Turkish Stocks Drop Most in World as Lira Weakens on Rate Move

Turkish stocks fell the most in the world as the lira weakened and bonds dropped after the central bank kept its benchmark unchanged yesterday, spurring bets the regulator isn’t doing enough to support the currency.

The Borsa Istanbul National 100 (XU100) index retreated 2 percent to 70,763.07 at the 12:30 p.m. midday break in Istanbul, heading for the lowest close since June 24 and tumbling the most among 94 indexes tracked by Bloomberg. The lira depreciated 0.8 percent to 1.9650 a dollar, the most after South Africa’s rand among emerging-market currencies in Europe, the Middle East and Africa. Two-year benchmark bond yields rose to a six-week high.

All but 12 shares fell after the central bank refrained from increasing the benchmark one-week repurchase rate and the overnight borrowing rate from 4.5 percent and 3.5 percent, respectively. The regulator raised the overnight lending rate by 50 basis points to 7.75 percent, as economists including Ahmet Akarli of Goldman Sachs Group Inc. said the move was unlikely to shore up markets as the use of that rate is limited.

“The market may want to force the central bank’s hand to raise the benchmark rate, with the lira among the worst-performing emerging-market currencies today,” Isik Okte, a strategist at state-run Turkiye Halk (HALKB) Bankasi AS’s investment unit in Istanbul, said in e-mailed comments. “Higher rates mean lower share prices for banks.”

Tougher Rules

The 16-member banks index tumbled 2.4 percent, poised for the lowest close in more than a year. State-run Turkiye Halk dropped 3.2 percent to the lowest since July 2012. Turkiye Garanti Bankasi AS (GARAN) slumped 2.7 percent and Akbank TAS (AKBNK) fell 1.4 percent.

The Ankara-based Banking Regulation and Supervision Agency announced draft rules to rein in loan growth on Aug. 16, aimed at controlling the increase in consumer loans and encouraging savings. Under the rules, consumer overdraft accounts and credit card loans would be treated as consumer loans and therefore subject to general provisioning regulations.

Turkey’s two-year bond yield advanced 15 basis points, or 0.15 percentage point, to 9.51 percent, the highest level on a closing basis since July 11. The nation’s benchmark equity index has dropped 9.5 percent this year, compared with a decline of 12 percent for the MSCI Emerging Markets Index.

“Rising interest rates across the world create an unfriendly environment for stocks,” Tunc Obuter, the head of trading at Garanti Investment in Istanbul, said in e-mailed comments. An “unsatisfactory” central bank decision and new rules on credit have resulted in a “negative decoupling” for Turkish stocks, he said.

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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