(News Bulletin 247) – The Istanbul market fell sharply on Monday when neither of the two candidates was able to win the ballot in the first round.

The Turkish presidential election remains undecided, and uncertainty is never good for the markets. Evidenced by the fall of the Istanbul Stock Exchange on Monday, the day after the first round of the election.

The Istanbul market thus dropped 3.1% around 11:50 a.m. According to the Reuters agency, a “circuit breaker”, i.e. an interruption of trading in the event of high volatility, took place at the start of trading, while the BIST 100, the most important index of the Turkish Stock Exchange, gave up more than 6 .3%. The Turkish lira fell against the dollar, the greenback taking 0.4% against the Turkish currency at 19.6566 Turkish liras.

The first round of the election should not, except improbable reversal of last minute, not allow to give a winner. Neither Recep Tayyip Erdogan, in power for 20 years in the country, nor the opposition candidate, Kemal Kiliçdaroglu having crossed the 50% threshold. According to AFP after counting 99% of the ballots, Erdogan won 49.4% of the vote, against 44.95% for his main Social Democratic opponent. The second round is due to take place on May 28 and each of the two candidates has affirmed their confidence in their final victory at the end of the ballot.

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Economic heterodoxy in question

“The results are quite encouraging for Erdogan, whose party should retain its majority in parliament and which has a good chance of winning in the second round. This reduces uncertainty about Turkey in the short term, but increases geopolitical risks in the medium term. (Turkey is a member of NATO)”, judge Xavier Chapard of La Banque Postale Asset Management.

This good performance by Erdogan nevertheless takes the market by surprise, as investors did not expect such a good score from the outgoing president, notes Bloomberg.

“This is a major disappointment for investors who were hoping for a victory for the opposition candidate who promised the end of heterodox economic policy,” said Hasnain Malik, strategist at the Tellimer cabinet, quoted by the news agency. “The next two weeks will be characterized by a high level of uncertainty,” he adds.

Remember that Recep Tayyip Erdogan and Kemal Kiliçdaroglu have diametrically opposed visions of the economy. The outgoing president has emphasized growth at all costs, stubbornly refusing key rate hikes from the country’s Central Bank – whose independence remains weak – while the country is experiencing hyperinflation. . Faced with this very unconventional economic policy (to put it mildly), the opposition candidate promised a return to a liberal, orthodox economic policy, with an independent and credible central bank.