Istanbul market leaps 12.5 percent and sets a new trade volume record

ISTANBUL (Reuters) – Turkish shares jumped more than 12 percent to their highest level since mid-January yesterday, as optimism for stable government after last Sunday’s elections continued to drive a powerful rally after months of lethargy. The main index ended 12.52 percent up at 13,472.17 points, its highest close since January 14. A record 668 billion shares changed hands and market-heavy banks again led the move. Garanti Bankasi, rising 17.78 percent to 2,650 lira, Is Bankasi C series, up 18.52 percent at 6,400 lira, and Yapi Kredi Bankasi, ending 17.33 percent higher at 2,200 lira, made up 28.7 percent of the total turnover. The banks sector index rose 17.44 percent. A 10-percentage point drop this week in government debt yields and local currency strength also supported the rally in banks, bruised by a February 2001 crisis, as brokers said banks were seen benefiting from falling yields. But gainers were spread across the board as 285 of 295 shares traded rose. Turnover hit an all-time high in Turkish lira terms of 2,403 trillion lira ($1.47 billion). Market gains in post-poll enthusiasm have reached 31.9 percent in lira terms since voters swept to power the Justice and Development Party (AK), suspected by some of Islamist leanings. Yesterday’s buying was also supported by news that ratings agency Standard & Poors had revised its outlook for Turkey to stable from negative, saying last Sunday’s election made stable government likely. «The market has bought every expectation there is to buy. Additionally, the S&P news accelerated the buying,» said Ersan Hurer at Toros Securities in Istanbul. The AK has enough seats to form a government on its own, ending a series of weak coalitions that have plagued Turkey. Investors hope strong government can mean smooth implementation of a $16 billion IMF reform pact and a return to growth. Some brokers said the rise was helped by speculation of a bailout of commercial bank Yapi Kredi, as well as optimism about IMF reforms under the AK government. Ali Babacan, the AK’s coordinator of economic affairs, indicated the new government would render the bank watchdog, a flagship of Turkey’s IMF pact, more independent. «It is one of the most important of the regulators…We want to give it more independence from political interference,» Babacan told CNBC-E television. Turkey’s central bank said yesterday that the new government’s pledges to stick by the IMF reform pact and reduced worries about conflict in Iraq should help bring a stable lira exchange rate. «Linked to confidence that the economic program will be implemented with determination after the elections and the lower uncertainty concerning an Iraq operation, the exchange rate is expected to follow a stable course,» the central bank said in a regular review of monetary policy. The lira rose against the dollar yesterday as the new government increased hopes of lower borrowing costs for the debt-laden treasury. The central bank also said it was closely tracking domestic demand as a possible threat to future inflation. It said capacity usage was high in some sectors and investment low.

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