Turkish markets rocked as court removes opposition leader

• Istanbul stock trading suspended
• Central bank reportedly intervenes
• Court says delegates bought votes

Turkish markets have been thrown into turmoil after a court annulled a 2023 ballot that installed a new leader for the country’s main opposition party, ruling that a former party chairman must be reinstated.

Trading on the İstanbul stock exchange was suspended before the close of business on Thursday after the blue-chip BİST 100 index fell 6 percent, while bank shares lost 8 percent.

The lira eased only fractionally across the day, amid reports that the central bank was deploying foreign-exchange reserves to maintain rates at around 45.6 lira to the US dollar.

Thursday’s retreat took the index’s losses to just over 10 percent for the past week. Turkish shares have also come under pressure on concerns the war in the Gulf is no closer to resolution and fears that higher energy prices are flowing into the economy.

The Ankara regional appeals court on Thursday overturned lower-court decisions that had found the poll valid, ruling there had been vote-buying among delegates at the 2023 congress of the Republican People’s Party (CHP) which elected Özgür Özel as leader.

The court ordered that the CHP’s entire leadership relinquish its positions and reinstated Kemal Kiliçdaroğlu, a long-time chairman widely viewed as ineffectual.

At a rally that drew thousands in the capital Ankara late on Thursday, Özel called the court ruling a judicial coup orchestrated by the Justice and Development Party government of President Recep Tayyip Erdoğan.

Turkish markets are likely to come under further pressure due to the ruling, according to İris Cibre, financial markets executive and founder of Istanbul-based Phoenix Consultancy, while there are limits to how far the lira can be supported.

“This comes at a time when the economy is in a fragile state due to the war and this has placed a huge burden on the central bank,” Cibre told AGBI.

She estimated that in the hours after the decision, the central bank spent $9 billion to support the lira.

Further reading:

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• Turkey’s exports to GCC dropped 35% in March
• Turkish central bank’s expensive balancing act

However, Timothy Ash, a senior sovereign strategist at London-based BlueBay Asset Management, said the central bank has sufficient reserves to ward off rapid currency devaluation.

“They will defend the currency with foreign-currency intervention and then hike policy rates if they have to,” Ash said. “They will maintain the current FX policy.”

In March last year the İstanbul exchange shed 8 percent in a day when İstanbul mayor Ekram İmamoğlu was detained on a raft of charges including abuse of office, forming a crime syndicate and espionage.

İmamoğlu, who remains in custody, is the CHP’s declared candidate for presidential elections due in 2028, though if he is ruled out of contention it is expected that Özel will replace him on the ballot.