Turk shares drop 9 pct, lira hits 5-month low on global jitters, politics

ISTANBUL (Reuters) – Turkish shares fell as much as 9 percent and the lira hit a five-month low yesterday, leading a slide in emerging markets as investors, spooked by global credit worries, dropped riskier assets. Investors are focused on global developments but an announcement from Prime Minister Recep Tayyip Erdogan that President Ahmet Necdet Sezer had told him to propose his new cabinet to the next president – to be elected this month – rather than him, weakened the currency slightly in late trade, traders said. Sezer, an arch-secularist, has vetoed several appointments made by the newly re-elected Islamist-rooted Justice and Development Party government, and some had expected another veto was on the way. Analysts said Turkey, where investors have retained positions over past weeks, was likely to see steeper falls than other emerging markets. «We clearly see a significant risk of this sell-off accelerating and we certainly will not rule out that we will move to the weakest levels on the lira last year,» said Danske Bank analyst Lars Christensen. The lira weakened as far as 1.4115 against the dollar, a slide of 5.1 percent on the day to a five-month low. It trimmed losses to close on the interbank market at 1.3860. The main share index plunged 9 percent, to its weakest level since April, before closing 6.8 percent lower at 44,473 points. The index has lost 21 percent from its historic high in July but is still 14 percent higher than at end-2006. The losses also hit the local bond market, with the yield on the benchmark May 6, 2009 bond rising to a three-month high of 18.79 percent, before closing at 18.75. «Right now there is no logical explanation,» said an Istanbul trader. «People are rushing out of the markets, and foreign (markets) are incredibly bad.»