ISTANBUL, May 27 (Reuters) - Turkish shares rose on Tuesday, led higher by a rebound in recently battered banking stocks, but the rally was expected to be short lived due to ongoing political uncertainty.
Istanbul's main share index .XU100 rose 1.9 percent on Tuesday to 40,189.29 points, overperforming an emerging market index bechmark .MSCIEF, which was 0.18 percent down at 1418 GMT.
“It was an investor reaction to previous losses. The market has been under a lot of selling pressure due to political developments and poor global sentiments,” said Burak Urucu of Meksa Invest.
The index of banking shares .XBANK rose 3.02 percent on the day, with shares in Yapi Kredi Bank (YKBNK.IS) up 6.06 percent at 2.80 lira and shares in Garanti Bank (GARAN.IS) up 4.55 percent at 5.75 lira following losses suffered on news of a law proposal to cap sky-high credit card interest rates.
Yapir Kredi saw its shares drop 7.5 percent last Friday after the proposal was announced. Credit cards account for 21 percent of Yapi Kredi’s total loans as of the end of the first quarter.
“Banking shares are recovering today after the selling last week and early this week .. the credit card news was a real blow for the sector, which will affect the bottom line,” said Urucu.
Still Tuesday’s gains were seen as a one-off in a generally dour market that is still focused on domestic political tension and a court case aimed at closing the ruling business-friendly AK Party.
“We think this will be a short-lived rally. The markets are still in a bearish mood, and the markets will reamin focused on the AKP closure case,” said Urucu.
Currency weakened on Tuesday as the lira IYIX= softened to 1.2495 against the dollar from Monday’s close of 1.2465, while the yield on the Jan. 13, 2010 benchmark bond <0#TRTSYSUM=IS> rose to 20.01 percent from Monday’s close of 19.99 percent.
Turkey’s Treasury sold a much lower-than-expected $238.5 million of a dollar-denominated bond at auction on Tuesday, official data showed, which pushed up lira bond yields as it raised concerns on the borrowing outlook.
Bond yields are also under pressure because of rising inflation expectations and forecasts that the central bank will follow up this month’s 50 basis point rate hike with more tightening. (Reporting by Thomas Grove)