Istanbul bourse trading halted for second time, main index down 7%

Trading on the Istanbul bourse was halted for a second time on Friday as a market-wide circuit breaker kicked in after heavy declines.

Turkey's lira, stocks and bonds have suffered since Wednesday when authorities detained Istanbul Mayor Ekrem Imamoglu, seen as the main political rival of President Tayyip Erdogan. Protests erupted and thousands marched nationwide.

The second circuit-breaker was issued at 0827 GMT on Friday, with the benchmark BIST-100 index XU100 down 7.01% and the banking index down 9.25%. Trading resumed at 0857 GMT, according to Borsa Istanbul.

The Turkish lira USDTRY traded at 38.0050 against the U.S. dollar at 0840 GMT, flat when compared to its close on Thursday. The currency is down 6.7% so far this year.

On Wednesday, the lira tumbled to a record low of 42 per dollar following Imamoglu's detention, before recouping most of the day's losses.

The central bank sold some $10 billion in FX, according to economist calculations, following the drop, and took liquidity measures to limit market volatility.

The central bank did not open its one-week repo auction on Friday after deciding to suspend policy funding. Economists say the move, along with an overnight lending rate hike to 46%, amounted to a 350-400 basis-point tightening in policy.

Overnight interest rates on Thursday climbed 134 basis points to 43.64%, according to data.

Turkey's banking index (.XBANK) extended losses to slide almost 9% on Friday after the central bank decisions.

Serhat Baskurt, Head of Algorithmic Trading at ALB Yatırım, said the decisions indicated that foreign exchange demand has been higher than expected.

"This has put an end to expectations of a rate cut in April and triggered a sell-off in banking stocks," Baskurt said.

The central bank moves will increase lenders' funding costs, which could weigh on their profitability, said Yusuf Dogan, treasury director at Trive Menkul Degerler.

"The move may push loan rates higher and shrink credit volumes, negatively impacting banks' net interest margin."

Separately, Turkey's sovereign dollar bonds slid for the third straight day, with 2038 maturity shedding more than 1.3 cents to be bid at 99.35 cents on the dollar. That bond was on track for a weekly price loss of over 2 cents, the largest since January 2024.