Reuters/Tolga Uluturk
Politician İmamoğlu detained
Turkish lira drops 12%
Boursa İstanbul falls 7%
Markets in Turkey were thrown into turmoil on Wednesday after the arrest of Ekrem İmamoğlu, a leading political opposition figure, with the stock exchange, lira and bonds all recording sharp losses.
İmamoğlu, the mayor of Istanbul, was expected to be named on Sunday as the Republican People’s Party candidate for Turkey’s next presidential election.
He was detained early Wednesday on a prosecutor’s order over allegations of corruption, including the rigging of tenders and bribery, as well as having alleged links to a terrorist organisation.
İmamoğlu is in his second term as mayor of İstanbul, a city of 16 million and Turkey’s economic centre. He was detained along with at least 100 others, including municipal officials, journalists and businessmen.
After news broke of his detention, the Turkish lira fell by as much as 12 percent at one point, hitting a record low of 42 to the US dollar.
Boursa İstanbul was forced to suspend trading soon after the opening bell, having fallen just over 7 percent.
Turkey’s finance and treasury minister Mehmet Şimşek tried to calm markets after the arrest of İmamoğlu, issuing a statement saying: “Everything necessary for the healthy functioning of the markets is being done. The economic programme we are implementing continues with determination.”
Both the stock exchange and the lira recovered somewhat during the day, but each was still down by around 5 percent in early afternoon trading.
Turkish bonds also posted their worst one day loss in more than a year, down 1.6 cents to $0.85.
One reason for the fall in the lira was a rush by locals into foreign currency as a hedge to the uncertainty after İmamoğlu’s arrest, according to economist Mustafa Sönmez, though Turkey’s central bank has sufficient reserves to maintain stability.
“Turks went for foreign currency, pushing prices up,” Sönmez told AGBI.
“But there was an intervention and there is enough water in the tank for now to extinguish the fire.”
Market fallout over the longer term is harder to forecast, Sönmez said, with the risk that international investors opt to move out of Turkish assets.
“Long-term expectations will depend on how developments evolve.”
