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Turkey's lira hits two-month low, equities fall
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Turkey headed for runoff vote on May 28
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Thai baht rallies after opposition secures win
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South Africa's rand recovers from record lows
(Updates bond and CDS moves in paragraph 5, adds graphic,
details throughout)
By Amruta Khandekar
May 15 (Reuters) - Turkey's lira hit a two-month low on
Monday and stocks tumbled, as a tightly-contested presidential
election headed towards a runoff vote with incumbent President
Tayyip Erdogan in the lead, while broader emerging market
equities gained.
Erdogan and opposition rival Kemal Kilicdaroglu were on
track for a May 28 runoff vote after the former performed better
than expected, but fell short of an outright majority in
Sunday's election - an event seen as the biggest political
challenge to his 20-year rule.
The results came as a disappointment to investors hoping
for a shift to a more orthodox monetary policy amid recent
challenges plaguing the Turkish economy, including runaway
inflation, a searing drop in the lira and devastating
earthquakes earlier this year.
The lira weakened to 19.70 versus the dollar at the session's open and held near those levels, eyeing its worst trading session since November. Turkey-issued dollar bonds fell by more than 7 cents and the cost of insuring exposure to the country's debt spiked on Monday, with the five-year Turkey credit default swap spread jumping to 606 bps, according to S&P Global Market Intelligence, the highest since November 2022. Turkish equities also took a hit, with Borsa Istanbul issuing a market-wide circuit breaker after the benchmark index dropped more than 6% in pre-market trading. After trading resumed, the BIST-100 fell 2.5%, while the country's main banking index dropped 9.1%. "Had the opposition candidate won outright, you would have seen an appreciation in the lira and that would have been based on the assumption that the opposition candidate would return to orthodox policy, restore investor confidence and attract public and private sector capital flows," said Elliot Hentov, head of macro policy research at State Street Global Advisors.
The Thai baht climbed 0.5% after the country's two main opposition parties agreed to form a ruling coalition following a surprise win in a weekend election over military-backed rivals. Broader emerging market stocks rose 0.4%, snapping four days of declines, while currencies were flat. The South African rand gained 1.5% against the dollar, recovering from all-time lows hit last week after the worst power cuts on record and on U.S. allegations of arms shipment to Russia.
Sentiment towards the currency has improved after South African officials rejected the allegations, with President Cyril Ramaphosa stating that the country's non-aligned position did not favour Russia over other states.
In other news, Pakistan's external financing requirements have not been changed in talks with the International Monetary Fund (IMF) over bailout funds, the IMF Resident Representative in Pakistan said, denying local reports that the Fund was seeking fresh financing. Argentina announced a package of measures to rein-in soaring inflation and support the wobbly peso currency on Sunday, including an interest rate hike. An official source told Reuters the hike would be 600 basis points, bringing the rate up to 97%.
For GRAPHIC on emerging market FX performance in 2023, see For GRAPHIC on MSCI emerging index performance in 2023, see For TOP NEWS across emerging markets For CENTRAL EUROPE market report, see For TURKISH market report, see For RUSSIAN market report, see <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Turkey markets hit by election results ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Amruta Khandekark; Editing by Sherry
Jacob-Phillips and Sonia Cheema)
