Turkey Assets in World-Topping Relief Rally on Simsek, Rate Cutby
Borsa Istanbul 100 Index rises 3.5%, most in the world
Lira rises as much as 1.8%, erasing losses of as much as 0.6%
Turkish stocks and the lira rose the most in the world and bonds rallied after the central bank cut a key interest rate, hours after the last member of a team credited with the nation’s economic boom years survived a cabinet reshuffle.
The Borsa Istanbul 100 Index jumped 3.5 percent after the central bank reduced the overnight-lending rate by 50 basis points, matching the median estimate of 18 analysts surveyed by Bloomberg. The decision came hours after Mehmet Simsek was named deputy prime minister. The lira climbed 1.7 percent against the dollar and was the best-performing major world currency. Government bond yields fell the most since November.
The central bank’s action on Tuesday calmed investors who had worried pressure from officials, including President Recep Tayyip Erdogan, for radical interest-rate cuts could grow after former Prime Minister Ahmet Davutoglu announced his resignation this month. It added momentum to the rally in Turkish markets that were already responding well to Simsek’s reappointment after weeks of speculation about his future in government. He’s credited by investors for maintaining fiscal discipline and acting as a buffer to Erdogan’s push against orthodox monetary policy.
“There will still be some doubts, but this is a relief insofar as the fear the central bank would start cutting rates aggressively before core inflation has moderated,” Henrik Gullberg, a London-based senior emerging-market strategist at Nomura International Plc, said by e-mail. “The political and policy risk premia built in over the past few weeks since Davutoglu’s dismissal is now at least partly reversed.”
Policy makers cut the overnight-lending rate to 9.5 percent, and left the one-week repurchase and overnight-borrowing rates unchanged at 7.5 percent and 7.25 percent, matching median estimates in separate Bloomberg surveys.
Banks led the advance in Turkish stocks. Akbank TAS was the biggest contributor to gains, jumping 5.1 percent, followed by Turkiye Garanti Bankasi AS’s 4.3 percent rise. The Borsa Istanbul Banks Index climbed 4.6 percent, the most since December.