It’s normal at this point in the counting for Erdogan’s lead to look large as his strongholds typically announce results earlier, and sure enough he does…
With 27% of the ballot boxes opened in the presidential election, according to state-run news agency Anadolu, Erdogan has a commanding 58.33% of the vote (Ince at 27.28%, Aksener at 7.58%, and Demirtas at 5.69%) which means no second round of voting (since Erdogan’s count is greater than 50% (which is considerably better than expected).
And with 11.9% of votes counted in parliamentary election, according to Anadolou, Erdogan’s AKP has 51.9% of the vote (MHP at 13.1%, , CHP at 15.6%, IYI at 8.50%, and HDP at 7.33%).
So it looks like a done deal…right?
Maybe not – Opposition party CHP’s co-head Bulent Tezcan in live press conference in Ankara, says state-run news agency Anadolu is completely making up numbers.
“We’re chasing them closely. They are caught red-handed,”Tezcan says.
“Erdogan’s vote in the presidency has so far not exceeded 48 percent even once,” CHP’s Tezcan says. Some 9,638 ballot boxes have reported results so far. Erdogan’s share is 46.6 percent and Ince is trailing him with just above 40 percent, Tezcan says.
In Turkey’s presidential election, there are two scenarios: Either Erdogan wins and renews his mandate for another 5 years or he gets less than 50% and Turkey goes to a second round of voting in 2 weeks, @AnkaraWonk reports #tictocnews pic.twitter.com/CJlJi6oTPO
— TicToc by Bloomberg (@tictoc) June 24, 2018
So, to sum up, as expected, there is a huge discrepancy in vote tallies.
Anadolu Agency currently shows Erdogan at 57% with 38% of ballot boxes reporting.
The opposition CHP is saying in a press conference now that its parallel vote tally has never had Erdogan at above 48%.
CHP has Erdogan at 46.6% now — and they say the opposition’s going to win this one.
AKP President Recep Tayyip Erdogan and Republican People’s Party (CHP) challenger Muharrem Ince. Image via Hurriyet
Furthermore, such discrepancies are not unusual, as Bloomberg’s Constantine Courcoulas notes, here’s something to put the results reported so far by the state-run Anadolu Agency into perspective.
In the 2017 referendum, with 31 percent of ballots opened, President Recep Tayyip Erdogan’s “yes” camp” had secured 61.77 percent of the vote.
By the time 97.09 percent had been opened a few hours later, that had dropped to 51.42 percent.
Developing…
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As a reminder, for financial markets, each of the likely outcomes comes with associated risks.
In the past, Turkish assets have responded positively to political events that were perceived as increasing political stability, while responding negatively to political instability (Exhibit 2).
Exhibit 2: Asset prices tend to react positively to the perception of political stability in the short run
Turkish asset prices one day/week after political events
Source: Goldman Sachs Global Investment Research
Viewed from this perspective, a win for the AKP in both the presidential and parliamentary elections would be the most stable outcome. However, President Erdogan’s comments on monetary policy during the election campaign – advocating lower interest rates and indicating that he would play a more active role in monetary policy – have raised concerns over the future direction of monetary policy in the event of this outcome.
Though one glance at the current state of Turkish stocks, debt, and FX signals this is a considerable concern…
A split government (with Mr. Erdogan as President and the opposition obtaining a majority in parliament) would likely represent the most negative outcome for Turkish assets, in our view, as it would imply political instability and high levels of uncertainty over the future direction of monetary policy.
An opposition victory in both elections would also bring significant challenges, not least the task of forming a new government and agreeing on a cohesive legislative programme. However, under the assumption that these challenges can be overcome, we would expect it to be the most market-friendly scenario in the medium term.
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