This Wednesday, Ekrem Imamoglu, the mayor of Istanbul was convicted of insult for calling Turkey’s supreme election council “fools” years ago. He might serve up to over two years in prison and be banned from politics. The sentence is not in effect yet and Imamoglu moved for an appeal.
This was seen by the public as an attempt to sideline a major political opponent by President Erdogan. This conviction left many people questioning Turkey's 'democratic' regime and legal system.
The markets took the news badly and dipped sharply after the decision was released, closing the day 3.6 percent down even though the BIST index broke its record earlier in the day. Thursday, the market opened 2% up at 5174, but it saw lows around 5090, then recovered to 5188 to close the week at around +2.6%.
Taking a closer look at individual stocks, the companies popular amongst foreign investors generally performed worse than the market. One of the most popular stocks Eredemir Steel Company (IST: EREGL) lost 3.3% since the conviction. Another stock heavily bought by foreign funds, Sisecam (IST: SISE), is down 2.8% since Wednesday. This was not the case with all such stocks, Akbank (IST: AKBNK), closed the week 5% up after the conviction.
I think this reaction to a conviction which is not final yet suggests that the foreign investors are likely to dump their shares if Turkey shows more signs of political instability, which is likely considering the high tension in the country due to the coming election. In this case, I would be more careful about the stocks heavily bought by foreign investors. However, these stocks might be found at a bargain in the case of a selloff by foreign investors.
Sources:
The data used was taken from finance.yahoo.com
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