The news of the arrest of Ekrem Imamoglu last week triggered heavy losses in Turkey's capital markets, as many investors appear to be losing confidence in the presidency of Recep Tayyip Erdogan.

Turkish stocks experienced their worst week since the global financial crisis of 2008, with the blue-chip ISE 100 stock index losing more than 16% at the peak of the rout.

In response, Turkey's capital markets authority banned short selling and betting on further price declines. At the same time, it eased stock buybacks to support plunging shares. While the index initially rose by about 2%, it soon turned negative again, reaching its lowest level since November.

Observers agree that this development could become a major problem for Erdogan. In recent years, Turkish investors have turned to the stock market to protect their wealth from high inflation, which is hovering around 39% this month.

At the beginning of this week, Turkey's bond and stock markets stabilized somewhat after Finance Minister Mehmet Simsek pledged to do "whatever is necessary" to shore up financial markets.

He stated that Turkey continued to offer good long-term investment opportunities. Together with the governor of the Turkish central bank, Fatih Karahan, he reaffirmed President Erdogan's commitment to maintaining the investor-friendly policies pursued over the past two years to prevent a selloff of the Turkish lira.

The Turkish national currency has depreciated against the dollar, but the fact that it fell by only 3% reassured investors.........

© Deutsche Welle