Turkish Stocks Enter Correction on Renewed Political Concerns

  • Benchmark index falls more than 10 percent from April peak
  • Lira tumbles for seventh day, longest slump in almost a year

Turkish stocks entered a correction and the lira headed for the longest losing streak in almost a year after a power struggle involving President Recep Tayyip Erdogan shattered investor confidence.

The benchmark Borsa Istanbul 100 Index fell 1 percent to a 10-week low on Monday, extending its retreat from a bull-market peak less than a month ago to more than 10 percent. That met the common definition of a correction, showing how renewed political risk is undoing a market that’s produced some of the world’s safest returns this year.

The nation’s equities have fallen on 10 of the past 12 trading days as a rift between Erdogan and Prime Minister Ahmet Davutoglu over the management of the economy and the president’s bid to amass executive powers culminated in the premier saying he’ll quit. His departure would mark an unraveling of an Erdogan team that’s been credited with spurring Turkey’s growth over the past decade. Further changes may come in a cabinet reshuffle May 22.

“Investors are nervous about the possible replacement of economy head Mehmet Simsek and the risk of diminishing focus on structural reforms promised by Davutoglu at the beginning of the year,” Gulsen Ayaz, a director of institutional equity sales at Deniz Yatirim Menkul Kiymetler in Istanbul, said by e-mail.

Equity investors pulled out almost $300 million in the week through May 6, the most since January 22. The Borsa Istanbul Index, which fell below its 100-day average for the first time since February, is heading for the first monthly loss this year.

Turkiye Garanti Bankasi AS and Akbank TAS, the nation’s biggest lenders by market capitalization, contributed the most to Monday’s decline. The lira, the second worst performer among emerging-market currencies this month, weakened for a seventh day. The yield on 10-year government bonds rose to the highest since March.

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