Turkish stocks, lira hit after minister urges prime minister to quit

ISTANBUL – Hürriyet Daily News

DAILY NEWS photo

Turkey’s main stock index fell up to 3 percent on Dec. 25 after one of three Turkish ministers who resigned over a high-level corruption scandal said Prime Minister Tayyip Erdoğan should follow suit.

The lira weaked down to 2.0855 against the dollar, from 2.0650 earlier after the minister’s remarks.

The financial markets had opened the day with slight gains as two ministers, whose names are involved in a vast graft scandal, announced their resignation from the Cabinet.

The Borsa Istanbul (BIST), Turkey’s main stock exchange, edged up by around 1.1 percent as of 11.49 a.m., rising modestly.

The Turkish Lira, which had fallen around 3 percent against the dollar since the U.S. Federal Reserve decided last week to modestly cut its monthly stimulus injections, also gained strength, rising around 0.64 percent.

Economy Minister Zafer Çağlayan and Interior Minister Muammer Güler stepped down this morning, being the first heads to roll over a massive graft probe that has shaken the government. Erdoğan Bayraktar followed them, urging the prime minister to follow suit.

Already under pressure this year by expectations that the Fed would begin to stem a flood of dollars that has boosted global emerging markets, the lira and stock markets was beaten down further by a police investigation in which dozens of senior businessmen and people with links to the government were detained last week.

Central move seeks to soothe with auctions

The main stock index has been displaying a rippled projection after sustaining heavy losses last week, mostly on sharp drops in shares of state-owned Halkbank, whose chief executive was arrested in connection with the investigation.

The lender’s shares have dropped by almost 20 percent since Dec. 16, causing the main index to plummet.

The central bank’s offer of hefty forex-selling auctions, amounting to at least $6 billion until the end of January, has helped to temper market reaction to a corruption investigation that has pitted the government against the judiciary.

The central bank sold $450 million in a regular forex auction on Dec. 25.

The bank will sell a minimum $450 million every day until the end of 2013, Governor Erdem Basci told a news conference on Dec. 24, totaling at least $3 billion until year-end.