Turk markets rally after AKP win

ISTANBUL – Turkish financial markets rallied strongly yesterday as investors welcomed a decisive election victory for the ruling Justice and Development Party (AKP) and anticipated it would press ahead with its pro-business reform agenda. The lira strengthened to 1.25 against the dollar, its highest level since March 2005, bond yields fell and the main share index hit a fresh record high. «This result is the best possible election result for the market,» said investment adviser Stefan Herz in a note from Charlemagne Capital. The 1.2465 level is key, marking a six-year high against the dollar. It would take the lira back to the July 2001 level, to which it fell after a currency peg was abandoned during a major financial crisis. Sensitive to deep political divisions in Turkey, Erdogan was conciliatory in his initial comments as he tried to reassure those who suspect him of plotting to dismantle the secular state, saying he would govern for all Turks. With all votes counted from Sunday’s poll, unofficial results gave the Islamist-rooted AKP 46.5 percent, up more than 12 points on 2002, but a more united opposition means it will get 340 out of 550 seats, slightly fewer than before. In the wake of the results, ratings agency Moody’s said it expected the re-elected government to push ahead with economic reforms but warned that the upcoming presidential election and security issues remained a risk. It retained its stable outlook on Turkey’s Ba3 credit rating. The result boosted shares, with the main ISE National-100 index closing up 5.1 percent at a record high of 55,625 points. Among shares in focus, petrochemical firm Petkim surged 9 percent as the election result helped calm concerns that the recent sale of a 51 percent state-owned stake in the company might be canceled. Bonds also benefited. The May 6 2009 benchmark bond yield fell to 17.25 percent, down from a close of 17.42 percent on Friday. Analysts noted that Erdogan, crucially, did not have the two-thirds majority in parliament that would be required to change the constitution and stoke possible tension with the army and secular establishment. «This in effect means that he cannot push through his own presidential candidate regardless of the opposition… to his credit Erdogan already seems to be playing down the possibility of conflict by stating that he would seek national unity and respect Turkey’s secular constitution,» Charlemagne Capital added. Turkey’s sovereign dollar bonds and credit default swaps (CDS) rallied in line with the other market gains. «An AKP victory was priced in but the scale of the victory is larger than most people expected so there may be room to go a bit higher on Turkish asset prices,» said Cuneyt Basaran, a bond trader at Commerzbank in London. There was little reaction to the central bank’s release of the minutes of its latest Monetary Policy Committee, which said an acceleration in domestic demand must be avoided if it is to reach its medium-term annual inflation target of 4 percent. Business says new government must work to ease social tensions ISTANBUL (Reuters) – Turkey’s leading business association said yesterday the parliament formed after Sunday’s general election should seek social reconciliation amid tensions created by a presidential election this year. The statement from the Turkish Industrialists and Businessmen’s Association (TUSIAD) also said the next government should focus on structural reforms and democratization after the resounding victory for the ruling pro-business Justice and Development Party (AKP). The presidential vote was derailed because the powerful secularist establishment objected to the candidacy of Foreign Minister Abdullah Gul, fearing that as president he would erode the separation of religion and state. «We are of the view that an understanding must be found to create an atmosphere of social reconciliation to ease sensitivities in society, including those related to the presidential election,» TUSIAD said. «With the start of the new parliament’s work, it would be appropriate for the new government to focus rapidly on the areas of structural reforms and democratization which form Turkey’s real agenda,» TUSIAD said. Separately, rating agency Moody’s retained its stable outlook on the Turkey’s Ba3 credit rating but identified a presidential election later this year as a risk, along with the government’s potential reaction to recent bomb attacks attributed to Kurdish guerrillas.

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