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The Borsa Istanbul 100 Index fell 5.4%, extending its sharpest slump in almost eight years. The exchange was forced to halt trading on Monday for intervals of 30 minutes when the gauge fell by 5% then by 7%. On Tuesday a single-day uptick rule will come into effect to discourage shorting stocks.
President Recep Tayyip Erdogan’s ouster of Naci Agbal prompted speculation the monetary authority will break with his hawkish policies, sparking a slump in the lira and sending 10-year bond yields higher by more than 4 percentage points. Foreign investors have a big presence in Turkey’s banking industry and the nation’s lenders have led the equity declines.
Erdemir and Garanti fell 7.6% and 9.9%, respectively, helping push the Borsa Istanbul Banks Index down 7.9%. Istanbul-based brokerage Ak Investment removed Garanti BBVA (MC:BBVA) and Yapi Kredi, the two Turkish lenders it had on its top picks list, from its model portfolio on Monday citing “rising market volatility.”
The lira traded 0.9% lower as of 09:59 a.m. in Istanbul against the U.S. dollar after plunging 7.5% on Monday.
“In emerging market economies, monetary policy is no more an internal affair for governments,” said Mohammed Ali Yasin, the chief strategy officer at Al Dhabi Capital Ltd. in Abu Dhabi. “Rather it’s a perception of how the financial world judges what’s best for the economy of that country.” His firm was planning to add exposure to Turkish shares before this week.
