Turkey has banned short selling across all stocks and relaxed share buyback rules to prevent further equity losses. The country’s benchmark index tumbled last week, triggered by the detention of a prominent opposition leader, Istanbul Mayor Ekrem Imamoglu. The new rules, announced late Sunday, expand a previous ban that limited short-selling to the top 50 listed companies.
The regulator has also allowed listed companies to repurchase shares at prices above the last market close and reduced the minimum equity capital protection requirement for margin trading from 35% to 20%. Imamoglu’s arrest on Wednesday caused a market rout, sending the Turkish lira to an all-time low and driving bond yields higher. The banking stocks index reported its steepest weekly drop since at least 2001.
In response, the central bank raised a key interest rate during an unscheduled meeting on Thursday.
Turkey curbs short selling amid crisis
At the margins, moves by authorities could quell things or stop markets moving in a volatile way, but the underlying concerns remain for investors,” said Kyle Rodda, a senior analyst at Capital.com in Melbourne.
He added that this “increases country risk in Turkey, which will widen credit spreads” and raises the chances of more central bank policy actions. According to Bloomberg’s indicative pricing, the Turkish lira was quoted around the 38-per-dollar level in Asian trading on Monday. The currency closed at 37.73 per dollar on Friday.
Kumiko Ishikawa, a senior analyst at Sony Financial Group in Tokyo, wrote in a research note to clients that there is a good chance that downward pressure on the Turkish lira will continue for the foreseeable future. On Sunday, Turkish central bank officials held a “technical meeting” with commercial lenders to prepare for potential market volatility, according to a statement from the Turkish Banks Association. The central bank also announced it will hold a liquidity bill auction with a 91-day maturity, the first such action in nearly two decades, aimed at absorbing excess lira.
Photo by; Imad Alassiry on Unsplash
