Turkish shares pulled down by Bank Asya, neighbouring conflicts

ISTANBUL Thu Aug 7, 2014 11:21am EDT

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ISTANBUL Aug 7 (Reuters) - Doubts about the future of Bank Asya dragged down Turkish stocks on Thursday, highlighting rifts in the government's economic team. Conflict in Iraq and Ukraine also unsettled investors.

Islamic lender Bank Asya ended down more than 5.3 percent after the authorities cancelled its tax collection and social security payment deals. That was seen as a step towards winding down the lender, which was founded by sympathisers of Islamic cleric Fethullah Gulen, an ally-turned foe of Prime Minister Tayyip Erdogan.

The main Istanbul share index fell 0.74 percent to 78,843 points, underperforming the broader emerging markets index which was down 0.46 percent.

Persistent tensions in Ukraine and investor anxiety over the impact of counter-sanctions imposed by Russia continued to drive a selloff in emerging markets.

In Iraq, also Turkey's neighbour, Islamic State militants extended their gains in the north. Thousands fled in fear of persecution by Sunni militants seeking to establish an Islamic empire.

The lira slipped to 2.1638 against the dollar by 1453 GMT, from 2.1617 late on Wednesday.

The benchmark 10-year government bond yield fell to 9.46 percent from 9.55 percent at Wednesday's close. (Reporting by Dasha Afanasieva; Editing by Larry King)

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