan it would produce a seismic and very negative move in South African markets, ratings et al. It would suggest ... a more aggressive and confiscatory black empowerment agenda," said Tim Ash, sovereign strategist at BlueBay Asset Management.

Benchmark government bond yields were just off two-month highs, having shot up 70 basis points this week. Five-year credit default swaps inched to 215 bps, a 2-1/2 month high, according to IHS Markit.

Broader emerging equities were flat and currencies mostly weakened after upbeat U.S. data and hawkish policymaker comments boosted the dollar and Treasury yields.

Hungarian bond yields slipped further after the central bank struck a dovish note in a Wednesday policy meeting at which it tried to squeeze more cash out of short-term deposits. Three-year yields eased 7 bps to 1.23 percent.

For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 969.22 -1.10 -0.11 +12.40

Czech Rep 984.55 +1.33 +0.14 +6.83

Poland 2234.76 +9.35 +0.42 +14.73

Hungary 32438.63 +144.60 +0.45 +1.36

Romania 7956.14 +2.26 +0.03 +12.29

Greece 665.61 +1.09 +0.16 +3.41

Russia 1122.17 -3.41 -0.30 -2.62

South Africa 45300.13 +84.77 +0.19 +3.18

Turkey 89118.60 -1063.13 -1.18 +14.05

China 3241.31 -11.63 -0.36 +4.44

India 29482.51 +72.99 +0.25 +10.73

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 27.02 27.02 -0.01 -0.06

Poland 4.24 4.24 +0.07 +3.97

Hungary 309.76 309.60 -0.05 -0.30

Romania 4.56 4.55 -0.07 -0.44

Serbia 123.82 123.84 +0.02 -0.38

Russia 56.98 56.99 +0.02 +7.51

Kazakhstan 315.25 315.23 -0.01 +5.84

Ukraine 27.02 27.10 +0.30 -0.07

South Africa 13.05 12.99 -0.49 +5.19

Kenya 102.95 102.90 -0.05 -0.56

Israel 3.62 3.61 -0.27 +6.30

Turkey 3.64 3.66 +0.40 -3.15

China 6.89 6.88 -0.15 +0.79

India 64.91 65.02 +0.17 +4.68

Brazil 3.14 3.14 +0.03 +3.64

Mexico 18.97 19.02 +0.24 +9.18

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 326 3 .03 7 69.47 1

All data taken from Reuters at 08:57 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.

Editing by David Goodman

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