Turkey’s securities regulator has widened its ban on short selling, extending it to all shares in an effort to curb the rapid market decline that followed the arrest of a key opposition figure.
This action comes as the nation’s benchmark index plummeted 17% after the detention of Istanbul’s mayor, a noted adversary of President Recep Tayyip Erdogan. The arrest sent shockwaves through financial markets, dragging the lira to its lowest level ever against the dollar and pushing bond yields upwards.
Announced on Sunday night, the new regulations extend past limitations that restricted short selling primarily to the top 50 companies.
Additionally, the Turkish regulators also revised rules on the share repurchase program. Now, firms listed on the Turkish exchange can conduct share buybacks above previous closing prices, while the requirement for equity protection in margin trading has been loosened to 20%, down from the former 35%.
These interventions are a direct reaction to the market disorder instigated by the apprehension of Ekrem Imamoglu. After the news emerged last Wednesday, the tumultuous economic landscape prompted the banking regulator to convene with prominent financial leaders on Sunday, discussing strategies to buttress the market ahead of the anticipated chaotic start to the trading week. Meanwhile, the central bank took an unusual step, increasing an important interest rate in a surprise session on Thursday while holding its main rate steady.
Early trading in Asian markets saw the Turkish lira quoted at 37.99 against the dollar, indicating continuing instability, according to LSEG.
The countermeasures announced are set to remain effective until April 25 as authorities strive to stabilize the economic and political climate.
