The Turkish Lira fell by 4.6% to 3,0157 per U.S. dollar at the end of the trading session on the new York stock exchange, falling nearly to an eight-year low against the U.S. currency after the group of Turkish military announced the seizure of power in the country “to restore freedoms and democracy.” Losses of the Turkish stock market can be 20%, regardless of what the outcome of this crisis, said Bloomberg Emad Mostak, an expert on emerging markets at London-based consulting company Ecstrat.
“Even if the coup attempt fails, it is a disaster for Turkey, where the premium relating to political risks skyrocketed,” since the Party of justice and development Erdogan to dismantle the opposition — Mostak said in a research note to clients Ecstrat.
Sales of the Lira triggered a decline in other currencies high yield emerging markets at the end of the trading session in new York. The South African Rand lost 2.4 percent, the Mexican peso 1.4 per cent.
“Turkey is a hot spot on the geopolitical map of the world,” says Timothy Gryski, investment Director at new York investment Fund Solaris Asset Management. Financial markets reacted immediately on the news, trying to minimize risks. Political tensions makes the Turkish economy vulnerable, since it depends on foreign investment to compensate for the negative balance of the current account deficit. The figure will rise to 4.5% of GDP this year from 4.4% of GDP in 2015, economists predict in a Bloomberg survey.
“Turkey has a high external borrowing needs is the result of a significant credit boom, wrote in a research note, Neil shearing, chief economist for emerging markets at research company Capital Economics. In these conditions, political instability could trigger a serious downturn in the economy.
“I don’t think it [the coup attempt] will lead to a significant reassessment of risks in global markets,” said Bloomberg, Jeffrey Kleintop, investment Director at investment company Charles Schwab. — I don’t think it will cause shocks in markets such Brexit”.
Up to this point, the Turkish equity market ranked second in growth in Eastern Europe since the beginning of the year (15%) after Kazakhstan (20%). Among all stock markets tracked by Bloomberg, Turkey is ninth on growth, and ahead of all developed. In the first quarter, GDP increased 4.8%, exceeding analysts ‘ forecasts.