Turkish stocks slide on fallout of corruption probe

Turkish stocks slide on fallout of corruption probe

Turkish stocks fell further in early trade on Wednesday, depressed by a corruption probe which has heightened political tensions ahead of elections next year.

Police detained sons of three ministers along with some prominent businesspeople on Tuesday, state officials said, in what was widely seen as a challenge to Turkish Prime Minister Recep Tayyip Erdoğan's AK Party.

Shares in state-run Halkbank fell 3.25 percent by 0917 GMT, extending Tuesday's losses after police searched its headquarters in Ankara as part of their investigations. The bank said on Tuesday it had been asked to supply information to the authorities but that it was continuing its regular activities.

Shares in Turkey's largest housing developer Emlak Konut GYO , which is partly state-owned, fell more than 3.8 percent after it said on Tuesday its general manager had been summoned to police headquarters in Istanbul.

The main stock index was down 2.9 percent at 68,887 points, sharply underperforming a 0.11 percent rise in the wider emerging markets index.

"Yesterday's developments have the potential to significantly affect the AK Party's image ahead of the March 2014 local elections," Commerzbank said in a note to clients.

"How Erdoğan attempts to isolate these investigations from becoming generic corruption allegations against the AKP will prove key," it said.

The yield on the 10-year benchmark bond rose to 9.72 percent from 9.63 percent on Wednesday.

The lira was little changed at 2.0409 against the dollar compared to 2.0407 late on Tuesday.

Domestic news deflected attention from the US Federal Reserve, which is due to conclude its two-day meeting later on Wednesday. Opinion is divided on whether it will start scaling back the $85 billion monthly stimulus that has helped support emerging market assets this week or wait for January - or March.

Turkey has depended on cheap foreign capital to finance its large current account, and it is feared this could dry up when the United States begins trimming its stimulus