June 10 (Bloomberg) -- Turkey’s lira weakened the most in more than a year and bank stocks plunged as Prime Minister Recep Tayyip Erdogan warned demonstrators and lashed out against financial speculators for seeking to profit from protests against his government.
The currency slumped 1.2 percent, the most since May 2012, to 1.8980 per dollar at 9:25 p.m. in Istanbul. Turkey’s benchmark stock index slid 2.5 percent as Turkiye Garanti Bankasi AS, the country’s biggest lender by market value, lost 3.4 percent.
While Erdogan told his supporters this weekend the government would be ready to meet a representative for the protesters, he also said that if demonstrators remain in the streets, “we’ll have to answer them in the language they understand.” At least three people have died in more than a week of clashes as protesters accuse Erdogan of increasingly autocratic behavior since police cracked down on a rally in Istanbul’s Taksim Square on May 31.
“The message was uncompromising, arguing that the demonstrators in Taksim and elsewhere were extremists, looters, and the undemocratic minority, and that he would not bow to them,” Tim Ash, chief emerging markets economist at Standard Bank Plc in London, wrote in an e-mailed note today.
The lira depreciated 1.5 percent to 2.5159 a euro as the relative strength index fell to 25, below the 30 threshold commonly cited by technical traders as being in “oversold” territory.
“You who started this struggle against us, you’ll pay a heavy price for it,” Erdogan said, referring to private banks and an “interest-rates lobby” he says is trying to undermine and profit from Turkey’s economy by keeping its interest rates high. “The interest rates lobby has exploited my people’s sweat for years, and you won’t be able to exploit it any longer.”
Turkey pays the fourth-highest interest rates on its two-year local-currency debt among 21 major emerging markets, according to data compiled by Bloomberg.
Erdogan said yesterday that his government would “squeeze the throat” of speculators in the stock market. He also said that there were powers inside and outside Turkey who were unhappy with the country’s economic success under his Justice and Development Party or AKP, which won the last election in 2011 with 50 percent of the vote.
He asked his followers to deposit their money in state banks, while accusing private banks of opposing him.
Turkiye Is Bankasi AS, Turkey’s biggest bank by assets, sank 3.6 percent to 5.90 liras.
“We are talking about 50 percent of the population which has been repressed for 10 years,” said Ipek Ozkardeskaya, a currency strategist at Swissquote Bank in Geneva, referring to the proportion that didn’t vote for Erdogan’s Justice and Development Party. “The political risk in Turkey is becoming concrete and this may push the lira back to the levels above 1.90.”
The protests are increasingly credit negative as they heighten Turkey’s susceptibility to balance of payments risks through reduced tourism and portfolio investment, Moody’s Investors Service said in its Credit Outlook report today. Moody’s lifted Turkey to investment grade last month, two weeks before the anti-government protests began.
Emlak Konut Gayrimenkul Yatirim, a property developer, plunged 8 percent, the most in two years, after delaying a public share offering.
Yields on the government’s benchmark two-year lira bonds retreated five basis points to 6.5 percent in the second day of declines, paring this month’s increase to 43 basis points. The drop today is a result of low trading volume, according to Inan Demir, chief economist at Finansbank AS in Istanbul.
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