Turkish markets weather Monday’s financial storm
Posted by meb at October 28th, 2008
As markets around the world tumbled, the İstanbul Stock Exchange (İMKB) finished its day of trading, gaining 0.66 percent to close at 24,336.71 points.
The results seem to support the proclamations of Turkish politicians and an increasing number of business leaders who maintain that the Turkish economy’s sound financial health is shielding it from many of the consequences of the financial crisis.
The Turkish lira also gained strength today as faith in the Turkish markets manifested itself. At day’s close, $1 was buying YTL 1.65. During last week’s trading, the dollar soared against global currencies, including the lira, and at times was trading at more than 1.72.
Central government attempts to prop up the value of the lira also appear to be affecting the lira’s strength, but it is still too early to determine whether the central bank’s dollar auctions will be effective in the long term.
Fatih Keresteci, a strategist at HSBC, said yesterday that the total number of bids in the bank’s second $50 million auction today was $87 million, down from the $128 million in bids in the bank’s first $50 million auction last week. “This decline is an indicator of a fall in the demand for dollars,” Keresteci said.
The recent hikes in the exchange rates stemmed from dollar purchases — especially in markets abroad. Interest rates have retreated from 25 percent. The interest rate for Treasury bills with a maturity date of June 23, 2010, slightly exceeded 25 percent during the day but dropped to 24.41 percent.
Elsewhere in the world, stocks fluctuated Monday as investors tried to determine how the government’s efforts to prop up the banking sector and aid the US economy might help stave off a protracted global recession.
In midmorning trading, the Dow Jones Industrial Average fell 53.84, or 0.64 percent, to 8,325.11.
Broader stock indicators also fell. The Standard & Poor’s 500 index declined 8.41, or 0.96 percent, to 868.36, and the NASDAQ composite index fell 20.13, or 1.30 percent, to 1,531.90.
The market is facing the uncertainty as it awaits the start of a regularly scheduled two-day meeting of the Federal Reserve. There is speculation that the world’s major central banks could announce coordinated rate cuts; the Fed is expected to lower its fed funds rate by a half-point to 1 percent on Wednesday.
The ongoing selling is due in part to the belief that a worldwide recession is inevitable, but it’s also being triggered by hedge funds and other investors unloading stock because they’re being hit by margin calls. In a margin call, a broker who lent money to an investor calls in the loan, forcing the investor to sell stock to repay the loan.
In the US, investors were cheered after sales of new homes showed an unexpected increase in September. While median home prices have dropped to the lowest level in four years, investors appeared pleased that the market was beginning to chip away at an inventory glut. The Commerce Department reported that sales of new single-family homes rose by 2.7 percent in September to a seasonally adjusted annual rate of 464,000 homes. Economists had expected sales would drop from August.
The median price of a new home declined by 9.1 percent from a year ago to $218,400, its lowest level since September 2004.
News that the Treasury plans to start distributing money to major banks this week is offering investors some room for optimism, even as economic worries remain. But investors are worried that the credit crisis has hurt the world’s economy.
European stock markets fell heavily after the Nikkei index in Japan closed at its lowest in 26 years as the financial crisis raised recession fears and drove up the yen, piling the pressure on the country’s exporters.
Tokyo’s Nikkei 225 index closed down 6.4 percent at 7,162.90 — the lowest since October 1982 — with exporters like Toyota Motor Corp. and Sony Corp hit hard. The losses came despite a report that the government was considering massive capital injection into struggling banks in a bid to calm jittery financial markets.
“Worries about the impact of the surging yen on Japanese export earnings have hit the Nikkei hard,” said Julian Jessop, chief international economist at Capital Economics. “This in turn has led to sharp falls in European markets even when, as on Friday, the US had closed higher the day before.”
Benchmarks in Britain, Germany and France trading down more than 4 percent. The FTSE 100 index was 190.97 points, or 4.9 percent, lower at 3,693.39. Germany’s DAX was down 200.24 points, or 4.7 percent, at 4,095.43. France’s CAC-40 was the worst performing European index, down 216.34 points, or 6.8 percent, at 2,977.45.
Oil prices fell to their lowest level in more than a year on Monday before rebounding to just above $63 a barrel as growing evidence of a global economic slowdown had investors betting on a further drop in energy demand.
source: Today’s Zaman
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