Turkish stocks rebound, central banks drains lira

ISTANBUL (Reuters) – Turkish stocks firmed yesterday in a rebound from sharp losses linked to Middle East tension and the lira edged higher, supported by the central bank’s policy of draining lira from the market. The main Istanbul stock index rose 2.8 percent to 33,617.96 points after falling about 9 percent over four sessions to Monday’s close. «In recent days, the stock market had fallen too much. It’s not normal that while Israel loses 3 percent we lose 9 to 10 percent. Today we are seeing a reaction to that,» said Emre Tezmen, general manager of Tera Stockbrokers. Violence in Lebanon and neighboring Israel has hit Turkish stocks as investors weigh the impact of higher oil prices on energy importer Turkey, and possible harm to trade and tourism. The lira strengthened 0.7 percent on the day to close at 1.5795 to the dollar on the interbank market. The central bank, which hardened a hawkish tone in comments last week, is continuing with a policy begun last month of lira deposit auctions. But amid tension in the Middle East, it has stepped up the pace to drain more cash than it pays back and yesterday it pulled 600 million lira from the market. «They (the central bank) are showing they are really on top of things at the moment,» said Simon Quijano-Evans, economist at CA-IB/Bank of Austria, adding that Turkey had also benefited from strength in emerging European markets. Turkish investors appeared to shrug off comments from the government reaffirming its right to enter northern Iraq to conduct operations against members of the separatist Kurdistan Workers’ Party, blamed for killing 16 security personnel over the last week. Turkish bonds on the secondary debt market weakened, however, with the yield on the April 9, 2008 benchmark bond rising to 20.40 percent from 19.91 percent on Monday. A July 16, 2008 discount bond auctioned yesterday becomes the new benchmark today, and in Wednesday-dated trade its yield stood at 20.78 percent. (Reuters)