Turkish Lira Drops With Stocks on Rising Election Prospects

Turkey’s lira and stocks weakened for a second day on speculation the outcome of parliament speaker votes on Wednesday increased the possibility of a re-election.

The currency depreciated 0.3 percent to 2.6994 per dollar at 12:43 p.m. in Istanbul, bringing its loss for the year to 14 percent, the most among 24-emerging market currencies after Brazil’s real. The Borsa Istanbul 100 Index of equities slid 0.6 percent to 81,188.11 at the midday break, the lowest in two weeks.

Ismet Yilmaz, an AK Party candidate and defense minister, was elected parliament speaker after the fourth round of voting on Wednesday. Most parties supported their own candidates, suggesting that they may not be seeking to create a coalition. The election doubled the probability of elections to 40 percent, according to an e-mailed note from Oyak Securities in Istanbul.

“Turkish markets have fully or at least partly priced in a grand coalition and today’s mild selloff could be the emergence of first doubts regarding a coalition,” Atilla Yesilada, an economist at GlobalSource Partners Inc., said in an e-mailed report. “I don’t know when it will start, but a fair pricing of re-election prospects should trigger a fairly strong correction in the markets.”

Elections on June 7 deprived the AK Party, founded by President Recep Tayyip Erdogan, of a parliamentary majority for the first time since 2002. A government needs to be decided within 45 days of Erdogan asking Prime Minister Ahmet Davutoglu to form a coalition, or Turkey will hold another election.

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