Turkish stocks fell, heading for their lowest close in a month, as Prime Minister Recep Tayyip Erdogan became the country’s first directly elected president. Bonds gained and the lira fell against the dollar.
The victory consolidates the Justice and Development Party’s hold on power after an almost 12-year tenure, the longest period of political stability since a multiparty system was adopted in 1946. Investors said they will now seek clarity on who will run the party after Erdogan steps down as prime minister and they assess the government’s commitment to financial stability.
“For Turkey there is still a lot of uncertainty over who will be the next prime minister and economy team,” Istanbul-based Erkin Isik, a fixed-income strategist at Turk Ekonomi Bankasi AS, said today by e-mail. “So Turkish markets may underperform.”
The Borsa Istanbul 100 Index dropped 0.7% percent to 78,625.29 as of 11:45 a.m. local time. The lira weakened 0.4 percent to 2.1530 per dollar, reversing earlier gains. The currency depreciated 0.5 percent against the dollar last week as conflicts raged in Iraq and Syria to the south, Armenia to the east and Ukraine across the Black Sea. The yield on two-year lira benchmark bonds fell three basis points, or 0.03 of a percentage point, to 9.33% after falling as
much as 28 basis points at the open.
Erdogan, 60, who won 52 percent of the vote, according to the state-run Anatolia Agency, will have to step down as leader of the AKP to assume the presidency on Aug. 28. The party has 45 days to pick his successor, who will be appointed by the president to head the government. Erdogan’s 11-year tenure as premier saw annual growth average 5 percent, with foreign investors pouring $78 billion into Turkish stocks and bonds since 2006.
(An earlier version of this story corrected the tenure of the Justice and Development Party.)
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