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Turkish assets down on profit taking, manufacturing contracts
March 1, 2012 / 9:41 AM / in 5 years

Turkish assets down on profit taking, manufacturing contracts

* Lira weaker, yields up

* Investors sell for profit taking after European liquidity operation

* Shares dip

ISTANBUL, March 1 (Reuters) - Turkish assets were weaker on Thursday after data indicated a possible slight contraction in industrial output, a day after markets rallied on a European liquidity boost and a decline in oil prices.

By 0924 GMT, the lira was at 1.7518 versus the dollar, compared with 1.7460 in late trade on Wednesday.

The lira had firmed below 1.7400 versus the greenback on Wednesday as investors increased their lira buying after the dip in oil prices eased worries about Turkey's current account deficit and the half-trillion euro European liquidity operation boosted global risk appetite.

"The lira is currently moving in tandem with external developments. After (Federal Reserve Chairman Ben) Bernanke's speech, hopes for another liquidity easing diminished and this has created a selling pressure on the lira," said a forex trader of one bank.

"If the lira firms below 1.74 versus the dollar, it can go until 1.71. But after Bernanke's speech, this seems a bit difficult," the trader added.

Bernanke on Wednesday offered a tempered view of the U.S. economy and stopped of signaling further Fed bond purchases, dashing the hopes of some traders in financial markets who were betting on more monetary stimulus.

Against its euro-dollar basket the lira stood at 2.0440, compared with 2.0397 in late trade on Tuesday.

Turkish manufacturing contracted for the first time in six months in February, suffering one of the biggest monthly declines in activity in recent years, after output and new orders were hit by a bout of bad weather, a survey showed on Thursday.

The HSBC Manufacturing Purchasing Managers' Index (PMI) for Turkey dipped to 49.6 in February, its lowest level since August and down from 51.7 in January. It was the first time since August that the index had fallen below the 50 level that separates growth from contraction.

"We will monitor if the index remains below 50. There is a strong correlation between the PMI index and industrial production. According to this data, we can see a significant slowdown in the industrial production in January and February," wrote Gizem Oztok, economist at Garanti Securities.

"We keep unchanged our growth forecast of 1.5 percent for 2012," she added.

Turkey's strong economic growth, estimated around 8.5 percent in 2011, contributed to the widening of its current account deficit to 10 percent of gross domestic product.

Turkey's two-year benchmark bond stood at 9.18 percent, up from a previous close at 9.13 percent.

"We expect the benchmark yield to move between 9-9.4 percent during intraday trade," wrote analysts at TEB.

The main Istanbul stock index was 0.46 percent down at 60,450 points, outperforming a 0.77 percent decline in the MSCI emerging markets index.

On dollar bond markets, Turkey's share of the EMBI Global index widened 1 basis point to 332 basis points over U.S. Treasuries. (Writing by Seltem Iyigun)

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