Turkish markets weaken on Japan and worries over any US rate cut

ISTANBUL (Reuters) – Turkey’s currency, bonds and stocks fell yesterday as emerging markets came under pressure from expectations that Japan may raise rates and the United States will not cut in the short term. The main Istanbul share index fell 1.57 percent to 37,832.05 points. Falling commodity prices, which hurt emerging market countries such as gold exporters Brazil and South Africa, have affected global bourses and unsettled emerging market peers. «The Brazilian market disturbed us as its performance on Friday was very poor,» said Ayse Colak, head of research at Tera Stock Brokers. The wobble in emerging markets was aggravated by Friday’s release of stronger-than-expected US non-farm payroll figures that hinted at a soft landing and dashed expectations of a US interest rate cut in the near future. «Emerging markets are weakening and now the same thing is happening in Turkey. It could be the (expected) Japanese interest rate hike and Friday’s (US) non-farm payrolls, which provided a strong signal that the Fed decision will be stable,» said Burak Suren, assistant manager of fixed income at Akbank. Speculation is growing that the Bank of Japan will raise rates at its meeting next week. The lira closed the day at 1.4440 against the dollar versus Friday’s 1.4310. It touched 1.4525 in intra-day trading. Lower Brazilian and South African markets also hurt Turkey, and political risks have hampered sentiment as Turkey eyes two elections in 2007. «Domestic sentiment has not recovered yet. We still have political risks ahead of us that are keeping investors at bay,» Colak said. Market sentiment in Turkey has been hit by newspaper reports last week quoting Prime Minister Recep Tayyip Erdogan as saying the government has shelved plans to privatize its electricity grids. But Finance Minister Kemal Unakitan said he knew of no plans to scrap the tenders for the country’s 20 power grids. The plans form a major part of the privatization program which has brought billions of dollars of capital to the debt-burdened country. Turkish industrial output rose 10.9 percent in November, the Turkish Statistics Institute showed yesterday, much higher than an expected 6.5 percent rise. The National Bank of Greece (NBG) has said it will begin its tender call to buy up minority shares in Turkey’s Finansbank. NBG said in an announcement to the Istanbul Stock Exchange the tender would begin at 5.9356 lira, after Turkey’s Capital Markets Board said the bank would have to raise its offer to $4.1469 from its original offer of $4.04. The deadline for the call is January 29. NBG finalized its purchase of 46 percent of Finanbank’s shares in last August.

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