Turkish stocks rally, Lira falters after Opposition’s strong show in local elections

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on Apr 1, 2024
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  • Turkish stocks surged on Monday while the lira struggled to maintain stability.
  • The benchmark stock index BIST 100 opened more than 1% higher led by a robust performance in banking shares.
  • Istanbul Mayor Ekrem Imamoglu emerges as Erdogan's principal rival.

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Turkish stocks surged on Monday while the lira struggled to maintain stability following a significant victory by the political opposition in local elections, dealing a blow to President Tayyip Erdogan’s AK Party (AKP).

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Analysts attribute the AKP’s defeat to economic challenges including soaring inflation and slowing growth, compounded by an aggressive monetary policy stance maintained by Erdogan despite concerns.

Stock rise, Turkish lira falters

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The benchmark stock index BIST 100 opened more than 1% higher, led by a robust performance in banking shares, which climbed 1.7%. By 0730 GMT, the indexes were up 0.63% and 2.12% respectively.

However, the lira faced pressure, briefly touching 33 against the dollar in overnight trading, before settling at 32.43, marginally weaker than Friday’s close.

Turkey’s five-year credit default swaps, indicating investment risk, saw a modest decline, while bond yields dipped slightly. The outcome of the elections marks a significant setback for Erdogan and the AKP, as the opposition secures its position as a formidable force in Turkish politics.

Istanbul Mayor Ekrem Imamoglu emerges as Erdogan’s principal rival, further consolidating his influence.

The results show the electorate’s concerns over economic conditions, with inflation nearing 70% and economic growth slowing.

Erdogan’s steadfast commitment to tightening monetary policy despite the high-stakes vote reflects his determination to address economic challenges, albeit with mixed results.

Most markets closed on Monday

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Many financial markets remained closed on Monday for Easter holidays, limiting trading activity and contributing to thin liquidity.

The implications of the electoral outcome for Turkey’s political and economic landscape remain uncertain, as both domestic and international stakeholders assess the ramifications of the opposition’s resurgence and Erdogan’s response.

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