Turkish equities staged a sharp recovery Friday, erasing a significant portion of the previous day's politically-induced losses as investors assessed the fallout from a court ruling that roiled domestic markets.
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Turkish Stocks Jump 5.2% in Rebound From Political Selloff
Turkey’s benchmark stock index surged 5.2 percent as it clawed back from a steep, politically-driven selloff, though the gains did little to alleviate pressure on the nation’s currency and bonds.
"The sell-off was exaggerated by panic," Ata Invest's Head of Research Cemal Demirtas said, explaining that the court's decision to announce its move against the opposition while markets were open was like "performing surgery without anaesthesia." The Borsa Istanbul 100 index plunged 6 percent on Thursday, triggering a market-wide circuit breaker, after a court annulled the main opposition party’s 2023 congress, a move seen as an attempt to oust its popular leader, Ozgur Ozel.
The political maneuvering fueled a flight from Turkish assets. The U.S.-traded iShares MSCI Turkey ETF slumped almost 10 percent and the cost to insure Turkish debt against default climbed to a six-week high. The selloff was particularly severe in banking stocks, which fell nearly 9 percent on Thursday before recovering a modest 1.2 percent in Friday's session.
The rebound in equities comes against a backdrop of continued weakness in the Turkish lira, which slid to a new record low of 45.74 per dollar. Analysts at JPMorgan said that "rising political risks come at an unhelpful time for the lira," and that the central bank may be forced to raise its policy rate to 40 percent from 37 percent. The country's domestic 10-year bond yields are already at a record 33 percent, reflecting investor concerns over inflation and political stability.
This article is for informational purposes only and does not constitute investment advice.
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