Turkish markets drop amid election stalemate
Türkiye’s markets plunged on Monday as investors braced for a runoff in the presidential election. Neither the country’s long-standing leader, Recep Tayyip Erdogan, nor his opponent, Kemal Kilicdaroglu, managed to win outright in the first round of voting.
The benchmark stock index, the BIST 100, was down by as much as 6.7% during morning trading, triggering a market-wide circuit breaker, before recouping some of the losses later in the day. As of 14:10 GMT, the index was down 4.5%. The country’s main banking index, XBANK, also fell, losing more than 9%.
The Turkish lira slumped and was trading near a two-month low at 19.66 to the dollar as of around 10:30 GMT. It had hit 19.70 at one point, its weakest point since a record low of 19.80 following the deadly earthquakes in March. State lenders were forced to intervene to limit the losses, Bloomberg reported, citing sources.
The yield on Türkiye’s dollar-denominated sovereign bond due in 2037 rose 71 basis points before later recouping some of the losses. Five-year credit default swaps, which represent the cost of buying insurance against the risk of default by the government, surged 22% in morning trading, its highest level since November, according to data from S&P Global Market Intelligence.
Erdogan has been in power in Türkiye for 20 years, which makes him the longest-serving leader in the country’s history. However, amid concerns over his recent unorthodox economic decisions, which have seen inflation skyrocket and the lira plunge, many analysts have predicted a victory for opposition candidate Kilicdaroglu, who has promised a reversal to more traditional economic policy.
According to the country’s electoral chief Ahmet Yener, with 99% of ballots in Sunday’s vote counted Erdogan led Kilicdaroglu by a margin of 49.4% to 44.96%. The two are now set to face each other in a runoff on May 28. Experts say Erdogan’s strong showing in the first round may signal his ability to win the runoff.
“This is a major disappointment to investors hoping for a win for opposition candidate Kilicdaroglu and the reversion to orthodox economic policy he promised. The two weeks ahead will be characterized by a high level of uncertainty,” Hasnain Malik, a strategist at Tellimer in Dubai, told Reuters.
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