Yesterday saw the Turkish stock market fall more than 7% in response to last weeks failed Coup attempt. The cost of insuring against a default on Turkish government debt based on five-year credit default swaps rose 22bp as investors took stock of underlying political risks in the country.

Piotr Matys at Rabobank told FT.com that “We expect Turkish assets to be vulnerable in the short term.” And that “Turkish bonds and stocks face a turbulent period due to heightened political risk.”. Viewing political risk in the context of single events and short term gains and losses underlies the fundamental and yet commonplace misapplication of political risk metrics by analysts. Let’s look at one political risk indicator – expropriation – as a leading indicator of political instability in Turkey. Expropriation is an excellent example because like political risk as a whole, expropriation is often analysed and priced in the context of single events rather than as a predictive leading indicator of political instability.

Monday also saw Turkey halt the operations of Bank Asya, an Islamic lender linked to U.S.-based Muslim cleric Fethullah Gülen. Rather than being the first salvo fired this was actually the final action in a long ‘creeping’ expropriation and ultimate shut down of Bank Asya.

In February of 2015 Turkey took control of the assets of Bank Asya citing insufficient transparency and an unclear ownership structure at the bank. While denied by the government, the move was clearly a politically motivated expropriation as part of the escalating power struggle between President Tayyip Erdogan and the exiled Fethullah Gülen.

Bank Asya was started by supporters of the Gülen Movement and provided direct banking services to a number of its powerful supporters. In 2014 savers withdrew more than 20% of the Banks’s deposits over fears of the intensifying power struggle when the government accused the Gülen Movement of infiltrating state institutions such as the police and the judiciary through large-scale cheating and nepotism with the aim of toppling the government.

In the days following Bank Asya’s expropriation in 2015, the Turkish government cancelled Gülen’s passport while continuing to deny any political motivations for the Bank Asya seizure. Bank Asya is one of more than 20 Gülen-related companies, including some opposition media outlets, that have been hit by government crackdowns and creeping expropriations over the last two years.

These actions by the Turkish government seen in aggregate, rather than as single events, provide a valuable insight into the developing political instability in the country. When combined with other leading political risk indicators we can see that volatility in the Turkish market was and remains much higher than is being reflected in prices.

Investors should be watching events in Turkey not in the context of short term shocks but as indicators of overarching medium term political instability.