What happened
For the fourth day running, shares of Turkcell Iletisim Hizmetleri (NYSE: TKC), Turkey's largest cellphone company, jumped on Thursday, and were up 5.5% as of 10:45 a.m. ET.
And yet, this isn't really a story about Turkcell. It's about Turkey and the Turkish lira -- and the Turkish president.
Image source: Getty Images.
So what
The Turkish lira has lost more than 50% of its value this year. Turkey's president, Recep Tayyip Erdogan, has been trying to halt the currency's slide by the strange tool of lowering interest rates in hopes of reducing inflation. (Most economists will tell you that lowering interest rates is the exact opposite of what to do if you want to reduce inflation.)
This week, Erdogan decided to try something different, and it's working a bit better. As Turkey's Daily Sabah newspaper reports, the president is calming bank depositors' nerves by promising that the Central Bank of Turkey will compensate Turkish account holders for any loss in value of their deposits vis-à-vis foreign currencies. The Central Bank is furthermore setting stronger official exchange rates for the lira relative to the U.S. dollar, offering to pay only 11.64 Turkish liras per dollar today, versus 12.34 liras on Wednesday.
Now what
Put down your calculators. That works out to about a 6% one-day appreciation in the value of the lira versus the dollar, or about the same amount that Turkcell stock is up today.
The logical conclusion: Turkcell stock is going up because the value of the currency is uses to collect its revenue just went up. And Turkcell should keep on going up as long as the government has the financial wherewithal to continue supporting the value of the lira.
If Turkey's government runs out of hard currency, though -- look out below.
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