Turkiye’s financial markets reacted negatively to the presidential race outcome, as incumbent Tayyip Erdogan is projected to win the runoff. The value of its sovereign dollar bonds & equities decreased, while the cost of insuring exposure to their debt increased significantly.
Turkiye’s main banking index witnessed a 9.6% decline amidst fears of increasing inflationary pressures resulting from current policies. This came despite the fact that the index had experienced record-breaking growth of 26% within the same week, which was its biggest gain in nearly two decades.
Yesterday, the benchmark of the Istanbul bourse consisted of a 6.1% decline – its biggest dip since the start of February. The Turkish lira had its steepest fall in 6 months, finishing at 19.67 against the US dollar- a closing low. It also neared its intraday record of 19.80 touched in March.
The election board in Turkiye announced a May 28 runoff between Erdogan and Kemal Kilicdaroglu, as neither of them gained the minimum 50 per cent of the votes required to win from Sunday’s election.
According to the electoral results, Erdogan won the majority of votes with 49.51% compared to Kilicdaroglu’s 44.88%. It looks like the People’s Alliance, which includes Erdogan’s AKP, could get a majority in the parliamentary vote.
JPMorgan predicted that the Turkish lira could weaken by up to 5% since the beginning of this year, and reach 24-25 per US Dollar. Goldman Sachs calculations indicated that the lira might depreciate by as much as 50% in the course of twelve months. Volatility indicators for the lira decreased yesterday, indicating it may stay steady over the near term.
