Turkish stocks fell, with the Borsa Istanbul 100 Index heading toward its lowest close in more than two months after the cost of holding positions in the lira surged amid pressure on the country’s currency.
The benchmark dropped 5.2% to 1,068.01 at 5:25 p.m. in Istanbul, its biggest drop since March and heading for its lowest close since May 29. BIM Birlesik Magazalar AS, Akbank TAS and Turkiye Garanti Bankasi AS contributed the most to the index’s drop. The index fell for a fourth straight session as trading resumed following a holiday on Friday and Monday.
The lira weakened by 0.3% to trade at 6.9684 per dollar, after the overnight forward-implied yield on the lira jumped as much as 1,020 percentage points to 1,050% on Tuesday, the highest since March 2019.
The lira’s weakness has “disrupted morale” of equity investors, said Can Oksun, head of institutional trading at Global Securities in Istanbul. The bulk of today’s sellers are foreign investors, which may indicate their inclination to raise liras by selling stocks instead of paying as much as 1,050% overnight in the offshore market, Oksun said.
In the past, shortages of lira liquidity have forced many foreign investors to dump their positions in local-currency bond and stocks in order to meet the obligations. Tuesday’s blowout is the latest example of the dislocations caused by a slew of measures adopted by authorities to stand in the way of currency depreciation.