(Bloomberg) — Turkish bonds and stocks rebounded as top economic officials sought to reassure foreign investors about last week’s detention of Istanbul Mayor Ekrem Imamoglu, a move that triggered billions of dollars in outflows.
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Finance Minister Mehmet Simsek promised to do “whatever it takes” to stabilize financial markets, according to people who joined a teleconference organized by Citigroup Inc. and Deutsche Bank. Officials described the recent market turmoil as a temporary event, they said.
Simsek emphasized that Turkey still offers strong long-term opportunities while downplaying Imamoglu’s arrest, saying it was linked to corruption allegations, said the people, who asked not to be identified speaking about the private meeting with investors on Tuesday.
Simsek and central bank Governor Fatih Karahan reinforced President Recep Tayyip Erdogan’s pledge yesterday to maintain the broadly investor-friendly policies in place since mid-2023, seeking to avoid mass selling of the lira by Turkish residents.
Turkey’s sovereign bonds were the leading performers among emerging-market debt while the country’s main equities index jumped more than any other stocks gauge on Tuesday. The lira was steady against the dollar, helping reassure investors after the currency’s 3% tumble last week.
“Most of the outflows seems to have been foreigners,” said Timothy Ash, a senior EM sovereign strategist at RBC Bluebay. There’s “little evidence of dollarization by locals, which would be a game changer,” he added.
Last Wednesday’s detention and later formal arrest of Imamoglu, Erdogan’s most formidable and most popular political rival, has led to mass street protests and sent Turkish assets tumbling.
Authorities have taken emergency measures to stem the financial rout, including raising a key overnight interest rate, intervening in the exchange rate, and banning short-selling of Turkish equities.
Officials on the call appeared to be comfortable with the current level of policy tightness, but stressed they are prepared to take steps if needed, the people said. In a short statement, the Finance Ministry said that about 4,500 investors attended the call.
“We will never allow the gains we have made from the economy program implemented in the last two years to be harmed,” Erdogan said in televised remarks after a cabinet meeting on Monday. “Our institutions have both the authority and the will to ensure healthy market mechanisms.”
