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EMRE DELİVELİ

emre.deliveli@gmail.com

EMRE DELİVELİ > Who is manipulating Borsa Istanbul?

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Markets were shocked on June 25 when Turkish equities watchdog Capital Markets Board (CMB) launched an investigation into the country’s top brokerages on transactions from May 20 to June 19.

The CMB has asked for specific information from certain brokerages in the past. But never before had they undertaken such a broad investigation. They have requested information on personnel, including their Turkish ID numbers, all institutional or personal research and information notes sent to clients and communications with, or orders from, foreign customers.

As Turkish daily Radikal columnist Uğur Gürses noted, out of 45 major stock markets, 43 fell excessively in June. This is not surprising: Worries that the FED would exit its quantitative easing and Japan’s own monetary policy experiment would fail defined the month. To my knowledge, Turkey is the only country that launched an investigation.



Turkish equities were indeed one of the worst performers in June, but this was as much because of the country’s vulnerabilities as the Gezi protests. As followers of Turkish markets know very well, Turkey performs better than other emerging markets (EMs) in good times but underperforms in bad times. This time was no exception.

But surprisingly enough, we did not see major outflows from Turkish equities. Using data from EPFR Global, a company that tracks fund flows, I found out that outflows from Turkey, in comparison to overall EM outflows, were not more than in other “escape from EM” episodes, and certainly smaller than what the drop in Borsa Istanbul would have justified.



This is in line with what ministers Ali Babacan and Mehmet “nominal $” Şimşek have stated, which I had dismissed as propaganda. Economist Atilla Yeşilada also recently noted, based on reports from Standard Bank and Merrill Lynch as well as his own contacts, that investors had not lost their faith in Turkey. But how come Borsa Istanbul fell so much then? A look at foreigner ownership data may provide some clues.



Interestingly, the usually robust relationship between foreign ownership and equity prices is very weak during the period of the CMB investigation. Foreign ownership did indeed fall sharply on June 29, shortly before the police crackdown at Gezi Park. While that may please conspiracy theorists, there was a major sell-off in EMs across the board that day. Foreigners then increased their share when stocks fell 10 percent on June 3.



While foreigners seem to have bottom-fished from May 29 to June 3, their behavior afterwards is quite different. They have been constantly lowering their ownership since then without taking Turkish equity performance into consideration. They continued to reduce their Turkey exposure on June 13 and 14, the last two days ownership data is available, despite the sharp bounceback in Borsa Istanbul.

In sum, if there was any manipulation, domestic residents were as responsible as foreigners. Maybe that’s why Prime Minister Recep Tayyip Erdoğan is going after the local banks.

July/01/2013

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READER COMMENTS

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cemal ahmet

7/1/2013 6:29:33 PM

There is always market/price manipulation & the name of the game here is manipulate to accumulate but the truth is BIST massively overvalued & gone too far-too fast and the correction was inevitable.EMs are always high risk/reward.After a strong start to the year, equity markets have stumbled on fears over the next steps for US FED monetary policy.Equities take a tumble as reactive markets hear tightening not tapering from the FED- look at the impact of QE on markets & what the correction means.

Dave Chapman

7/1/2013 5:01:30 PM

Anyone with the vaguest understanding of how the markets work would understand that RTE's investigation is the most ridiculous exercise, and a scandalous waste of tax payers money. The FED Reserve were turning off the tap of easy money which would patently affect economies such as Turkey, that is so reliant on hot money. Plus markets ALWAYS wobble when there is political instability. Add in AKP incompetency..I watched the BORSA plunge the day they re-entered the park, contra to the promise no to

Brian Irlanda

7/1/2013 12:50:26 PM

I don't think there was any manipulation. People definitely took advantage of the situation that was created 100% by the government. That is to be expected as people try to protect their money. People are shaken by the government rhetoric and are not convinced that Turkey can maintain it's global economy in a divided nation. Don't blame someone else on breaking your windows when you throw the stones yourself! :-) This a hilarious article really!

Köksüz Kosmopolit

7/1/2013 11:11:37 AM

Foreign investors? Just a few marauders. But don't worry: one prayer from RTE's people will be enough to make them go away.

JRC JRC

7/1/2013 10:01:17 AM

I have been trying to find out if the AKP have been demanding meteorological data from the same period, plus menus from all restaurants (including daily specials), as well as how many fridges were produced in Turkish factories. These could all be part of the Great Provocation of 2013. No stone must be left unturned (how many stones were turned during the unrest?).

Laz Kemal

7/1/2013 8:58:18 AM

Sultan wanna-be may not care about the local banks because he doesn’t have much to lose. According to wikileaks a few years ago he had 8 Swiss bank accounts. 10 years ago he supposedly even owed money to his son! But now his reported wealth info, real and exaggerated reports, are disgustingly elevated. He claims Gezi protests are due to jealousy of his government’s economic success. In reality people are jealous of how well he and his family, friends and cronies have done under his economy

Fr Grey

7/1/2013 8:00:45 AM

I believe the action of foreigners are/were forced by the weak TL. If the government wants to push down TL, why don't they sell now and buy back later? Readers, I don't believe the central bank (the government, too) wants to keep a stable TL, I believe they want to push it down in a steady rate. They intervened the market in order to save the stock market and slow down the sharp decreasing rate. Maybe they did keep TL stable in 2012, but in fact, TL has dropped from1.5 to 1.9 after 2009.

mara mcglothin

7/1/2013 2:47:20 AM

You forgot the "boogeyman" EMRE BEY! When all else fails, itis the the boogeyman to blame for everything.

cezer "çapulcu" skonore

7/1/2013 1:04:31 AM

From now on, you will ask the PM's permission to sell stocks in Istanbul market.

K M

7/1/2013 12:32:08 AM

I'm still laughing after reading your close. Well played. But I know I shouldn't be, because when governments can demand that sort of information on a whim -- or, let's face it, to intimidate -- it bodes ill for the bourse.
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