ISTANBUL: Banking stocks led Turkish shares lower and the lira eased on Monday after Moody's said the country needed to improve its resilience to external shocks to win an investment grade rating.
The main Istanbul share index dipped 4.2 percent to 81,165.81 points, underperforming a fall of 0.7 percent in the global emerging markets index. Banking stocks fell 5.6 percent.
The lira eased to 1.7726 to the dollar by 1721 GMT, from 1.7698 late on Friday. Against its euro-dollar basket it slightly eased to 2.0758, from to 2.0742.
The yield on the two-year benchmark bond closed at 5.85 percent, a touch lower than Friday's close at 5.88 percent.
Moody's, which rates Turkey just below investment grade at Ba1 with a positive outlook, said the country needed to narrow its current account deficit, boost foreign reserves, or reduce private sector external borrowing to win an upgrade.
Fitch upgraded Turkey to investment grade at BBB- in early November, and Turkey needs at least one of the two other major ratings agencies to follow suit for it to join benchmark investment grade bond indexes, a status that many funds require before investing in a country.
Hopes that Moody's would upgrade Turkey had boosted Turkish assets in recent weeks.
"It seems that today's statement delayed the market expectations about Turkey getting a rating upgrade to investment grade soon from Moody's," said Bilge Gonen, head of forex at Burgan Bank.
Shares in Turkey's Isbank fell 7.26 percent to 6.64 lira after the bank's retirement fund said it will gradually sell 45 million lira worth of nominal shares, equivalent to 1 percent of its equity, in the stock market.
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