Turkey Stocks Drop Most in 16 Months on Moody’s Ratings Upset

Turkey’s stocks fell the most in 16 months as a credit rating upgrade anticipated by some analysts failed to materialize from Moody’s Investors Service.

The benchmark ISE National 100 Index (XU100) dropped 4.2 percent, the most since September 2011, to 81,165.81 at the close in Istanbul. The index lost 3.5 percent within 1 1/2 hours of 1:50 p.m., 10 minutes before Moody’s issued a statement outlining conditions for an upgrade. Of the 100 stocks, 98 fell, with trading volume at 38 percent above the gauge’s 30-day moving average. The measure hit a record high on Jan. 24.

An hour before its 5 p.m. conference call on Turkey, Moody’s said it would consider raising the rating to investment grade if “the government made further progress in lowering its external vulnerabilities.” The government can achieve this goal by “structurally reducing the current-account deficit, increasing foreign-exchange reserves, or reducing the private sector’s external borrowing,” it said in an updated credit opinion.

“Turkey partially met the first two conditions, while the third condition is impossible to meet,” Ozgur Altug, the chief economist at Istanbul-based BGC Partners, said in an e-mailed comment to clients today. The company’s “insistence on structural problems” appears to be “a little bit discouraging,” Altug said.

The nation’s banking index slid 5.6 percent. The three-day decline in lenders’ stocks was the steepest loss since August 2011.

Turkiye Is Bankasi (ISCTR) AS slumped 7.3 percent, Akbank TAS (AKBNK) dropped 5.7 percent, Turkiye Halk Bankasi AS (HALKB) fell 5.5 percent and Turkiye Garanti Bankasi AS (GARAN) slipped 4.8 percent.

Fitch Ratings raised Turkey’s credit rating to BBB- on Nov. 5, its lowest investment grade. Moody’s rates Turkey at Ba1, one level below investment grade. Standard & Poor’s rates the country two levels below that threshold.

Financing of the current-account gap renders Turkey vulnerable and the country’s savings rate trails many of its peers, Sarah Carlson, an analyst at Moody’s, said in a teleconference call.

To contact the reporter on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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