Turk stocks slide on liquidity crunch fears

ISTANBUL (Reuters) – Turkish stocks fell more than 2 percent and the lira also softened against the dollar due to fears of a worsening liquidity crunch in world markets and also falling Asian and European equities. Traders said the fear that investors might sell their carry trade positions in higher-yielding Turkey contributed to the markets’ fall as did rising inflation in the United States. The lira was hit by London-based sales in the morning, but later clawed back some of its losses to close at 1.1850, or 0.25 percent weaker than Friday’s close versus the dollar. The markets were unaffected by Turkish air strikes against Kurdish guerrillas in northern Iraq at the weekend, which the Turkish military described as successful. Trade was weak ahead of a two-day public holiday starting on Thursday but the lira is expected to regain lost ground after the holiday, said one banker. «The Istanbul Stock Exchange retreated with the fall on foreign bourses. The downward trend has been going on for a while and Morgan Stanley’s announcement might have backed the fall,» said Ekspres Investment Deputy General Manager Sinan Goksen. The main Istanbul stock index fell 2.38 percent to 53,603.43 points. Morgan Stanley cut Turkish shares to equalweight from overweight in a report published yesterday. The lira was also hit by the sell-off. A banker said the lira could weaken to a resistance level of 1.195 against the dollar. «(But) we have just one-and-half days more this week and we do not expect much movement for the rest of the week,» the banker said. The euro and yen moves against the dollar would determine the direction of the lira against the greenback, the banker added. An International Monetary Fund team started talks in Ankara over a seventh review of Turkey’s $10 billion standby loan deal. The talks were delayed from October, and the Turkish government expects the review to be completed next month. Bonds weakened with the yield on the benchmark August 5, 2009, paper rose to 16.71 percent from Friday’s 16.52 percent. Meanwhile, data showed yesterday that Turkey’s unemployment rate was at 9.3 percent in the August-to-October period, compared to 9.1 percent in the same three months last year.