Turkish stocks entered a technical bear market on Tuesday
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Bloomberg News
Tugce Ozsoy and Taylan Bilgic
Published Feb 08, 2023 • 3 minute read
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A trader talks on his phone inside the trading room of the Borsa Stock Exchange in Istanbul Turkey, June 25, 2018. Photo by Kostas Tsironis/Bloomberg Turkey’s stock exchange suspended trading for the first time in 24 years, following a selloff that erased US$35 billion from the value of its main equities gauge in the wake of two devastating earthquakes.
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Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors “Our stock exchange has decided to halt trading in equities, futures and options markets,” Borsa Istanbul said in a statement on Wednesday morning, following two market-wide circuit breakers. It didn’t say when trading would resume.
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The benchmark Borsa Istanbul 100 Index has lost 16 per cent this week, erasing almost US$35 billion from the value of its member stocks, in the aftermath of two deadly earthquakes that struck Turkey’s southern region. Turkish stocks, which are this year’s worst performers globally, entered a technical bear market on Tuesday after falling more than 20 per cent from their January high.
“At times of catastrophes like this, suspending trading in the stock market is a better decision in order to protect investors,” said Haydar Acun, managing partner of Marmara Capital in Istanbul. Investing in equities is popular among locals as a hedge against the country’s rampant inflation, which surged to a high of around 86 per cent in 2022.
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The death toll from the powerful earthquakes that hit 10 Turkish cities and parts of neighbouring Syria has already topped 8,000, with emergency teams racing against time to rescue potentially thousands of victims trapped in the rubble in freezing temperatures. Turkey has begun deploying soldiers in areas hit by the tremors following the announcement of a three-month state of emergency.
Panic trading Memories of 1999, when an earthquake hit Turkey’s industrial hub near Istanbul, contributed to panic among retail traders this week. Trading in Turkish stocks was suspended for a week at the time, leading to discussions among market players this time around whether it would be more appropriate to do the same.
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Article content “The current panic and pessimistic mode may have also increased risks for traders as it clouds rational thinking. It’s late, but still the right decision to take,” said Mehmet Gerz, chief investment officer at Istanbul-based Ata Portfoy.
The slump in Turkish stocks is the worst three-day drop since December 2021 and is set to be the worst weekly performance since the 2008 global financial crisis. Several automatic market-wide circuit-breakers were triggered on Tuesday and Wednesday after Turkey’s Capital Markets Board eased some of the precautionary measures it took on Monday in order to limit the fallout.
The total number of equity investors from the quake-hit cities stood at around 380,000 as of January, according to statistics from the Central Securities Depository of Turkey. That makes up about 10 per cent of all equity accounts investing in the Turkish stock market.
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Article content Before trading was halted, several companies had been trying to contain the damage to their shares by announcing share repurchase plans. Among them were state-owned Turk Telekomunikasyon AS, which announced a new buyback program on Wednesday before the market opened, and mobile phone operator Turkcell Iletisim Hizmetleri AS, which increased the amount it’s allocated for bond, stock and ADR buybacks.
Nasdaq’s 2023 ‘junk rally’ flies in the face of risky backdrop Big Tech is back, but be careful about going all in on rate-sensitive sectors Three important investing terms that confuse investors to their detriment Some exchange-traded funds tracking Turkish assets in Europe and the US were still trading after the Turkish gauge was suspended. The iShares MSCI Turkey UCITS ETF was down about 7.4 per cent as of 12:10 p.m. in London, while the iShares MSCI Turkey ETF fell 5.9 per cent in U.S. premarket trading.
On Twitter, the hashtag “#borsadaislemleriptaledilsin” — calling for cancellation of this week’s trades on Borsa Istanbul — was the top trending topic in Turkey on Wednesday.
“There’s a liquidity crunch, so if the market remained open, it would have continued to plummet,” said Gokhan Uskuay, a fund manager at Istanbul-based portfolio manager Allbatross. “It may be too late for the exchange to cancel Monday’s trades, but it’s possible to cancel trades on Tuesday and Wednesday, and that’s what they should do,” he said.
—With assistance from Inci Ozbek.
Bloomberg.com