US embassy cable - 02ANKARA7847

UNCLAS ANKARA 007847 
 
SIPDIS 
 
 
SENSITIVE 
 
 
STATE FOR EUR/SE, EB/IFD/OMA AND E 
TREASURY FOR OASIA - MILLS AND GUNARATNE 
STATE PASS USTR - NOVELLI AND BIRDSEY 
 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, PREL, TU 
SUBJECT: TURKISH MARKETS RALLY ON ELECTION RESULTS 
 
 
Sensitive but Unclassified.  Not for internet distribution. 
 
 
1.  (U) On November 4, Turkish markets reacted positively to 
the AK Party's landslide victory in parliamentary elections. 
The lira strengthened very slightly, closing at TL 1,678,000 
to the dollar; the Istanbul Stock Exchange 100 index closed 
up 6.1 percent; the benchmark lira T-bills closed unchanged 
at 64 percent in annual compounded terms. 
 
 
2.  (SBU) The local T-bill market weakened in the morning, 
but by afternoon was attracting buyers (rumors say AK Bank, 
already the largest holder of Turkish bonds, was buying). 
Market participants expect strong demand in two Treasury 
auctions to be held November 5, ahead of the November 6 TL 6 
quadrillion (about $3.5 billion) redemption.  Foreign 
investors will likely join these auctions, per JP 
Morgan/Chase Treasurer Gumisdis who expects rates to decline 
to 62-63 tomorrow.  Yapi Kredi Treasurer Huseyin Imece told 
us some potential investors stayed out of the market today, 
given the normal thin volumes, but will likely jump in 
tomorrow in the large auctions. 
 
 
3.  (SBU) Comment: Turkish market contacts across the board 
caution that the initial optimism with AK's single party 
government could quickly fade.   Gumisdis said the markets 
will focus on who AK appoints to be "economy minister" adding 
that AK old-timers, like Ali Coskun, are not confidence 
enhancing.  However, many of the AK young guard, like Ali 
Babacan, will be fine. 
PEARSON