Erdogan win pushes Turkey stocks to record

Istanbul: Turkish stocks reached a record and the lira rallied the most in three months after Prime Minister Recep Tayyip Erdogan won a constitutional referendum that may strengthen his government's powers, boosting re-election prospects.

The ISE National 100 Index gained the most since July, rising as much as 2.4 per cent to a record 62,032.22, and added 834.15, or 1.4 per cent, to 61,442.23 at 10.59am in Istanbul.

The lira gained as much as 1.5 per cent, the most in three months, and traded 1.1 per cent stronger at 1.4945 versus the dollar. The yield on Turkey's two-year benchmark bonds fell three basis points to 8.05 per cent, according to an ABN Amro Holding NV index.

"The referendum result is an important signal for the continuation of a single party government," said Tolga Kotan, who helps manage about $800 million (Dh2.9 billion) of assets at Finans Asset Management as chief investment officer in Istanbul, in a telephone interview on Monday.

"I expect 2011 will be a year of growth and impact both industrials and bank stocks positively. Investors will keep their long positions in Turkey."

In the week before the referendum, investors sent the ISE National index to a historic high as they bet on a win that could help extend economic growth averaging about 5 per cent a year.

The benchmark has added 17 per cent this year, the most among major European markets, while the MSCI Emerging Markets index rose 3.8 per cent. The lira has gained 5.6 per cent against the dollar in the past three months.

"This result is definitely positive for the market because it clears the uncertainties regarding the 2011 elections," Soner Inanc, head of equities at broker Citi Menkul Degerler AS in Istanbul, said in a telephone interview on Sunday.

"The Turkish market will continue to outperform other emerging markets after political risk is cleared with such a clear majority. The result indicates that it's almost certain that there will be a single party government at the elections."

Larger margin

The package of constitutional changes was supported by 58 per cent of voters to 42 per cent against, with a 78 per cent turnout in Monday's vote, state broadcaster TRT said, citing official figures from the country's election board.

The margin was larger than foreseen by pre-vote surveys. Erdogan's own polls predicted the measures would pass with 55 per cent.

"In a nutshell, it means that less than a year before the elections, the ruling party remains firmly in the driver's seat, which in turn reduces the need for ‘emergency' fiscal spending to boost popularity," BNP Paribas SA strategists in London, including Elisabeth Gruie, wrote in a note on Monday.

The referendum was widely viewed as a preview of Erdogan's chances of winning a third term in office at general elections to be held by July.