The cost of nullity: 9 billion dollars evaporated in 1 hour
The decision by the Ankara Regional Court of Justice 36th Civil Chamber to annul the CHP's 38th Ordinary Elective Congress held on November 4-5, 2023, due to "absolute nullity" has received extensive coverage in the world press. The US-based Bloomberg highlighted the absolute nullity ruling in its headlines, emphasizing its impact on the stock market with the title: "Turkish court removes opposition leader from office, triggering a sharp sell-off in markets."
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Bloomberg's report stated, "A court in Turkey has ruled for the removal of the leader of the country's main opposition party. The landmark decision is seen as potentially strengthening President Recep Tayyip Erdoğan's grip on power while increasing the risk of political unrest and renewed market volatility."
Following the decision, the exit of foreign investors was very rapid. The figures provided by economists point to a literal crisis. With the news breaking at 17:40, the decline in the stock market reached 6 percent, and a circuit breaker was immediately triggered.
Economist Rıfat Gencal stated that 10 billion dollars evaporated following the absolute nullity ruling.
İris Cibre wrote that 9 billion dollars had evaporated. Cibre said, "7 billion USD in the first hour - 2 billion USD more afterwards... We will start tracking the CBRT's net gold, local swaps, and NDFs again. Isn't it a shame, really, a shame. I am curious about what the Minister and the Central Bank Governor will tell investors in London right now..."
RISK PREMIUM SOARED
Following the nullity ruling, Turkey's 5-year CDS premium increased by approximately 4.4 percent in one day, reaching the 257 level. As investors rapidly fled from risk following the decision, political uncertainty was directly priced into the economy.
According to data reflected on Bloomberg screens, while Turkey's CDS was trading sideways in the 243-245 basis point band during the day, it rose sharply in the evening hours following the decision. The CDS premium quickly climbed to the 257 level, ending the day with an increase of approximately 10.8 basis points. The rate of increase was 4.4 percent.
CDS indicates the cost of insurance taken out against a country's risk of defaulting on its debt. An increase in this indicator means that Turkey's external borrowing costs may rise, foreign investor perception may deteriorate, and pressure on the economy may intensify.