Turkish stocks extends losses as political tension rises
By Seda Sezer
ISTANBUL, May 4 (Reuters) - Turkish stocks extended losses on Wednesday, a day after their biggest fall in more than five months, as signs of worsening tension between President Tayyip Erdogan and Prime Minister Ahmet Davutoglu hit investor confidence.
Erdogan is due to meet Davutoglu on Wednesday, bringing their usual weekly meeting forward by a day. Last week, the ruling AK Party took the authority to appoint provincial party officials away from Davutoglu, a move seen as reducing his power over grass-roots supporters.
Analysts see the decision as evidence of discord between Erdogan, who wants an executive presidency in Turkey, and Davutoglu, who would be sidelined if the country's parliamentary system were to be replaced.
"The tensions have clearly rattled the markets," said William Jackson, an economist at Capital Economics in London.
"One of the major concerns for investors is that Mr. Davutoglu is perhaps seen as a more moderate and conciliatory figure within the government, in contrast to Mr. Erdogan's apparent increasing authoritarianism."
The BIST 100 share index, the broadest measure of Turkish stock performance, slid 0.7 percent to 80,489 by 0814 GMT, after dropping 3.29 percent on Tuesday, its biggest daily percentage drop since late November.
Analysts are also concerned about the impact of the rift on monetary policy.
The lira fell to 2.8625 against the dollar, the lowest since April 18, while the benchmark 10-year government bond yield rose to 9.59 percent from 9.46 percent.
Turkey's currency hit a record low of 3.0750 against the dollar on Sept. 24.
A firm believer in consumption-led growth, President Tayyip Erdogan has repeatedly called for lower interest rates, while Davutoglu is seen as more supportive of central bank independence.
"The conspicuous rift between the president and the premier is bad news for the conduct of Turkish monetary policy," said Nicholas Spiro of Lauressa Advisory in London.
"The more the premier's position is being undermined, the greater the perception among investors that Mr Cetinkaya's wings will be clipped," he said, referring to central bank governor. (Editing by David Dolan and John Stonestreet)
