Erdogan Retaliation Seen Hurting Gulen Companies: Istanbul Mover

By Benjamin Harvey Dec 23, 2013 – Bloomberg – Companies close to Fethullah Gulen’s religious movement plunged in Istanbul on speculation that Turkish Prime Minister Recep Tayyip Erdogan is regaining the upper hand in a power struggle with the Islamic cleric.

Islamic lender Asya Katilim Bankasi AS (ASYAB) slumped 11 percent, energy explorer Ipek Dogal Enerji Kaynaklari & Uretim AS also dropped 11 percent, gold explorer Koza Altin Isletmeleri AS (KOZAL) fell 6.6 percent and basic metals miner Koza Anadolu declined 12 percent at the close in Istanbul today. The companies are represented by business lobby Tuskon, which utilizes the Gulen movement’s network to expand in the developing world, according to the group’s chairman Rizanur Meral.

Erdogan and Gulen, a 75-year-old cleric based in Saylorsburg, Pennsylvania, have been exchanging barbs since Dec. 17, when an investigation into official corruption ensnared the chief executive officer of a state-run bank, a construction billionaire and the sons of three ministers. In a video published on his website on Dec. 21, Gulen wished fire on the houses of the corrupt. Erdogan responded yesterday, saying he’d “descend upon the dens” of those hiding inside state institutions.

“The sentiment is changing against Gulen,” Haydar Acun, a managing partner at Sardis Securities Inc., a brokerage in Istanbul, said by e-mail today. “The prime minister’s comments have obviously scared off investors.”

‘Parallel State’

The four companies were the biggest decliners on the exchange today. The Borsa Istanbul 100 (XU100) Index dropped 2.1 percent, extending losses since the Dec. 17 corruption probe to 9 percent.

Gulen, whose followers are influential in the judiciary and police forces that are leading the investigations into corruption, has denied any role in the probes. Erdogan says there is evidence of a “parallel state” within the state that’s seeking to overthrow his elected government.

Koza Group’s investor relations team, which also answers for Ipek, was in meetings and unavailable for comment today, according to a person who answered the phone at their offices in Ankara. Bank Asya, as the Islamic lender is known, didn’t immediately respond, requesting a written request for comment.

Grave Allegations

The allegations of corruption are “grave” and all steps in the probe should adhere to the rule of law, Tuskon said in an e-mailed statement today. Bribery in the state is “like cancer” and “will cause the country to collapse unless precautionary measures are taken immediately,” the group said.

More than 100 officers in Turkey have been purged by Erdogan’s government since the first detentions on Dec. 17 and journalists were banned from police stations as of yesterday. Erdogan said on Dec. 21 that he would reveal one-by-one those behind what he says is a plot against his government, and made reference to a media group that also owned gold licenses.

The Koza-Ipek group also owns Bugun newspaper, Bugun TV and Kanal Turk with its media unit Ipek Medya. Haberturk newspaper’s editor-in-chief Fatih Altayli said in an editorial on Dec. 22 that the government was planning an operation against a bank linked to Gulen, without naming the bank or saying how he got the information.

“Erdogan seems determined to hit the Gulen party where it hurts them most, in their Treasury coffers, by making unveiled, unambiguous threats to the Koza Group that their mining licenses could be revoked and instigating some kind of investigation into the operations of Bank Asya,” Julian Rimmer, a broker at London-based CF Global Trading U.K. Ltd., said in e-mailed comments today. “The share price collapses are understandable reactions given the high political stakes.”

Shares in property developer Emlak Konut Gayrimenkul Yatirim Ortakligi AS (EKGYO) jumped as much as 5.1 percent, the most in more than a month, before closing down 0.9 percent at the close. The company said Chief Executive Officer Murat Kurum and two board members returned to work yesterday following questioning by police in relation to the graft probe.

To contact the reporter on this story: Benjamin Harvey in Istanbul at