Turkey: The turbulent situation surrounding the financial markets
2025-03-26
■ Since March 19, several important opposition leaders have been detained, causing a sharp drop in the Turkish market.
■ Although the government and the central bank have taken market stabilization measures, the instability of the market is expected to continue.
Since March 19, Turkey's main stock indices, government bonds, and the local currency (lira) have fallen sharply. The cause was reported that the Turkish authorities had placed Istanbul Mayor Imamoglu, who belongs to the opposition Republican People's Party (CHP), under house arrest. In addition, the Turkish government announced that more than 100 people, including the mayor, had been arrested. Imamoglu is seen as a strong rival of the ruling Justice and Development Party (AKP) and the next presidential candidate. His sudden detention has weakened the market's political trust in Erdogan's government, causing foreign investors to sell Turkish assets at the first opportunity. On March 19, the Istanbul Stock Exchange triggered the circuit breaker mechanism twice due to the market crash; according to data from the London Stock Exchange Group (LSEG), the lira depreciated to the 40.9 lira range against the US dollar.
To stabilize the market, the government and the Central Bank of the Republic of Turkey (CBRT) announced a series of intervention measures in the following days. In the foreign exchange market, it was reported on the 19th that, under the instruction of the CBRT, Turkish financial institutions sold about 8-9 billion US dollars to curb the depreciation trend of the lira. In addition, the CBRT held an emergency meeting on the 20th and decided to raise the overnight lending rate to 46.0% (while the main policy rate, the one-week repo rate, remained at 42.5%). It was also reported that the CBRT held a "technical meeting" with commercial banks on the 23rd. In the stock market, the Turkish Capital Markets Regulatory Authority (CMB) issued a statement on the 23rd, announcing a ban on short selling of all stocks and relaxing relevant regulations on stock repurchases. The above stock trading-related measures will continue until the close of April 25. Since 2023, Finance Minister Simsek and CBRT Governor Karahan have been committed to restoring confidence in the financial markets, and it is expected that the government and CBRT will continue to intervene according to market trends in the future.
These measures have temporarily stabilized Turkey's financial markets, but they may continue to fluctuate in the short term. With many uncertainties such as the US government's upcoming "mutual tariffs" policy and the unclear ceasefire situation in Turkey's neighbor Ukraine and the Middle East, foreign investors' confidence in the Turkish market has not yet fully recovered. The Turkish judicial department officially announced on the 23rd that it would arrest Imamoglu on charges of corruption, but protests in support of the opposition have broken out in many cities including the capital Ankara. Although the next presidential election is scheduled for 2028, if the government further arrests important figures of the opposition, the Turkish market may fall into chaos again.
■ Although the government and the central bank have taken market stabilization measures, the instability of the market is expected to continue.
Since March 19, Turkey's main stock indices, government bonds, and the local currency (lira) have fallen sharply. The cause was reported that the Turkish authorities had placed Istanbul Mayor Imamoglu, who belongs to the opposition Republican People's Party (CHP), under house arrest. In addition, the Turkish government announced that more than 100 people, including the mayor, had been arrested. Imamoglu is seen as a strong rival of the ruling Justice and Development Party (AKP) and the next presidential candidate. His sudden detention has weakened the market's political trust in Erdogan's government, causing foreign investors to sell Turkish assets at the first opportunity. On March 19, the Istanbul Stock Exchange triggered the circuit breaker mechanism twice due to the market crash; according to data from the London Stock Exchange Group (LSEG), the lira depreciated to the 40.9 lira range against the US dollar.
To stabilize the market, the government and the Central Bank of the Republic of Turkey (CBRT) announced a series of intervention measures in the following days. In the foreign exchange market, it was reported on the 19th that, under the instruction of the CBRT, Turkish financial institutions sold about 8-9 billion US dollars to curb the depreciation trend of the lira. In addition, the CBRT held an emergency meeting on the 20th and decided to raise the overnight lending rate to 46.0% (while the main policy rate, the one-week repo rate, remained at 42.5%). It was also reported that the CBRT held a "technical meeting" with commercial banks on the 23rd. In the stock market, the Turkish Capital Markets Regulatory Authority (CMB) issued a statement on the 23rd, announcing a ban on short selling of all stocks and relaxing relevant regulations on stock repurchases. The above stock trading-related measures will continue until the close of April 25. Since 2023, Finance Minister Simsek and CBRT Governor Karahan have been committed to restoring confidence in the financial markets, and it is expected that the government and CBRT will continue to intervene according to market trends in the future.
These measures have temporarily stabilized Turkey's financial markets, but they may continue to fluctuate in the short term. With many uncertainties such as the US government's upcoming "mutual tariffs" policy and the unclear ceasefire situation in Turkey's neighbor Ukraine and the Middle East, foreign investors' confidence in the Turkish market has not yet fully recovered. The Turkish judicial department officially announced on the 23rd that it would arrest Imamoglu on charges of corruption, but protests in support of the opposition have broken out in many cities including the capital Ankara. Although the next presidential election is scheduled for 2028, if the government further arrests important figures of the opposition, the Turkish market may fall into chaos again.