TURKEY-ELECTION/MARKETS Turkish lira at record low, stocks hit after poll upset

Record ID: 150543

  • Title: TURKEY-ELECTION/MARKETS Turkish lira at record low, stocks hit after poll upset
  • Date: 8th June 2015
  • Summary: ISTANBUL, TURKEY (JUNE 8, 2015) (REUTERS) CUSTOMERS AT TELLER'S WINDOWS IN BANK CASHIER COUNTING DOLLAR CURRENCY VARIOUS DOLLAR BANKNOTES BEING COUNTED FINANCIAL ANALYST, SERHAT GURLEYEN, RESEARCH DIRECTOR AT IS YATIRIM, INVESTMENT CONSULTANTS, IN OFFICE (SOUNDBITE) (Turkish) FINANCIAL ANALYST, SERHAT GURLEYEN, SAYING: "Markets reacted in a very sharp selloff as expected.
  • Embargoed: 23rd June 2015 13:00
  • Keywords:
  • Location: Turkey
  • Country: Turkey
  • Topics: General
  • Reuters ID: LVA68AJC52V2AO4FZYYGFZJYB06I
  • Aspect Ratio: 16:9
  • Story Text: The Turkish lira tumbled to a record low and stocks were hammered on Monday (June 8) as investors fretted over the possibility of a minority or coalition government after the ruling AK Party failed to win a majority in a parliamentary election.
    The prospect of deepening political risk has further undermined investor sentiment in Turkey, already seen as an unattractive emerging market due to stalling economic growth, high debt levels and a heavy reliance on external financing.
    "Markets reacted in a very sharp selloff as expected. All around the world the markets are asking (for) a government with a strong mandate from (the) public and a good economic policy, some reforms going forward. But in Turkey now, even the most likelihood, scenario is probably an early election," said Serhat Gurleyen, financial analyst with Is Yatirim investment consultants.
    Current political uncertainty scares investors off, he added.
    "For (an) early election we assign 60 percent probability and for a coalition government we assign 40 percent probability. In case of a coalition, which markets believe will be sustainable, we believe current market prices are very attractive, both in equity market and in rate market, but as I say uncertainty is huge and we have to wait a bit to have more insight about market outlook."
    Turkey's government gathered for an emergency cabinet meeting on Monday at the AK Party headquarters in Ankara to discuss its post election strategy.
    After the meeting Turkish Finance Minister, Mehmet Simsek, told journalists he was not surprised by the market reaction to the results.
    "This was expected. They started pricing the risk premium. Therefore, this is not a surprise," Simsek said.
    The lira hit record lows, weakening as much as 5 percent. It was fetching 2.75 to the dollar at 1130 GMT.
    The lira's relentless decline - it is down more than 15 percent this year - means further pain for construction firms and other companies with dollar-denominated debt.
    It may also put pressure on the central bank to raise rates to keep inflation in check. The central bank has avoided tightening monetary policy, leading to concern about political pressure on policy.
    In the run-up to the election President Tayyip Erdogan had likened high interest rates to "treason".
    Investors had been hoping the AKP would squeak by with enough votes to retain a single-party majority without handing Erdogan greater power.
    Erdogan, Turkey's most popular but divisive modern politician, had hoped for a crushing victory for the AKP -- which he helped to found -- to allow it to change the constitution and give him broad executive powers.
    The broadest measure of Istanbul stock performance opened down more than 8 percent and was 6 percent at 1130GMT. Banks, the most liquid stocks and popular among foreign investors, bore the brunt of the pain.
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