Turkey’s market rout worsens amid protests
ISTANBUL — Turkish stocks were set for their worst week since the aftermath of 2008’s Lehman Brothers collapse on Friday as concerns about this week’s detention of President Tayyip Erdogan’s main political rival refused to subside.
The lira was set for a 4 percent weekly slump despite aggressive action from Turkey’s central bank in recent days while the latest selloff in stocks triggered two market-wide circuit breakers on Borsa Istanbul.
Turkey’s lira, stocks and bonds have suffered since Wednesday when authorities detained Istanbul mayor Ekrem Imamoglu, seen as Erdogan’s main political rival. Protests erupted and thousands marched nationwide.
The move against Imamoglu was called a coup attempt by the opposition and appears to cap a months-long legal crackdown on opposition figures which has been condemned as a politicized attempt to silence dissent.
By 1450 GMT [10:50 pm Philippine time] the benchmark BIST-100 index was trading 7.82 percent lower, and the banking index had fallen 9.37 percent, after trading resumed at 0857 GMT [4.57 pm].
Weekly plunge
The benchmark BIST-100 index is on track for a 15 percent weekly plunge — its worst drop since the global financial crisis in October 2008.
Turkey’s sovereign dollar bonds also slid for the third straight day, with the longer-dated issues shedding two cents and on track for a weekly loss of more than three cents, their largest since January 2024.
The cost of insuring Turkey’s debt against default also widened by 18 basis points to 322 bps, data from S&P Global Market Intelligence showed, the widest levels since March 2024.
While the Turkish lira traded at 38.005 against the US dollar, flat from the previous close and above Wednesday’s record low of 42, the currency is down 6.7 percent so far this year.
The central bank sold some $10 billion in FX after Wednesday’s record low, according to economists’ calculations, and took liquidity measures to limit volatility and ease FX demand.
The central bank also suspended its one-week repo auction and hiked its overnight lending rate to 46 percent, which economists said amounted to a 350-400 basis-point tightening in policy.
The moves are expected to increase funding costs, which could weigh banks’ balance sheets, pushing loan interest rates higher while lowering credit volumes.
Turkey’s Finance Minister Mehmet Simsek on Friday called market fluctuations “temporary” and said necessary measures were being taken.
The central bank promised to tighten policy “in case a significant and persistent deterioration in inflation is foreseen”. Overnight interest rates on Thursday climbed 134 basis points to 43.64 percent, according to data.
