Inspired by an Economist graphic following last month’s British election, we ask: do Turkish general election results have a big impact on the country’s stock market?
In a country that depends so much on foreign direct investment and the markets’ perception of political stability, the answer is yes, absolutely.
The Istanbul stock exchange has been known to react dramatically to the general elections held since it first began trading in the 1980s.
The three elections in the 1990s each produced coalition governments. 1991 saw the eight-year ANAP government kicked out of office and replaced with a coalition government, without much disruption to shares.
But after the 1995 election, which resulted in a small but decisive win from the Islamist RP, stocks fell on fears of political uncertainty. All the main parties said they would not join an RP government and they kept to their word – for six months.
Of the three, it was 1999 – which saw the first victory of a centre-left party in 22 years – that had the most dramatic rise.
But just look at the surge in 2002, when the AK Party were elected to govern; investors were clearly delighted that months of a shaky coalition and an uncertain election result had come to an end.
The AK’s subsequent 2007 and 2011 victories, however, were more predictable ahead of time and did not lead to any significant surges or dips.
Might that change this year?