QUOTES-Turkey's lira hits record low, stocks rally, after Erdogan victory

International reserves have continuously fallen since the beginning of the year and are close to levels when previously TRY volatility sharply increased." "With the election now behind us, we put our rate forecast on hold.

Turkey's incumbent president Tayyip Erdogan won a runoff vote, extending his rule into a third decade. The nation is grappling with a cost of living crisis, a plunging currency and depleted foreign reserves. MARKET REACTION:

LIRA: The Turkish currency hit a fresh record low of 20.065 at the session's open. It has fallen 7% since the start of the year, and lost more than 90% of its value over the past decade. DEBT: Turkey's international bonds were steady while five-year credit default swaps were hovering at Friday's closing level.

STOCKS: Turkey's benchmark index was trading 3.3% higher on Monday. The banking sub-index was trading 0.8% higher. COMMENTS:

ROGER MARK, ANALYST NINETY ONE "In our view, Erdogan's biggest challenge is Turkey's economy. His victory comes against a backdrop of perilous economic imbalances, with his heterodox economic model proving increasingly unsustainable."

"Without a change in policy direction, Turkey is heading towards a more extreme balance-of-payments crisis with a rising likelihood of tighter capital controls. In an extreme scenario, this could see the 'lirafication' (forced conversion) of residents' extensive dollar deposits and the prospect of Turkish borrowers defaulting on external obligations." HASNAIN MALIK, HEAD OF EQUITY RESEARCH AT TELLIMER

"An Erdogan win offers no comfort for any foreign investor. A painful crisis affecting all assets is on the way, with very high inflation, very low interest rates, and no net foreign reserves. Only the most optimistic would hope that Erdogan now feels sufficiently secure politically to revert to orthodox economic policy." CLEMENS GRAFE, CO-HEAD OF CEEMEA ECONOMICS, GOLDMAN SACHS

"Unlike the first round results which came as a surprise to markets and markets strongly reacted, we think the outcome of the second round was now mostly expected and we would not expect much of an immediate market reaction. The focus of the market will continue to be on the TCMB's FX reserves and the TRY (Turkish lira). International reserves have continuously fallen since the beginning of the year and are close to levels when previously TRY volatility sharply increased." "With the election now behind us, we put our rate forecast on hold. Our previous forecast was probability weighted depending on the election outcome. With President Erdogan now reelected we will switch back to a modal forecast."

SERDAR PAZI, RESEARCH GROUP DIRECTOR AT GLOBAL SECURITIES "We may observe a short term rally in equities, particularly in line with the exchange rate, which is likely to stay above 20 levels. Exporters may benefit significantly in the mean time. Mr. Erdogan praised the low-interest rate policy during his campaign as well as in his victory speech last night. We think a reversal of this policy remains unlikely, at least until the local elections, which will be held at the end of 1Q24. Meanwhile, the authorities could continue to rely on restrictions and regulations to keep the TRY depreciation in check amid a high current account deficit and low FX reserves."

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