By Canan Sevgili and Halilcan Soran
(Reuters) - Turkey's stock market has logged its worst two days since the global financial crisis of 2008 this week, with bank shares plunging and stop-loss halts activated after President Tayyip Erdogan shocked investors by sacking the central bank governor.
The fall in the main BIST-100 index on Monday was the largest since mid-2013, when a "taper tantrum" in response to the U.S. Federal Reserve's announcement it would ease asset purchases in future rattled emerging markets including Turkey.
In the two sessions after Erdogan's firing on Saturday of Naci Agbal, a policy hawk, in favour of Sahap Kavcioglu, who like Erdogan is a critic of high rates, three circuit breakers briefly halted all trading on the Istanbul exchange.
Although the index briefly turned positive on Tuesday in high volatility following an initial dive, analysts said foreign investors were abandoning positions.
"Foreigners are vacating their positions at their losses regardless of the price, and the reaction in the market seems difficult until these orders are finished," said Enver Erkan of Tera Yatirim.
Graphic: Turkish stocks - https://fingfx.thomsonreuters.com/gfx/mkt/nmovarddgpa/stockgraphic.png
Agbal, appointed less than five months ago as the fourth governor in five years, had drawn market plaudits by lifting the policy interest rate by 875 basis points, to 19%, to curb double-digit inflation. The latest hike was on Thursday, two days before he was removed.
One of Erdogan's economic advisors, Yigit Bulut, called the stock selloff a temporary speculative attack. Speaking on broadcaster Haberturk, he said Turks had sold $5.1 billion on Monday to profit from high exchange rates as the lira fell to near record lows following Agbal's departure.
Before the partial recovery, Turkey's banking index was down 8%, with Garanti Bank and Akbank leading the losses.
Many local retail investors selling shares "recently entered the market and have no experience with sell-offs," said Tuncay Tursucu, director of research at Integral Securities. "On the other hand we see companies and stakeholders keep on buying and taking gradual long term positions."
Tursucu added the selling may continue through the week.