Turkish shares dip

Turkish shares ended three days of strong gains on profit taking and the lira weakened versus the dollar as investors sold riskier assets due to fears about an imminent downgrade of euro zone countries. A senior euro zone government source said credit rating agency Standard & Poor's is set to downgrade several euro zone countries, not including Germany.
The main Istanbul share index closed 1.14 percent down at 51,561.68 points, largely underperforming the MSCI emerging markets index, which was down 0.15 percent. "In the first session there was profit taking as the index rose for three consecutive days. But in the second session we saw selling accelerating due to panic with the euro-dollar declining sharply after the downgrade news. The biggest decline was in banking shares," said Yunus Kaya, an analyst at Gedik Investment.
Turkish banking shares, which make up almost half of main Istanbul index, closed down 1.84 percent. "There is no bad news specific to banking sector. They were the worst performers just because they are the most liquid shares," Kaya added. By 1352 GMT, the lira traded at 1.8621 versus the dollar, compared with 1.8550 in early trade, as investors sold riskier assets on downgrade speculation.
The lira hit 1.8399 per dollar at one point on Thursday afternoon, its strongest in a month on foreign inflows seeking attractive bond yields. "Today's (weakening) trend of lira doesn't seem to have local reasons. Other emerging currencies have also weakened. The downgrade could deteriorate risk appetite for a while. However, one can expect the positive sentiment would continue again as the markets find support from the European Central Bank printing money to ease the indebted countries' borrowing," said Nilufer Sezgin, economist at Ekspres Invest.
Under a new policy, the central bank has been holding intraday repo auctions instead of fixed-rate ones to tighten lira liquidity and intervening directly in the forex market to support the lira on "exceptional days". Against a dollar/euro currency basket, the lira traded at 2.1087, stronger than 2.1124 in early trade and compared with 2.1135 in late trade on Thursday. The yield on Turkey's benchmark bond maturing on December 4, 2013 closed at 11.05 percent, compared with a previous close at 10.99 percent in thin trade.