Turkish stocks declined the most in more than a week as police raids on 23 businesses from TV stations and newspapers to the country’s largest gold miner fueled investor concern that political risk will escalate in the run-up to November elections.
Gold miner Koza Altin Isletmeleri, energy explorer Ipek Dogal Enerji and mining company Koza Anadolu Metal plunged after the Ankara headquarters of their parent, Koza Ipek Holding, were raided on Tuesday. The conglomerate is linked to President Recep Tayyip Erdogan’s former ally and now biggest rival, the U.S.-based cleric Fethullah Gulen.
“The investigation on listed Koza-Ipek group companies adds to the already high implied political-risk premium in Turkey, particularly for foreign investors,” Akin Tuzun, an analyst at Moscow-based VTB Capital, said by e-mail.
The declines are a setback for companies that had rallied after an inconclusive June election in Turkey, which failed to hand an outright majority to the president’s former party and spurred optimism Gulen-linked shares stood to benefit if Erdogan’s grip on power weakened. Opposition party CHP lawmaker Baris Yarkadas said the crackdown will widen to target other newspapers critical of Erdogan as he prepares for Nov. 1 repeat elections.
Koza Group Plunges
Koza Altin tumbled 19 percent to 19.70 liras at the close in Istanbul, the biggest drop since the stock started trading in February 2010 and the worst performer on the Borsa Istanbul 100 Index, while Koza Anadolu slid 18 percent, the most since January 2005. Ipek Dogal Enerji Kaynaklari fell 15 percent to 1.87 liras, the biggest decline since June 2013. The nation’s benchmark gauge fell 2.2 percent.
Prosecutors ordered the detention of Koza Ipek Chairman Akin Ipek and six other senior managers, including the group’s chief executive officer, Haberturk reported, citing judicial officials it didn’t identify. Koza Ipek group holdings transferred $7.04 billion to their accounts in Bahrain, Malta, Cyprus, according to a search warrant published by Hurriyet.
Bugun newspaper, owned by the Koza Ipek group, ran a front-page story on Tuesday accusing the administration of allowing shipments of weapons to Islamic State in Syria. The story may have aggravated the government, Bugun newspaper Editor-in-Chief Erhan Basyurt said in a phone interview from Istanbul.
“The real purpose of the raid is to intimidate the media,” he said.
Shares of publishers Dogan Sirketler Grubu Holding and Hurriyet Gazetecilik also fell 5.8 percent and 5.1 percent, respectively.
Turkish police in December detained the editor-in-chief of the country’s best-selling daily newspaper and the head of a television station. That operation against networks suspected of being affiliated with Gulen sent the Borsa Istanbul 100 Index down the most in a year.
Tuesday’s operation also comes after the government in February took management control of Bank Asya, an Islamic lender associated with followers of the U.S. cleric.
“The perception among foreign investors particularly is that the raid is targeting the group due to its affiliation with Gulen,” Haydar Acun, an Istanbul-based fund manager at Marmara Capital Portfoy Yonetimi AS, said by e-mail. “The case of Bank Asya intensifies the fears that similar operations may be carried out for other opponent groups as well, and this is negative for investor confidence.”