Turkish assets plunge as currency rebounds

ISTANBUL

Turkish stocks fell 7.1 percent and bond yields rose on July 18 when the country’s markets re-opened after the failed coup attempt on July 15. However, the Turkish Lira rebounded from the historic lows it hit as the coup bid was ongoing. 

Turkish stocks posted their biggest daily fall in three years, with tourism-related stocks and banking stocks seeing around 10 percent declines, mainly after the discussions about death penalty have stirred. 

“A bit of political risk premium has to be repriced in the FX and bond market. This has already happened to some extent,” Murat Toprak, emerging market strategist at HSBC, was quoted as saying by Reuters.

“In the near-term the political risks will be reflected in the CDS and bond markets,” said Toprak, adding that he expected yields on local debt to hit double digits.

Following a raft of reassurances from Turkish policymakers and measures by the economic administration, the lira strengthened against the dollar by 2 percent, though those gains failed to offset the more than 4 percent fall of the currency late on July 15.

The lira was trading at 2.93 to the U.S. dollar on July 18, after crashing 4.99 percent to trade at a historic low of 3.04 lira to the dollar as the coup attempt was ongoing.