Turkish assets mixed as local polls loom

ISTANBUL, March 24 Mon Mar 24, 2014 6:17am EDT

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ISTANBUL, March 24 (Reuters) - Turkish assets were mixed on Monday after the weekend shooting down of a Syrian warplane that allegedly violated Turkish airspace fanned political tensions in the countdown to high-stakes municipal elections.

Turkey's armed forces downed the plane on Sunday along the Syrian frontier, near an area where Syrian rebels have been battling President Bashar al-Assad's troops for control of the Kasab border crossing.

"Global sentiment seems to be positive but Turkish assets are underperforming slightly, which is hardly surprising," said Gokce Celik, analyst at Finansbank.

Campaigning for Sunday's local elections in Turkey has been overshadowed by weeks of recordings anonymously posted on social networking sites that purport to reveal corruption in Prime Minister Tayyip Erdogan's inner circle.

Last week, the government blocked Twitter, a vehicle for many of the audio tapes, in a move condemned by opposition parties and Western governments as undemocratic. But hundreds of thousands of supporters turned out to hear Erdogan speak on Sunday at a rally in Istanbul.

"Given the Twitter ban, the Syria incident and local elections at the weekend, and the probability that political tension may escalate during the week, we might see the pressure on lira assets maintaining through the week," Celik said.

The main Istanbul share index was up 0.26 percent at 64,749 by 0905 GMT, lagging the main emerging markets index which rose 0.92 percent.

Turkey's 10-year benchmark bond yield rose to 11.29 percent from 11.24 percent at Friday's close.

The lira firmed to 2.2398 in the morning against the dollar, from 2.2448 late on Friday.

Turkey's main political parties are continuing their election campaign this week and Erdogan is due to speak at rallies in the Black Sea provinces of Trabzon and Ordu on Monday.

The government is facing mounting criticism for its attempts to block the corruption allegations, which target the prime minister, members of his family and former ministers.

Erdogan strongly denies any wrongdoing and blames the probe on followers of U.S.-based Turkish Islamic preacher Fethullah Gulen, whom he accuses of trying to unseat him through an "attempted judicial coup". (Reporting by Dasha Afanasieva; Editing by Gareth Jones)

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