ISTANBUL, (Reuters) - The Turkish lira held steady on Monday, May 14, and shares edged up as markets awaited IMF approval of $10 billion in new crisis loans for a government that last week showed signs of internal conflict.
The main share index closed 0.99 percent up at 11,896.35 after spending most of the day in negative territory when political tension over the passage of a law to sell Turk Telekom worried investors already bruised by months of crisis.
"The clashes between Economy Minister Kemal Dervis and the other government partners somewhat disturbed the market," said Cenk Rizaoglu of EGS Investment.
Analysts say the index may rise if the new loans are sanctioned at the IMF board meeting in Washington on Tuesday.
"If the IMF approves the expected credits and the treasury auction later in the week goes well, a rise in share prices may occur," Rizaoglu said.
Turkey needs the new IMF deal to restore international confidence and help clean up chaos in its wobbly banking sector.
The treasury aims to auction a minimum net 754 trillion in 3-month bills on Tuesday. The government raised 410 trillion in 10-month domestic bills on May 8, less than the 600 trillion it sought and at higher rates than market expectations.
The lira remained unchanged Monday at 1,150,000 against the dollar on the central bank spot market. Analysts say they expect lira gains following the IMF decision provided political tension subsides.
"If political developments are not negative the dollar is expected to lose its strength against the lira to some degree," one analyst told Reuters.
The Turkish parliament passed two important laws over the weekend tied to the IMF deal — one to privatize Turk Telekom and another to reform Turkey's banking system — and has now approved 10 of 15 laws envisaged in an emergency reform program.
President Ahmet Necdet Sezer must now approve the flagship law to privatize Turk Telekom, which foresees the sale of the government monopoly to institutional and private investors, before it goes into effect.
Analysts say market trading on Monday was affected by worries over whether or not Sezer would ratify the law. Sezer had rejected similar legislation during his time as head of Turkey's Constitutional Court.
"I believe worries about whether the president will ratify Telekom have affected the quantity of trading," said Cem Marti of Ata Investment.
Meanwhile yields on the most heavily traded October 10 paper rose half a percent to 91.86 percent.
By Mark Bentley
© 2001 Mena Report (www.menareport.com)