Turkish outflows at highest level due to political concerns

Concerns over the political situation in Turkey and the resignation of its Prime Minister Ahmet Davutoğlu have led to foreign investors selling $459m worth of Turkish stocks and bonds so far this month, marking the largest outflow this year. There are fears that Davutolğu's departure could mean delays in reforms, an early election and more uncertainty about who is actually running the economy when private sector debt is high; furthermore, savings are low and President Tayyip Erdogan continues to support lower interest rates to boost growth through consumption. As we noted recently, after years of growth, bad debts and bankruptcies are increasing rapidly in Turkey putting a squeeze on banks and exposing a fragile economy. The World Bank reported last week that growth is predicted to cool to 3.5% this year, from near double digits a few years ago.

Turkish portfolio outflows hit highest this year on political worries

ISTANBUL, May 12 (Reuters) - Foreign investors have sold $459 million worth of Turkish stocks and bonds so far this month, in the largest portfolio outflow this year as political concerns have grown, the central bank said on Thursday.

Outflows totalled $298 million from the stock market and $161 million from the domestic bond market in the week ending on May 6, a day after Prime Minister Ahmet Davutoglu said he would quit after a public rift emerged with President Tayyip Erdogan.

"The central bank data show that, not surprisingly, Davutoglu's resignation triggered portfolio outflows from Turkey," wrote Yarkin Cebeci of JPMorgan Chase in Istanbul. "The total outflow ... was the largest in five months."

Investors resident overseas owned $44.1 billion lira worth of Turkish equities on May 6, compared with $50.28 billion the week before, the data also showed.