Turkish stocks fall to lowest level in more than a year

Turkey’s stock market dropped to the lowest level in 13 months in Istanbul, six days before presidential and parliamentary elections in the country.

The main BIST-100 index fell as much as 1.5 percent, led by food and mining stocks. It lost 1.2 percent to 93,445 at 1 p.m.

Turkish President Recep Tayyip Erdogan is seeking re-election at a time when emerging market assets are selling off on anticipation of further hikes in U.S. interest rates. The slide in Turkish stocks is being exacerbated by concern about economic policy and a recent hike in rates by Turkey’s own central bank, which raised its benchmark rate by 425 basis points to 17.75 percent in May and June to stem a slide in the lira to a record low.

The lira rose 0.2 percent to 4.7242 per dollar on Monday. The record low stands at 4.92 per dollar.

Turkish banking stocks have also underperformed the main index in recent weeks as the interest rate increases are expected to curb demand for loans. There is also concern about Turkey’s foreign-currency corporate debt, which totals more than $225 billion and is held largely by local banks.

In May, Erdogan pledged to lower interest rates and take more control of monetary policy should he be re-elected. His comments in London deepened concern about Turkey's economic health and the ability of the lira to withstand the sell off in emerging markets. The currency has dropped about 20 percent this year.