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Turkish stocks slip after regulation changes

Istanbul, October 9, 2013

Turkish bank stocks slid on Wednesday as new regulations meant to keep consumer loan growth in check threatened to hurt profits, while bonds were broadly flat, with investors awaiting news on the US fiscal impasse.

The regulations enacted by the banking watchdog aim to tame debt-financed consumption by making credit card loans more costly for lenders and tightening spending limits for consumers.

The moves, which include making credit card loans more costly for banks, are part of efforts to narrow the country's gaping current account deficit, which has left it particularly vulnerable to capital outflows.

Bank stocks fell 1.36 per cent, underperforming the main Istanbul share index, down 1.0 per cent at 74,316.51 points by 0955 GMT, as investors feared the regulations could eat into their profitability.

Lenders with high consumer loan portfolios were among the heaviest casualties, with shares in Garanti Bank down 1.6 per cent, Akbank down 1.9 per cent and Yapi Kredi down 2.4 per cent.

Bond yields inched up, with the 10-year benchmark yield rising to 8.84 per cent from 8.8 per cent on Tuesday, as the US budget standoff dragged on, reducing investor confidence that a deal will be reached before a mid-October deadline to avoid an historic debt default.

The deadlock overshadowed the nomination of Fed number two Janet Yellen, seen as a proponent of loose policy, to run the US central bank, a move seen as supporting emerging markets which have benefited from US stimulus.

After more than a week of modest gains, the lira fell slightly to 1.9878 against the dollar, from 1.9832 late on Tuesday.

"We think the lira will recover further in the upcoming period in case the US default risk does not materialise," brokerage TEB said in a research note.

"However, markets will be closed for most of next week and players may prefer not to carry lira risk during that period, as liquidity will decline visibly," it said.

Turkish markets will be closed for much of next week for the Muslim holiday of Eid al Adha. - Reuters




Tags: US | regulation | profit | bond | Turkish |

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