Turkey's lira weakened to an all-time low and stocks plunged after voters denied the ruling AK Party a majority government for the first time since 2002, raising the prospect of a coalition and conflict with President Recep Tayyip Erdogan. The currency tumbled as much as 5.2 per cent and the benchmark stock index dropped the most in two years.

The ruling Justice and Development Party, or AK Party, won 40.9 per cent of the vote, giving it 258 seats in parliament, according to preliminary results from the state-run news agency. It needed 276 to form a single-party government. The pro-Kurdish Peoples’ Democracy Party, or HDP, passed the 10 per cent threshold of the national vote needed to win seats in parliament, denying AK Party a majority. If a new government can’t be agreed upon within fourty-five days, the country may have to hold elections again. The results also mean the party won’t be able to deliver its key campaign promise of formally shifting the nation’s center of executive power from parliament to the president.

"There's far too much uncertainty at the moment," Kerem Baykal, a money manager at Ak Portfoy in Istanbul, said by e- mail on Sunday. "We don't even know which party or parties will be in the coalition, and on the very pessimistic side, if any party will join a coalition at all. That could even mean early elections. I don't think there will be a recovery until we get clarity on this."

The lira dropped to 2.8096 per dollar before trading at 2.8061 at 9:39 a.m. in Istanbul and the Borsa Istanbul 100 Index sank 8.2 per cent at the open of trading. The yield on the 10-year government bond jumped 63 basis points to 9.95 percent, the highest since September 2014 on a closing basis.

Bloomberg