Bloomberg: Turkey's election results disappoint investors, stock indices fall
Investors hoped for Erdogan's defeat and the country's return to normal economic policy
Turkish President Recep Erdogan did not suffer a decisive defeat in the first round of elections. However, there have been significant losses among investors who had bet on the victory of the opposition candidate with a more adequate economic program, Bloomberg reports.
None of the candidates received more than 50% of the vote in the first round, so the Turkish president will be elected in the second round in two weeks.
In connection with this news, the BIST 100 index of the Istanbul Stock Exchange fell by 6% (the financial sector suffered the most), and the Turkish lira fell by 0.4% to almost 20 liras per dollar despite government support for the exchange rate.
The rally before the election was associated with the hope that incumbent President Recep Erdogan would be defeated and the country would return to normal economic policy.
Currently, the country's central bank, which is dependent on the government, keeps the key rate at 8.5% with inflation above 40% and supports the market with its own funds: Bloomberg Economics estimated this spending at $177 billion over the past 16 months.
Foreign financial investment in Turkey has fallen sixfold over the past 10 years to $24 billion.
"The results of the first round are a huge disappointment for investors who were hoping for a victory for Kemal Kilicdaroglu and a change in the economic vector," Hasnain Malik, a strategist at Tellimer, told Bloomberg. – "The next two weeks are highly uncertain.
In the weeks before the election, analysts at JPMorgan and HSBC predicted a weakening of the lira to 24-25 per dollar, while Goldman Sachs predicted a "sharp depreciation" without specifying a time frame.
On May 15, Turkey's CEC officially announces the second round of the election and the results of the first round: incumbent President Recep Erdogan has 49.51% of the vote, while his rival Kemal Kilicdaroglu has 44.88%. The second round will be held on May 28.
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