Turkish stocks rallied on bets the worst weekly retreat since 2011 was overdone as Prime Minister Recep Tayyip Erdogan said he was ready to listen to the demands of anti-government protesters. The lira strengthened for the first time in three days and bonds gained.
“Investors are buying because the prices have come to reasonable levels,” Onder Turker, a fixed-income trader at Finansbank AS in Istanbul, said in e-mailed comments. “The political risk is still there and not much has changed, but bulk flows are changing the markets’ direction.”
The benchmark Borsa Istanbul Stock Exchange National 100 Index surged 3.2 percent to 78,332.59 at the close in Istanbul, recovering from a six-month low. The index has tumbled 8.9 percent this week, after the violent clashes between protesters and police began on May 31. Yields on two-year benchmark bonds dropped 23 basis points to 6.55 percent. The lira climbed 0.9 percent against the dollar to 1.8769.
Erdogan said today in a speech at a European Union conference in Istanbul that his party serves 100 percent of the Turkish people and has a record of protecting green spaces. The government objects to violence that occurred during demonstrations, not expression of democratic demands, he said.
The premier had earlier dismissed calls to halt a project to develop Istanbul’s Taksim Square as protests entered the eighth day.
“The prime minister has given a reason for his plans for the first time,” Baris Buyukdemir, general manager at Ceros Securities in Istanbul, said in e-mailed comments. “His tone was soft and this is what matters for the markets.”
The benchmark stock gauge’s relative strength index rose to 35 from 28 yesterday. A level below 30 suggests to some analysts the gauge is oversold and poised for a rebound. Ten-day volatility, a measure of price swings, surged to 74 today, the highest level since 2008, according to data compiled by Bloomberg.
“Liquidity is very tight in the market and a small number of sale orders is causing big movements and they are quickly reversed,” Sercan Kiliclar, a fixed-income trader at Akbank TAS, said in e-mailed comments.
The lira has lost less than 0.1 percent against the dollar this week in the biggest depreciation among emerging markets in Europe, the Middle East and Africa after the Russian ruble and the Romanian leu. Volatility was the lowest rate among peers today.
“The state banks are selling dollars, trying to support the lira, but nervousness is clearly visible in bond and currency markets,” Julian Rimmer, a trader at CF Global Trading in Istanbul, wrote in an e-mailed note.
The Privatization Administration sold $300 million for liras to make payments due today, its press office in Ankara said in a phone interview.
Turkey’s exchange rate will weaken to 1.98 per dollar in the fourth quarter, according to currency forwards data compiled by Bloomberg. It will decline to 1.9410 against the dollar in December, currency futures traded in Istanbul show.