Turkish Stocks, Currency Fall on Growing Tension With Syria

Published: Thursday, 4 Oct 2012 | 9:55 AM ET

Text Size

By: Reuters

• Twitter 12

  LinkedIn 0

  Share

Turkish assets weakened on Thursday on investor concerns about increasing tension with Syria, after a mortar bomb hit a residential district in southeast Turkey, killing five people.

STR | AFP | Getty Images

Market sentiment deteriorated after Turkish artillery hit targets near the Syrian border late on Wednesday and early on Thursday afterartillery shelling from Syria killed five Turkish civilians.

The government won parliamentary approval to send soldiers to foreign countries if necessary.

Its memorandum said "aggressive action" by Syria's armed forces against Turkish territory posed a serious threat to national security.

By 11:50 am, the lira weakened to 1.8057 against the dollar, from 1.7966 late on Wednesday. In early trade it hit its weakest since mid-September of 1.8085.

"Clearly a short-term risk for Turkey and Turkish assets, but also a shout to the rest of the world that the situation in Syria is untenable," said Simon Quijano-Evans, an emerging markets strategist at ING Bank. "Yesterday's events show that the lack of international community reaction raises the risk of unilateral Turkish action."

Against its euro-dollar basket, the lira eased to 2.0722, after hitting its weakest since Sept. 18 of 2.0759, from 2.0578.

"The lira and Turkish assets are unlikely to come unstuck as a result of these events," said Manik Narain, an emerging markets strategist at UBS.

"But the implication may be seen in 3-6 months time. The events will strengthen the authorities' conviction to embrace growth," Narain said, adding this may lead to fiscal deterioration and put pressure on the lira.

The main share index dipped 1.18 percent to 66,035 points, largely underperforming a rise of 0.15 percent in the MSCI emerging markets index.