Reuters: Investors prepare for Turk Telekom IPO, Turkcell slides

Reuters: Investors prepare for Turk Telekom IPO, Turkcell slides

Turkey's lira fell nearly 1 percent on Monday to its lowest in almost two weeks, as weakness in foreign markets put more pressure on Turkish assets already fragile because of political uncertainty at home.

Shares in leading mobile operator Turkcell fell 4.5 percent, bringing their losses since April 9 to 12 percent, compared to a 3 percent fall on the main shares index.

Analysts attributed the fall to an initial public offering for fixed-line operator Turk Telekom scheduled for May, which they expected to draw funds from Turkcell.

Turkcell said on Monday talks continued with a view to buying a majority stake in Syriatel, despite fresh U.S. sanctions against the Syrian operator's owner. But a source close to the deal said talks were taking longer than expected as some Turkcell executives held U.S. passports.

"Investors in Turkcell have been selling to prepare for the planned IPO of Turk Telekom," said one Istanbul-based analyst, adding that a downgrade to Turkish equities from Citigroup could have accelerated the losses.

Citigroup cut Turkish equities to "neutral" on Monday, saying it was the most exposed major market in the region to economic slowdown and risk aversion. It also cited political uncertainty over a case aimed at closing down the ruling AK Party, and a spike in inflation.

Turkey's central bank meets on Thursday, where it is expected to keep rates on hold, according to a Reuters poll. But economists say it could hike rates if the lira's fall accelerates.

The lira currency <IYIX=> closed on the interbank market on Monday at 1.3150 to the dollar, 0.8 percent weaker than its previous close, and 11 percent weaker than it ended last year. Earlier on Monday it traded as low as 1.3180.

"If the lira really sells off the Central Bank will step in and go for a hike. Inflation numbers aren't going to improve and there's a good chance they'll worsen," said Sarah Hewin, economist at American Express. She added that a move to around 2.20 against the euro, from current levels of 2.08, could prompt central bank action.

Turkish stocks also fell on Monday with the main index closing 0.55 percent lower at 41,747.30 points. The yield on the Jan 13, 2010 benchmark bond <0#TRTSYSUM=IS> rose to 18.64 percent from 18.45 percent on Friday. (Reporting by Emma Ross-Thomas, Ercan Ersoy)