Turkish stocks rose to the highest level in 10 weeks on speculation that the outcome of March 30 local elections won’t destabilize financial markets.
The Borsa Istanbul 100 (XU100) index climbed 1.9 percent to 68,321.71 at the 12:30 p.m. midday break, erasing this year’s decline. The lira weakened 0.4 percent to 2.1957 per dollar, snapping a three-day gain. Benchmark two-year note yields were unchanged at 10.98 percent after a three-day decline of 62 basis points, the most since Oct. 23.
Almost 53 million citizens will take part on Sunday, electing local representatives, including mayors and municipal council members, state-run Anadolu news service reported yesterday. Twenty-six political parties are competing for votes as polls show the governing Justice and Development Party, or AKP, led by Prime Minister Recep Tayyip Erdogan, will win the most contests.
“Today’s gains show investors are pricing an ideal scenario” of between 40 percent and 45 percent for AKP, Gokhan Uskuay, a strategist at Global Securities in Istanbul, said by phone. Voter support for AKP surpassing 45 percent could raise the possibility of snap local elections, while an approval rating below 40 percent could rekindle concerns that political stability may be weakening, he said.
Banks led today’s advance, with the 16-member lenders index advancing 2.9 percent to its highest level since Dec. 25. Turkiye Garanti Bankasi AS, the nation’s biggest lender by market value, rose 2.8 percent. Akbank TAS (AKBNK) climbed 3.1 percent and state-run Turkiye Halk Bankasi AS (HALKB) gained 3.2 percent.
Turkish policy makers are considering paying interest on a portion of the lira reserves lenders hold at the central bank, according to the minutes of Ankara-based bank’s latest meeting published March 25.
“The worst may be behind us, with imminent elections and consolidation of power by Erdogan,” Emad Mostaque, a London-based strategist at Noah Capital Markets, said by e-mail. “The central bank now appears to be helping the banking sector rather than hindering it.”