Turkey Stocks Fall With Bonds on Task Force Meeting, S&P Outlook

Turkish stocks dropped with bonds while the lira weakened as a group to combat terrorism financing prepared to meet to review compliance by member countries and after Standard & Poor’s cut the nation’s credit outlook.

Yields on two-year notes advanced 12 basis points to 10.72 percent and the Borsa Istanbul main index of stocks dropped 0.9 percent. The currency declined as much as 0.8 percent, before trading 0.1 percent weaker at 2.2215 against the dollar as of 6 p.m. in Istanbul. S&P cut Turkey’s outlook to negative on Feb. 7, citing slowing growth, erosion of institutional checks and balances and risk of an economic hard landing.

The Financial Action Task Force, or FATF, which is sponsored by the Organization for Economic Cooperation and Development, holds its second plenary meeting Feb. 12-14 to review the implementation of measures taken by a number of countries to address deficiencies, according to its website. Turkey’s parliament passed a draft law a year ago to combat terrorist financing as to avoid suspension by the group, state-owned Anatolia news agency said in February last year.

“What is really worrying the market is the FATF,” Burak Demircioglu, a trader at Burgan Yatirim Menkul Degerler in Istanbul, said in e-mailed comments. “It has a slim chance but if they take Turkey to the black list from the grey list, this would cause a lot of difficulties.”

Turkey has continued to take steps toward improving its combating the financing of terrorism, FATF said in a statement on its website dated Oct. 18. Concern remains and the country should take further steps to implement an adequate legal framework for identifying and freezing terrorist assets, it said.

Turkey’s credit rating outlook was cut to negative from stable by S&P and lowered its forecast for average economic growth in 2014-2015 to 2.2 percent from 3.4 percent.

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