Turkish stocks extend losses as political tension rises

ISTANBUL - Reuters

Turkish stocks extended losses on May 4, a day after their biggest fall in more than five months, as signs of tension between President Recep Tayyip Erdoğan and Prime Minister Ahmet Davutoğlu hit investor confidence.

Erdoğan is due to meet Davutoğlu on May 4, bringing their usual weekly meeting forward by a day. Last week, the ruling Justice and Development Party (AKP) took the authority to appoint provincial party officials away from Davutoğlu, a move seen as reducing his power over grass-roots supporters.

Analysts see the decision as evidence of discord between Erdoğan, who wants an executive presidency in Turkey, and Davutoğlu, who would be sidelined if the country’s parliamentary system were to be replaced.

“The tensions have clearly rattled the markets,” said William Jackson, an economist at Capital Economics in London.

The BIST 100 share index, the broadest measure of Turkish stock performance, slid 2.08 percent to 79,382 in the closing session on May 4, after dropping 3.29 percent on May 3, its biggest daily percentage drop since last November.

Analysts are also concerned about the impact of the rift on monetary policy.

The Turkish Lira fell to 2.88 against the dollar ahead of the meeting, the lowest since April 18, while the benchmark 10-year government bond yield rose to 9.59 percent from 9.46 percent.

Turkey’s currency hit a record low of 3.0750 against the dollar on Sept. 24.