Ankara – In a severe blow to the Turkish markets after the arrest of the mayor of Istanbul, Imamoglu, the lira, sought to its lowest historical levels, and the Istanbul Stock Exchange suffered heavy losses, amid an intense wave of sale of Turkish assets, prompting investors to reassess the investment risks in the country.
Imamoglu is one of the most prominent competitors of President Recep Tayyip Erdogan, and he has given a heavy shadow of the economic scene, and has increased tensions in financial markets.
While the government tried to calm fears, the market’s reaction was violent and fast, which raised questions about the future of the Turkish lira, the performance of the stock exchange, and the extent of the impact of this crisis on foreign investment flows in Turkey.
Historical
The Turkish lira witnessed its largest daily decrease ever during Wednesday’s trading, and it had come to a record level of 42 pounds for the dollar and fell 11% in light of an intense wave of sale that struck the financial markets.
Despite the attempts of local banks to intervene to support the currency, which partially improved to 38.90 pounds for the dollar in the latest trading, the lira is still at its lowest historical levels.
The lira closed the day before yesterday, Tuesday, at 36.67 pounds for the dollar, which means that it lost more than 12% of its value within hours, to become the worst performance among the emerging markets for this year.
The Turkish lira is trading at 38 against the dollar, in the latest transactions.
The wave of sale in the intervention of Turkish banks caused, as financial institutions sold approximately $ 8 billion in an attempt to stop the sharp deterioration, according to Bloomberg agency from sources described as well.
This intervention was not enough to contain the crisis, as the lira continued to retreat amid increasing concerns about political and economic stability in the country.
The Turkish stock market was not immune to economic repercussions, as the main Best 100 index (BIST 100) collapsed by 6.9% at the opening of trading yesterday, which prompted the Istanbul Stock Exchange to suspend transactions temporarily under the mechanism of “stopping automatic trading”, and after the resumption of trading, the index reduced some of its losses, but recorded its worst daily performance since late 2023.
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All sectors incurred sharp losses, but the banking and communications sectors were the most affected:
- The banking sector index decreased by 7.02%.
- The holding stock index decreased by 6.69%.
- The telecommunications sector was the most affected by a decrease of 7.56%.
The price of Turkish international bonds also decreased sharply, as Turkish bonds decreased for 2045 by 1.5 cents, to be traded at 85.13 cents per dollar, registered the largest decrease for one day more than a year, while excellent Turkish stocks decreased by more than 5%, recording its worst daily performance since late 2023.
Government bonds for 10 years have witnessed a jump in their returns by 175 basis points to 29.94%, which is the highest level of this year, which reflects the increasing investor concern about political risks and its potential effects on the macroeconomic economy.
Investment concerns
The arrest of the mayor of Istanbul, Akram Imamoglu, sparked the concern of foreign investors, who saw in this step an indication of the escalation of political risks in Türkiye, which led them to reconsider their investments in the country.
The head of market research in Europe described Nick Reese recent developments as a “shock to the Turkish political and economic system”, noting that investors were seeing a trend towards more stability, but the recent events dispelled these expectations, and this led to an intense wave of sale of Turkish lira and stocks.
In an attempt to contain the accelerated economic repercussions, the Turkish Treasury and Finance Minister, Muhammad Shimashk, sought to reassure the markets through a brief statement he published on his account on the “X” platform, in which he said that the government’s economic policy is still unchanged. But this message was not enough to calm the increasing fears.
Temporary fluctuations
For his part, economic analyst Bilal Baghish believes that the sharp fluctuations in the Turkish markets during the past two days were a natural result of internal political developments, but he indicates that global markets are currently focusing more on the expected interest decisions from the United States and the United Kingdom, which makes the impact of the internal factors in the long term less severe.
In an interview with Al -Jazeera Net, he adds that global inflation and interest rate pressures, especially in light of the postponement of any expected discounts in American interest rates, were already putting challenges to the global economy, which makes obtaining external financing more difficult, and increasing its cost.
He continues: short -term fluctuations are a reality in the financial markets, but they are temporary. Stressing that investors who are betting on the future of the Turkish economy and have long -term investment centers are the most beneficial at this stage.
It stresses that Türkiye needs to enhance its economic stability by improving its economic infrastructure and adopting deeper structural reforms to support sustainable growth.
The Federal Reserve (the US Central Bank) remained the interest rate unchanged in the range of 4.25% – 4.5% as expected, but policy makers indicated that they still expect to reduce borrowing costs 0.5% by the end of the year.
Possible modifications
With regard to his expectations for the coming days, the academic at Sultan Muhammad al -Fateh University expresses his optimism about the ability of the markets to restore their stability quickly, and believes that long -term investment centers will continue to achieve gains.
He adds that the government may resort to “minor adjustments” to support the stability of the market when necessary, but it does not see an urgent need for that at the present time.
It indicates that the Istanbul Stock Exchange has been moving in a horizontal range, but the recovery has begun to appear during the past two weeks, and the upward trend is expected to continue with the cluster of political blurring.
His analysis concludes by emphasizing that the stocks of the Istanbul Stock Exchange are among the most attractive globally in dollars, as their prices are still below their levels in the early decade, which opens important investment opportunities for investors looking to benefit from low prices.
The Turkish stock index rose 100 by 1.67% to 10025 points, in the latest trading today.
