Turkey’s Istanbul 100 index opened down 5.4%, triggering another circuit breaker.
The Istanbul Stock Exchange said trading in the derivatives market for single shares, stock index futures, options contracts and the share repurchase market would resume at 10:30 local time (15:30 Beijing time).
It is worth noting that the Turkish stock market has twice triggered circuit breakers on March 22, local time. That means Turkey’s Istanbul 100 Index has been shut down three times in two trading days.
On March 22, Turkey’s Istanbul index plunged 6.65% at the opening of trading after the Istanbul Stock Exchange announced it would suspend the circuit breaker until 10:30 a.m. When trading resumed at 10:30 a.m., the Turkish stock market plunged again, falling to 7%, triggering a circuit breaker.
Recently, Turkey’s financial market is in turmoil, suffering from three killings of “stock, debt and exchange”, and its assets are on the verge of “crisis of confidence”.
To be specific, the Turkish stock market triggered two circuit breakers on March 22, local time. Meanwhile, Treasury prices fell sharply and yields soared. The yield on Turkey’s 10-year bond rose the most in a single day. The Turkish lira is also near record lows against the dollar.
It is worth mentioning that the turbulence in Turkey’s financial markets is closely related to changes in its policies.
The move came after Turkey’s central bank sharply raised its benchmark interest rate to 19 percent in a bid to fight rising inflation, Xinhua reported. In Turkey, President Recep Tayyip Erdogan has been urging the central bank to implement low interest rates to help the country’s economy recover from the impact of the new pandemic.
On March 20, Erdogan ordered the sackings of Turkey’s central bank governor, Naji Abbar, and appointed Shahap Kavchioglu as the new governor. A graduate of Istanbul University’s accounting school, Kavchioglu is a former lawmaker for Turkey’s ruling Justice and Development Party. Kavchioglu said after taking office, the central bank will maintain the current monetary policy, any future policy changes will be to ease inflation as the target.
Remarkably, Mr. Erdogan has fired three central bank governors in two years over economic issues such as interest rates, the exchange rate and inflation. In July and November 2020, Erdogan changed the governor of the central bank twice. Turkey’s central bank has suffered a blow to its authority.
Societe Generale said the sacking of Turkey’s central bank governor had put “Turkey on a point of no return” and recommended the removal of all long positions in Turkish assets. In a note to clients, the bank lowered its target price for the second quarter to 9.7 per dollar against the Turkish lira, leaving room for depreciation of more than 24% from current levels.
However, although Turkey’s financial markets have been hit by the “stock exchange”, but industry experts believe the spillover impact of the incident will be limited.
Analysts noted that since 2019, Erdogan has twice replaced the head of Turkey’s central bank because of monetary policy. The previous two impacts on global markets may have had some effect on risk appetite in the very short term, but it is hard to change the trend of global markets themselves. In the past, the global spillover from Turkish central bank rate increases has been relatively limited, given the size of Turkey’s economy.