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Turkish stocks and lira hit by Erdogan attack on 'speculators'

Turkish stocks and lira hit by Erdogan attack on 'speculators'
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Turkey’s stock market slid further on Monday after the prime minister accused banks, some of the country’s largest companies, economists and investors of encouraging the protests there so as to manipulate the financial markets for their own gain.

On Sunday in a series of speeches, Recep Tayyip Erdogan said “speculators” who want the interest rate to stay high are causing market volatility.

The main Turkish share index fell 2.48 percent on Monday.

By the end of the session it was down 19 percent since the anti-government street demonstrations began. Analysts said the prime minister’s comments had not helped.

The government’s cost of borrowing also increased as the ratings agency Moody’s warned prolonged unrest could have a negative effect on its credit.

The cost of insuring Turkish debt against default rose to the highest since the end of October 2012, according to data from Markit, although it remained far from crisis level.

The value of the currency – the lira – weakened further as domestic and international investors fear more turmoil.

‘We will choke the speculators’

Speaking in Ankara, Tayyip Erdogan rounded on what he called a “high interest rate” lobby of speculators for causing the market volatility and vowed to “choke” those who were growing rich off “the sweat of the people”.

“Those who attempt to sink the bourse, you will collapse … If we catch your speculation, we will choke you. No matter who you are, we will choke you,” he said. He urged Turks to put their money in state not private banks.

“These political disturbances become increasingly credit negative the more they intensify and the longer they continue,” the Moody’s rating agency said, warning a fall in tourist arrivals and portfolio inflows could increase balance of payments risks.

Collision course

Timothy Ash, head of emerging market research at Standard Bank, said Erdogan’s outburst marked a change in attitude towards foreign investors.

“This marks an abrupt about-turn for an administration that has always appeared to value foreign investment and has been very sensitive to markets, and how markets perceive its policies,” Ash said.

“That era now seems to have ended and the administration appears set on a collision course with foreign investors and with markets,” he said.