Turkey’s capital markets regulator has implemented sweeping measures to stabilize the stock market, including an outright ban on short-selling across all listed companies and the relaxation of share buyback regulations. These actions come in response to a sharp decline in the country’s equity markets after the detention of a prominent opposition leader, Istanbul Mayor Ekrem Imamoglu.
Announced on Sunday, the new regulations extend a previous short-selling ban, which had only applied to the top 50 listed companies, to cover all stocks. Additionally, the rules now allow companies to repurchase shares at prices above their last market close, a move designed to support market prices. The minimum equity capital protection for margin trading has also been reduced from 35% to 20%, further easing conditions for investors.
The market turmoil began after Imamoglu, a leading figure opposed to President Recep Tayyip Erdogan, was detained on Wednesday. His arrest triggered a sell-off, driving the Turkish lira to record lows and pushing bond yields to new highs. The banking sector was hit hardest, with its index recording its most significant weekly drop since at least 2001. In response to the crisis, Turkey’s central bank raised interest rates in an unscheduled meeting on Thursday.
Despite the emergency measures, experts caution that underlying concerns about Turkey’s economic stability remain. Kyle Rodda, a senior analyst in Melbourne, noted that while the authorities’ actions might temporarily stabilize the market, the fundamental risks persist. “This increases country risk in Turkey, which will widen credit spreads,” Rodda said, suggesting that more central bank interventions may be necessary.
As of Monday morning, the Turkish lira was trading at approximately 38 per dollar, according to indicative pricing, down from a Friday close of 37.73. Kumiko Ishikawa, a senior analyst at Sony Financial Group in Tokyo, warned that downward pressure on the lira is likely to continue in the near term.
To mitigate potential volatility, Turkish central bank officials convened a “technical meeting” with commercial lenders on Sunday, according to the Turkish Banks Association. Additionally, the central bank announced plans to hold a liquidity bill auction with a 91-day maturity—a move aimed at absorbing excess lira from the market, marking the first such action in nearly two decades.
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