Turkey Stocks Head for 1st Weekly Loss in Five as IMF Bets Wane

By Seda Sezer

Jan. 15 (Bloomberg) -- Turkish stocks fell, heading for the first weekly decline in five, and the lira weakened after comments by Deputy Prime Minister Ali Babacan damped investor expectations of a deal with the International Monetary Fund.

The ISE National 100 index of stocks dropped 1.1 percent to 54,116.63 at 1:30 p.m. in Istanbul, heading for a 1.2 percent slide for the week. The lira fell 0.3 percent to 1.4509 per dollar, heading for its first weekly slump in four.

Babacan said yesterday there were no new developments in loan talks with the IMF and told journalists it was “wrong” that the talks are “on the agenda so frequently.” While Zaman newspaper reported Turkey and the IMF may decide on a loan this month at the World Economic Forum in Davos, Switzerland, Babacan said yesterday he won’t be there.

“IMF expectations started losing strength in the market since yesterday,” said Orhan Canli, a trader at Is Investment in Turkey.

Babacan said his decision not to attend Davos has nothing to do with the IMF discussions. “If there are any new developments then the public will be informed,” he said at the news conference in Ankara yesterday.

Turkey has been discussing a deal with the IMF since a previous program expired in May 2008. Investor expectations of a new loan helped cut bond yields by almost half last year as the government said it was nearing an agreement and the central bank cut interest rates by 10.25 percentage points to 6.5 percent.

Not Definite

Prime Minister Recep Tayyip Erdogan has balked at the IMF’s demands for spending restraints as Turkey sank into its deepest recession in half a century.

Babacan said last month that Turkey may sign a two-year IMF accord though there were still details to be agreed. Erdogan said on Jan. 11 that a decision could come in days or weeks. A day later Erdogan said an IMF accord was not definite, causing a halt to the lira’s longest rally since 1981 after 13 days of gains.

Lira-denominated benchmark bonds were little changed today, with yields falling 2 basis points to 8.53 percent, according to an ABN Amro index of securities.

To contact the reporter on this story: Seda Sezer in Istanbul at ssezer2@bloomberg.net.