Turkey’s currency and equities collapsed after the abrupt cessation of central bank management, a move that prompted investors to take a cautious stance on risky assets on Monday.
USDTRY dollar,
increased by up to 15% against the Turkish lira and the BIST-100 XU100 stock index,
traded 8% less after President Recep Tayyip Erdogan’s decision to replace Governor Naci Agbal with Sahap Kavcioglu – the third change to the Central Bank of the Republic of Turkey (CBRT) in two years. Turkey’s central bank last week raised interest rates by 2 percentage points to 19%, a full percentage point more than expected.
“With the removal of Naci Agbal from the CBRT, Turkey is losing one of the last remaining anchors of institutional credibility,” said Phoenix Kalen, a strategist at French bank Societe Generale. “During his short term, Agbal has succeeded where various predecessors have failed – in cultivating confidence in the central bank’s inflation targeting, in restoring monetary policy independence, in encouraging international investors to re-engage in the prone Turkish narrative to the crisis, in leading a rally of 18.0% in pounds against the dollar and most crucial – in arresting and even reversing the harmful trend of dollarization in the economy. ”
Movements in Turkey have sent traders into safe haven currencies such as the DXY dollar,
and the Japanese yen USDJPY,
and away from emerging market currencies, including the Mexican peso USDMXN,
South African USDZAR,
and the Russian ruble USDRUB,
BBVA BBVA,
which owns just under half of Turkey Garanti BBVA, fell 7% in Madrid.
This precaution has spread to stocks, where Stoxx Europe 600 SXXP,
and US ES00 futures,
were fractionally larger.
Stocks of airlines, including International Airlines Group IAG,
easyJet EZJ,
and Ryanair RYA,
skidded after it appeared that scientific advisers had urged British Prime Minister Boris Johnson not to lift the ban on foreign holidays. This is happening as the European Union fought in its vaccination campaign and is now considering blocking exports of AstraZeneca vaccines to the UK.
Shares of AstraZeneca AZN,
who reported separately that his vaccine, developed with Oxford University, was 79% effective in preventing COVID-19 and 100% effective in preventing severe disease in a US study, increased by 1.1%.
Volkswagen VOW3,
and its majority owner Porsche Automobil Holding PAH3,
both have advanced, continuing their stellar race since VW unveiled its plans for electric vehicles and batteries. Analysts at Deutsche Bank increased their price target for VW by 46% and Porsche by 38%. “With the global launch of the ID.4, we see great chances for VW to overtake Tesla’s TSLA,
[battery electric vehicle] sales immediately after next year, which should increase the credit given to its EV strategy “, said the analysts.