Turkcell Iletisim Hizmetleri (TKC -0.66%), the Turkish telecom most usually known to investors simply as "Turkcell," became one of the biggest losers on the New York Stock Exchange today, falling 14.6% through 10 a.m. EDT.
Don't blame Turkcell itself for its decline, though.
This problem isn't limited to Turkcell, you see. The whole Turkish currency -- the Turkish lira -- tumbled as much as 15% in value this morning after President Recep Tayyip Erdogan fired Turkey's central bank governor over the weekend, reports the BBC. As of the end of last week, one U.S. dollar was worth 7.22 Turkish lira. Even after recovering a bit this morning, that same dollar will now buy you 8.12 lira -- 12.5% more.
Unfortunately for Turkish consumers, and unfortunately for Turkcell investors, central bank governor Naci Agbal had been credited with leading the fight against inflation in the lira, which had been running around 15% annually prior to his appointment. Prior to being sacked, he had helped the lira recover 20% of its pandemic declines in value (relative to the dollar). Agbal's firing, therefore, has investors spooked that inflation could now run rampant if the central bank stops tightening the spigots on its money supply.
Erdogan has named a replacement, banking professor Sahap Kavcioglu, who is said to be against using interest rates to control inflation. (Turkey's official interest rate is 19% currently.) Erdogan's finance minister, Lutfi Elvan, has tried to reassure investors of Turkey's commitment to a free market.
Analysts, however, point to Erdogan's "increasingly authoritarian approach" in running the economy, and predict the president will have his new appointee impose "capital controls" on the economy -- measures that might include setting prices on goods and services and limiting investors' ability to buy and sell the lira. Even if that doesn't happen, simply lowering interest rates could have the effect of making Turkey's currency less attractive to investors seeking strong returns on bond investments.
And that's why investors are now spooked.