Turkish Shares Slide With Lira on Concern Iraq Turmoil to Spread

Turkish shares slid the most in five months and the lira weakened as concern mounted that the country may get dragged into the escalating turmoil in neighboring Iraq.

The Borsa Istanbul 100 Index plunged 3.3 percent, the most since Dec. 25 and the biggest retreat among more than 90 global benchmarks monitored by Bloomberg. The currency depreciated 1.2 percent to 2.1057 per dollar by 7:08 p.m. in Istanbul, the worst performer among developing-country peers. Yields on two-year government notes jumped 24 basis points to 8.45 percent.

Militants who split from al-Qaeda yesterday took control of Mosul, Iraq’s second-largest city, according to Noureddin Qablan, the vice chairman of the Nineveh provincial council. Prolonged unrest in Iraq could hurt Turkish businesses by impeding on exports and affecting their operations the neighboring nation, Ali Soner Guney, a fixed-income money manager at National Bank of Abu Dhabi, said by e-mail.

Investors took profit after the seizure of Mosul, a “geopolitically critical region” for Turkey, Cuneyt Paksoy, a strategist at Saxo Capital Securities in Istanbul, said by e-mail. “We cannot say the uptrend is over, but we should not forget that we are in a new phase where more caution is required.”

Before today’s declines, the Borsa Istanbul had soared 18 percent since Prime Minister Recep Tayyip Erdogan led his party to victory in local elections on March 30. The lira rallied 5.4 percent against the dollar in the period, the most among 24 developing-country currencies monitored by Bloomberg.

‘Really Overstretched’

Militants from the Islamic State in Iraq and the Levant, or ISIL, took 48 hostages at the Turkish consulate in Mosul, NTV news channel said, without saying how it got the information. Turkey is investigating the situation in Mosul, an official at the Turkish Ministry of Foreign Affairs said by phone, asking not to be identified in line with government policy.

“The market was really just looking for an excuse as valuations, particularly of banks, were really overstretched,” Baris Buyukdemir, general manager at Ceros Securities in Istanbul, said by phone.

Turkiye Garanti Bankasi AS, the nation’s biggest lender, dropped 3.6 percent today. The stock traded at 11.1 times projected 12-month earnings yesterday, the highest since May 2013, according to data compiled by Bloomberg.

Enka Insaat ve Sanayi AS, a Turkish builder with projects in Iraq, slumped 5.5 percent. Coca-Cola Icecek AS, which gets 9.2 percent of its sales from Iraq, according to its website, fell 6 percent. Tupras Turkiye Petrol Rafinerileri AS, the nation’s sole oil refiner, dropped 3.1 percent.

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