Turkish Stocks Drop as Brussels Blasts Add to Probe Concerns

  • Turkish equities retreat most in emerging markets, lira drops
  • U.S. charges against gold trader spark selloff of Halkbank

Turkish stocks retreated the most in emerging markets after the resurfacing of a corruption probe and explosions in Brussels sapped investor appetite for riskier assets. The lira also fell.

The Borsa Istanbul 100 Index lost 2 percent at the close, the biggest drop in six weeks, led by Turkiye Halk Bankasi AS. The gauge sank as much as 2.9 percent after two blasts ripped through a departure hall at a Brussels airport and a third struck a downtown subway station, causing deaths and injuries. The lira weakened 0.2 percent 2.8681 per dollar as of 5:42 p.m. in Istanbul.

The attacks fueled a selloff sparked by the U.S. indictment of a Turkish national who had been at the center of a corruption investigation more than two years ago, reviving concern the case may spread at a time when President Recep Tayyip Erdogan is seeking to boost foreign investment in the $720 billion economy. The probe in 2013 embroiled leading businessmen and key government figures, sparking a market rout.

“It would be interesting to see how things will unravel this time in Turkey following Reza Zarrab’s charge in the U.S.,” Michel Danechi, a London-based money manager at Duet Asset Management who helps oversee $1.5 billion in emerging-market assets, said by e-mail. “U.S. investigations can be very damaging and costly to people and companies involved. Investors seem to not want to take Turkey risks in stocks or lira during this process.”

U.S. Probe

Zarrab, a gold trader at the center of the bribery scandal in 2013, was charged by the U.S. for running a scheme to help the Iranian government launder hundreds of millions of dollars, according to an indictment unsealed Monday. He and two others are accused of using a web of companies over five years to induce U.S. banks to unwittingly process transactions that violated international sanctions against Iran.

Halkbank fell 8.7 percent, the most since June, to 10.50 liras. The state-run lender was one of those that Zarrab used to process payments, and its former Chief Executive Officer Suleyman Aslan was also embroiled in the scandal and briefly jailed. The Borsa Istanbul Banks Sector Index retreated 3.4 percent.

Brussels Attacks

Belgium’s military sent reinforcements to Brussels after the explosions at the airport and at the subway station, which is a short walk from the European Union’s headquarters. The blasts killed at least 31, injured more than 180 and raised fears of follow-up attacks. The nation moved to the highest terror-alert level.

The explosions will probably fuel risk aversion, said Piotr Matys, an emerging-markets foreign-currency strategist at Rabobank in London.

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