UPDATE 1-Turkish markets rally as key opposition ruling delayed

Turkey's stocks, bonds and lira currency rallied on Monday after a court delayed a ruling on whether to oust the main opposition party's leader over alleged irregularities. The adjournment to October 24 gave some respite to traders who were bracing for a potentially disruptive blow to the Republican People's Party (CHP) and its chairman, Ozgur Ozel - though some analysts warned the rallies could be short-lived.

The main Istanbul stock index jumped 5.4%, the banking sub-index rose 6.19%, and the lira, which has been at record lows, was on course to end a six-day run of falls. Government bonds also gained as much as 1 cent in the international debt markets, after the delay in the case seen as a test of democracy under President Tayyip Erdogan.

The 2043 maturity rallied to just under 74 cents on the dollar while the cost of insuring against a Turkish default dropped to its lowest since March. "The recent gains in Turkish bonds and stocks, as well as the strengthening of the lira, are unlikely to be sustainable given that the Ankara court has only delayed its ruling," Erik Meyersson, Chief Emerging Markets Strategist from SEB, said.

"Foreign exchange movements have been relatively modest, and the underlying risks remain. This is not a victory for the opposition," he added. The centrist CHP, which denies the charges of corruption and other irregularities against it, is level with Erdogan's Islamist-rooted, conservative AK Party (AKP) in opinion polls.

If the court goes on to rule next month to annul the CHP's 2023 congress over the alleged irregularities, that would strip Ozel of the title of chairman that he won there. The court on Monday rejected plaintiff requests to suspend Ozel, 50, and his administration pending a verdict. It ordered the CHP and election boards to submit information on CHP general and Istanbul congresses after they take place next week.

Capital Economics strategist Liam Peach said the court delay gave investors temporary space to focus on the broader economic policy shift in the country. "Absent any big political news over the next month, the decision is unlikely to have a major bearing on capital inflows into Turkey, which we expect to benefit from ongoing disinflation and the central bank's easing cycle," Peach said.

Anti-Erdogan street protests had flared in recent days ahead of Monday's court ruling, and the case has badly rattled Turkish assets. Hundreds of CHP members, including Erdogan's main political rival, Istanbul Mayor Ekrem Imamoglu, have been jailed pending trial in a separate, sprawling legal probe into alleged graft and terrorism links.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)