- Borsa Istanbul suspended trading of equities, derivatives
- First market-wide suspension of trading in Istanbul since 1999
According to Bloomberg article published on February 8, 2023, Türkiye’s stock exchange suspended trading for five days and canceled all trades executed on Wednesday, following a selloff that erased billions of dollars from the value of its main equities gauge after two devastating earthquakes.
Trading in Turkish equities, futures and option contracts was halted today and will resume on Feb. 15, according to a statement from Borsa Istanbul on Wednesday afternoon. It’s the first time in 24 years that the exchange has stopped trading.
Borsa Istanbul has also canceled trades that were executed on the morning of Feb. 8 before transactions were suspended, citing low trading volumes. Before those cancellations, the benchmark Borsa Istanbul 100 Index had erased $35 billion in value and was headed for its worst weekly performance since the 2008 global financial crisis.
Even with Wednesday’s trades being removed, the two days of selling following the deadly earthquakes in Türkiye’s southern region wiped out $21 billion in value. Turkish stocks, which are this year’s worst performers globally, entered a technical bear market on Tuesday after falling more than 20% 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% in 2022.
The death toll from the powerful earthquakes that hit ten Turkish cities and parts of neighboring Syria has already topped 11,000, with emergency teams racing against time to rescue potentially thousands of victims trapped in the rubble in freezing temperatures. Turkish President Recep Tayyip Erdogan promised to rebuild the disaster zone following the announcement of a three-month state of emergency.
Panic Trading
Memories of 1999, when an earthquake hit Türkiye’s industrial hub near Istanbul, contributed to panic among retail traders this week. Trading in Turkish stocks was suspended for a week at that time.
“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.
Several automatic market-wide circuit-breakers were triggered on Tuesday and Wednesday after Türkiye’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 Türkiye. That makes up about 10% of all equity accounts investing in the Turkish stock market.
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.
Some exchange-traded funds tracking Turkish assets in Europe and the US were still trading after the Turkish gauge was suspended. The iShares MSCI Türkiye UCITS ETF was down about 7.4% as of 2:40 p.m. in London, while the iShares MSCI Türkiye ETF fell 6.2% in US trading.
On Twitter, the hashtag “#borsadaislemleriptaledilsin” — calling for cancellation of this week’s trades on Borsa Istanbul — was the top trending topic in Türkiye 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.
