Turkey’s lira held near a two-month low, its sovereign dollar bonds tumbled and the cost of insuring exposure to the country’s debt spiked as the presidential election appeared headed for a runoff with incumbent president Tayyip Erdogan in the lead.
Turkish bank stocks were also hammered in early trade, with the main banking index falling by more than 8%.
The lira was at 19.65 to the dollar at 0833 GMT, after reaching 19.70 in earlier trading, its weakest since a record low of 19.80 hit in March this year following deadly earthquakes.
It was on track for its worst trading session since early November. The Istanbul bourse was trading more than 2% lower, after an earlier 6.38% drop triggered a market-wide circuit breaker.
Erdogan and opposition rival Kemal Kilicdaroglu were on track for a May 28 runoff vote after neither clinched the 50% of the vote to win outright. Observers said Erdogan’s stronger-than-expected performance gave him the edge in that race.
“This is a major disappointment to investors hoping for a win for opposition candidate Kilicdaroglu and the reversion to orthodox economic policy he promised,” said Hasnain Malik, head of equity research at Tellimer.
In the parliamentary vote, the People’s Alliance including Erdogan’s AKP was headed for a majority, meaning that even if Kilicdaroglu won a runoff, he would lead a split government, Financial Post reports.
