Qatari support ‘will not have major impact on Turkish lira’

Timothy Ash London-based strategist
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Updated 21 May 2020

Qatari support ‘will not have major impact on Turkish lira’

  • Turkey needs additional outside assistance, expert tells Arab News

JEDDAH: Turkey tripled its currency swap agreement with Qatar to $15 billion on the basis of existing currency arrangements in a bid to help steady the Turkish lira on Wednesday.

Turkey has also reportedly been seeking new or expanded swap lines with the US, the UK, China and Japan to forestall a potential currency spiral as the lira reached a record low earlier this month along with a depletion in the Central Bank’s net FX reserves.

However, Turkey has not yet reached an agreement with any of the G20 central banks with which it has been negotiating. Despite Qatar increasing its swap-line limit from $5 billion to $15 billion to enable Turkey to increase its foreign currency reserves, the Turkish economy remains in trouble. 

Timothy Ash, a London-based senior emerging markets strategist at Bluebay Asset Management, said the increase of the swap line from Qatar is unlikely to have a major impact.

“I think Turkey needs additional outside assistance — either G20 swaps or to resort to the International Monetary Fund (IMF). At the moment they are just buying time with the move to hike import tariffs,” he told Arab News.

Experts say that Turkey’s relatively high foreign debt obligations pushed it to diversify its overseas search for external funding rather than approaching the IMF. The ruling Justice and Development Party (AKP) will be keen to avoid having to deal with the IMF, having repeatedly criticized its predecessors for doing so.

Over the past few months, Turkey’s net foreign exchange reserves have fallen to under $10 billion. The current free fall in the lira’s value has only added to the country’s financial woes.

Wolfango Piccoli, co-president, political risk advisory at London-based Teneo, says that the $10 billion increase in its swap lines with Qatar only buys Turkey a little more time.

“These are the usual tricks that show the officials remain in denial,” he told Arab News. “It shows how reluctant policymakers are to face reality.”

Lee’s death sparks hope for Samsung shake-up, dividends

Updated 26 October 2020

Lee’s death sparks hope for Samsung shake-up, dividends

  • Shares in the company and affiliates rise; around $9bn in tax estimated for stockholdings alone

SEOUL: Shares in Samsung Electronics Co. Ltd. and affiliates rose on Monday after the death a day earlier of Chairman Lee Kun-hee sparked hopes for stake sales, higher dividends and long-awaited restructuring, analysts said.

Investors are betting that the imperatives of maintaining Lee family control and paying inheritance tax — estimated at about 10 trillion won ($8.9 billion) for listed stockholdings alone — will be the catalyst for change, although analysts are divided on what form that change will take.

Shares in Samsung C&T and Samsung Life Insurance closed up 13.5 percent at a two-month high and 3.8 percent, respectively, while shares in Samsung SDS also rose. Samsung Electronics — the jewel in the group’s crown — finished 0.3 percent higher.

Son and heir apparent Jay Y. Lee has a 17.3 percent stake in Samsung C&T, the de facto holding firm, while the late Lee was the top shareholder of Samsung Life with 20.76 percent stake.

“The inheritance tax is outrageous, so family members might have no choice but to sell stakes in some non-core firms” such as Samsung Life, said NH Investment Securities analyst Kim Dong-yang.

“It may be likely for Samsung C&T to consider increasing dividends for the family to cover such a high inheritance tax,” KB Securities analyst Jeong Dong-ik said. Lee, 78, died on Sunday, six years after he was hospitalized due to heart attack in 2014. Since then, Samsung carried out a flurry of stake sales and restructuring to streamline the sprawling conglomerate and cement the junior Lee’s control.

Investors have long anticipated a further shake-up in the event of Lee’s death, hoping for gains from restructuring to strengthen de facto holding company Samsung C&T’s control of Samsung Electronics, such as Samsung C&T buying an affiliate’s stake in the tech giant.

“At this point, it is difficult to expect when Samsung Group will kick off with a restructuring process as Jay Y. Lee is still facing trials, making it difficult for the group’s management to begin organizational changes,” Jeong said.

Lee is in two trials for suspected accounting fraud and stock price manipulation, as well as for his role in a bribery scandal that triggered the impeachment of former South Korean President Park Geun-hye. The second trial resumed hearings on Monday.

Lee did not attend the trial on Monday, as Samsung executives joined other business and political leaders for the second day of funeral services for his father.