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Türkiye's benchmark stock index, BIST 100, ended Friday down 0.92% at 10,729.49 points, extending weekly losses to 5%. The drop came as political uncertainty resurfaced after a court removed the main opposition Republican People's Party's (CHP) Istanbul chair over bribery allegations, reigniting disputes tied to its 2023 provincial congresses.
The banking index was hit hardest, dropping 7.4% over the week, as signs of potential political turmoil cast doubt on the Turkish central bank’s anticipated 300-basis-point cut at its next meeting.
Beyond political developments, worse-than-expected August inflation of 2.04% also raised questions about the Turkish central bank’s next policy move, trimming optimism over the anticipated size of the cut.
The market capitalization of the BIST 100 was around ₺9.99 trillion ($243.2 billion), with a trading volume of ₺139 billion.
Before the court decision on Tuesday, the BIST 100 index was trading above 11,300 points, close to its all-time high of 11,500 points in late August.
The Turkish central bank’s resumption of interest rate cuts in July by 300 basis points had fueled the rally, supported by continued net foreign inflows since June, totaling more than $1.5 billion over nine consecutive weeks. A lifted risk appetite in global markets, following signals from the U.S. Federal Reserve of a possible rate cut in September, also contributed to the trend.
However, central bank data showed the streak ended as foreign investors sold $139 million in Turkish stocks during the week ending Aug. 29.
The U.S. dollar/Turkish lira exchange rate ended the week at 41.251, up 0.25% on a weekly basis, while the euro/Turkish lira rate hit a new record high at 48.488, marking a 0.8% gain. The surge reflected increased demand for foreign currency following the court’s decision.
To stabilize the lira, the Turkish central bank reportedly intervened by selling around $5 billion, Bloomberg reported.
The central bank will announce its policy rate decision on Sept. 11, while the court is expected to rule on the CHP’s 2023 electoral congress on Sept. 15.
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