Turkish markets weaken on fears EU accession prospects are dim

ISTANBUL – Turkish shares, the lira and bonds all weakened yesterday as investors fretted over uncertainty surrounding Turkey’s prospects for starting European Union accession talks, brokers said. The lira slipped to a new low for 2004 of 1,435,000 to the dollar before finishing at 1,415,000 from Monday’s close of 1,376,400. It was weaker again in today-dated trade. The main share index finished down 1.99 percent at 18,217.13 points, recovering some of its earlier losses. It tumbled 3.56 percent to 17,924.95 in the morning session, extending a slide of 4.35 percent on Monday. The losses came after the widely anticipated failure of a UN referendum to reunite Cyprus on the weekend which has refocused attention on Turkey’s uncertain EU entry prospects. «The economic fundamentals are fine. It’s the EU process that is at the forefront and affecting investor sentiment,» said Simon Quijano-Evans of Bank Austria Creditanstalt. «The full focus will now be on the step-by-step reform process the government must follow ahead of the EU progress report in October. There are no two ways about this, the government knows what it needs to complete,» he said. Yields on the most active August 24, 2005 bonds rose to 23.5 percent from 22.99 percent on Monday. Dealers said signs that a US interest rate hike may come sooner than had been thought were also driving lira sales, as investors withdrew from emerging markets. Earlier in the day, the central bank halted its daily dollar purchase auctions until May 3 in the face of lira weakness and dwindling auction demand. Auctions The Treasury faces its largest debt redemptions of April this week when it pays back 5,600 trillion lira, of which 5,000 trillion is to the market. It sold a net 2,864.4 trillion lira in two auctions yesterday after an auction that raised 1,381 trillion lira on Monday. The total volume of yesterday’s auctions was lower than market expectations. Turkish Cypriots voted for a UN plan to reunite Cyprus on Saturday but three-quarters of Greek Cypriots voted «no,» scuppering a deal that would have allowed a united Cyprus to enter the EU this coming Saturday. Only the internationally recognized Greek-Cypriot side will join the bloc. Turkey hopes its support for the UN-backed process will boost its chances of winning a date to begin EU accession talks at the end of this year. «There are signals that the (positive) trend has been broken. However, there will not be a fully negative trend for as long as there is a chance of Turkey winning an (EU accession) talks date,» said Hakan Avci from Raymond James Securities. Disappointing economic data also undermined sentiment. The central bank said on Monday after markets closed that the current account deficit grew to $783 million in January, sharply above a median forecast of $495 million in a Reuters poll.

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