Local buying supports Turkish lira but shares slip

ISTANBUL, Nov 13 (Reuters) - Turkey's lira regained some lost ground on Thursday as Turks sold dollars to cash in on one of the lira's weakest levels since 2006, but stocks tracked global markets lower after a swathe of grim data.

With uncertainty beginning to surround the U.S. Treasury's banking rescue plan, and fresh data showing Germany -- Turkey's largest trade partner -- fell into recession for the first time in five years in the third quarter, risk aversion dominated.

By 1245 GMT the main stock exchange index traded down 1.48 percent lower at 24,966 points, outperforming the MSCI emerging market index which was down 2.52 percent.

Turkish stocks have now lost 55 percent of their value since the start of 2008 -- and third quarter earnings from Turkish companies have provided little comfort.

By 1240 GMT the Turkish lira traded at 1.628 to the dollar, up around 0.7 percent from Wednesday when it closed at 1.639 after suffering a 4.5 percent loss.

"In the last few days a mood of panic dominated on international markets, but now this is subsiding a little. People are waiting to see what will emerge from the G20 meeting this weekend," said HSBC strategist Fatih Keresteci.

"Locals are selling their dollars now and buying lira in anticipation of good news from the G20 meeting and maybe even a deal with the IMF which would then see the lira strengthen," said an Istanbul-based foreign exchange trader.

The lira has lost approximately a third of its value against the dollar this year, and is now trading at a level -- despite a brief dip last month -- last seen in early 2006.

Leaders of the Group of 20 industrialised and emerging nations -- including Turkey -- meet this weekend in Washington.

Besides the general global economic slowdown, economists say concerns over how Turkey will secure billions of dollars of foreign financing in the credit squeeze are weighing on markets.

Investors are keen for Turkey to sign up to another IMF stand-by deal given global financial turmoil, but analysts say the government is reluctant to commit to an agreement that would likely limit its room to spend ahead of municipal elections.

Turkey's $10 billion loan deal with the IMF expired in May.

BANK STOCKS

Shares in Turkish banks outperformed the index, boosted by a report by ratings agency S&P which outlined their resilience in the global market turmoil due to diversified funding and strong liquidity.

However major lender Yapi Kredi traded down 1.7 percent at 1.7 lira, after the bank posted a 14 percent rise in third-quarter net profit.

Analysts at Is Invest said although results were above market consensus the bank's profitability would start to worsen in the coming periods.

The most traded stock Garanti Bank traded down 1.4 percent at 2.10 lira.

The yield on the benchmark June 23, 2010 bond fell slightly to 22.50 percent from 22.51 percent the previous day.

(Reporting by Alexandra Hudson and Nevzat Devranoglu; editing by Patrick Graham) Keywords: MARKETS TURKEY

(alexandra.hudson@reuters.com; Telephone: +90 212 350 7062; Reuters Messaging: alexandra.hudson.reuters.com@reuters.net)

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