Turkey’s main stock index falls after election stalemate

Turkish stocks fell significantly on Monday morning following the tightly contested election on Sunday. The results will likely lead to a runoff between incumbent President Recep Tayyip Erdogan and opposition leader Kemal Kilicdaroglu.

The Borsa Istanbul’s BIST 100 opened at a loss of more than 6% before recovering to an approximately 2.6% loss at around 6:40  a.m. ET, according to market data. The dramatic fall prompted regulatory authorities to temporarily halt trading, according to multiple reports.

Background: Sunday’s elections in Turkey ended with Erdogan and Kilicdaroglu both receiving more than 40% of the vote, according to the latest results. With neither achieving the more than 50% required for a victory in the first round, the country is likely heading to a runoff vote on May 28. Erdogan has been in power for 20 years, making him the longest-serving leader in the country’s history. 

Why it matters: The performance of the Turkish stock market could reflect investors’ concerns about Erdogan. Bank stocks in Turkey rallied significantly last week as investors bet on Erdogan losing, according to Bloomberg.

On Thursday, the BIST 100 closed nearly 8% higher after Muharrem Ince of the Homeland Party dropped out of the race, according to Reuters. The market confidence reflected the momentum Kilicdaroglu had going into the election as the only candidate with a chance of defeating Erdogan.

The elections are occurring amid an economic crisis, marked by high inflation and the devaluation of the national currency, the lira. Erdogan has defied economic wisdom by refusing to raise interest rates to combat spiraling inflation.

Know more: The Turkish lira hovered around its record low of 19 to the US dollar on Monday morning, according to market data.

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