Istanbul: The stock and bond market rout at Turkey’s Bank Asya is starting to resemble the investor panic that overwhelmed African Bank Investments Ltd last month.

The Islamic lender has lost more than half its market value since trading resumed on 15 September after the shares were suspended from the Istanbul bourse for more than a month. On each of the six sessions since the restart the stock has closed down 10%, the maximum permitted by the exchange.

While the slump at Bank Asya mirrors a three-day run of losses at African Bank last month before it was rescued by the South African government, that’s where the similarities end. Investors deserted the Johannesburg-based lender after it surprised shareholders by saying it needed a second capital injection in less than a year to cover bad-loan losses. Asya is a casualty in a political feud that has pitted President Recep Tayyip Erdogan against exiled Islamic cleric Fethullah Gulen.

“Despite both being in trouble, the stories couldn’t be more different," Michael Harris, head of Turkey research at Renaissance Capital, said on Wednesday in an e-mailed response to questions. “African Bank lent poorly to South Africa’s lower quality borrowers and paid the price, while Asya has been collateral damage in the fight between Erdogan and Gulen."

Bank Asya’s deposits dropped 25% in the second quarter amid then-Prime Minister Erdogan’s criticism of the lender’s ties to Gulen and the withdrawal of funds by companies including Turkish Airlines, which is 49% government-owned. The lender plans to increase its capital to 1.125 billion liras ($509 million) from 900 million liras in a rights issue, it said in a 16 September statement.

Political battle

Erdogan and Gulen, a former ally who lives in self-imposed exile in Pennsylvania, became enemies after Erdogan accused Gulen of instigating a corruption probe against members of his government in December. Companies linked to Gulen such as Asya and miner Koza Altin Isletmeleri AS say they’ve been subject to negative regulatory actions and smear campaigns in the media in the months since.

While this time last year Asya was Turkey’s largest listed Islamic lender, its market value had dropped to 720 million liras by the close of trading on Wednesday, making it the smallest of the nation’s 16 bank listings.

“It’s a panic sale," Vedat Mizrahi, head of research at Unlu Securities, said in a phone interview from Istanbul. “There’s no downside limit. It will keep falling until someone decides it’s cheap enough to take the risk."

‘Economic lynching’

Earlier this week Erdogan called on the regulator to intervene in the bank. Asya responded by saying it’s paid all of its deposits on time and in full, and said that it faces “an economic lynching campaign."

Ordinary consumers are also seeking to help the bank. Cars, Xbox 360s and apartments are for sale on Turkey’s equivalent of eBay with the advertized purpose of helping the lender, whose bonds are the world’s highest-yielding Shariah-compliant notes not in default, data compiled by Bloomberg shows.

“There are obviously certain investors who want to sell the stock regardless of the price level," said Unlu’s Mizrahi. “Until those investors are cleared out the decline in this stock will continue." Bloomberg

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