An emergency meeting was decided when the situation started to threaten the system in Borsa Istanbul, which first rose tremendously and then fell by 14 percent with today’s depreciation in the last week, with the transactions initiated by a few big stock market players in public and private banks and bar few real sector shares 1.5 months ago. Intermediary institutions and government institutions are currently holding a summit in the Association of Capital Market Intermediary Institutions.
Borsa Istanbul, which closed the last week with 9 percent minus, recovered in the morning hours, while sales started again in the afternoon. It was stated that the daily loss reached 5.3 percent and that İşbank’s suspension of the MIR system was also effective in the developments that required the operation of the circuit breakers of Borsa Istanbul.
Due to the extraordinary transactions made in banking stocks for a while, the state banks, which had a ceiling for days in the stock market, which rose 59 percent in 1.5 months, and the fact that the process was reversed this time in a few stocks and the base sales continue today, an emergency summit is meeting.
WHAT HAPPENED TO THE EXCHANGE?
1- While the high inflation, which is the gift of the pandemic to the whole world, made itself felt much more in Turkey than in other countries, the economy management decided to lower the interest rates instead of raising them. While this situation punished those who hold deposits in Turkish Lira by melting their money against inflation, it also brought about high volatility in the foreign currency. However, many measures taken by the economy management and the Central Bank, especially the Currency Protected Deposit, have managed to keep the rise in the exchange rate, which may mean a crisis in the economy, at the level of 18 lira for now. Agreements to increase reserves made from various countries, especially Russia, also strengthen this set. On the other hand, it is not difficult to guess that if the economy administration cannot restrain the rise in the exchange rate as the election approaches, it will do its best to prevent inflation from creating bigger problems. If there is no interest, there is only one option left: the stock market. Treasury and Finance Minister Nurettin Nebati also expressed this situation. He made a statement that the citizen will earn by investing in the stock market.
SELF-FEEDING SYSTEM IS STARTING TO BE ESTABLISHED
2- Based on the facts above, the big players of the stock market have established a self-sustaining system even if they do not have big money in their hands. It is also said that they received support from the state, especially the Wealth Fund, while establishing this system, but let’s just say that this information is only circulating as gossip. As the sector, banking, which has very low prices (up to one third of the book value in some banks), was chosen due to the exit of foreign investors from Borsa Istanbul. In other words, the shares bought were not expensive but cheap. So how was the system set up? Let’s explain it in parts.
a- Investors, including the oldest players of the stock market, started to trade in the shares of public and private banks and a few real sector companies on the Futures Market (VIOP). In this market, you deposit the amount between 10 and 15 TL as cash collateral, not the entire equivalent of the stock you buy in futures. If the share price decreases in the stock market, the coverage is completed, and if the share price increases, there is an excess of coverage. When the stock increases by 1 in the stock market, you earn 10 liras in VIOP.
b- On the other hand, players buy the same shares in Borsa Istanbul (spot market) with their money. Of course, this is not enough, the partner is also given a share. Thus, the price of the shares in the spot market rises. As the share price rises, other investors join the movement.
c- As share prices rise in Borsa Istanbul, 10 to one is earned in VIOP and the deposited collateral becomes more. So there is an excess of collateral. Investors with this increased collateral invest this amount in the same shares in the spot market in the stock market. As a result of this transaction, the volume of loans given by brokerage houses to this investor also increases. More credit also means buying more shares and a higher rise in the stock price. Ascension continues in such a system that feeds each other.
13 IS THERE A CEILING SHARE?
With the last operation, the share of a public bank reached 13 ceilings with this system. There were similar climbs in other stocks as well. This brought the banking index up 150 percent and the stock market by 59 percent. So what happened last week?
3- The biggest support of the players was that they took over most of the shares that were bought and sold in the market with this system. In other words, there was no longer any seller in the face of rising shares. For this reason, as the share price increased, the ceilings continued in the shares seized with the excess collateral obtained from VIOP.
IS THE GAME DROPPING? WHAT WILL HAPPEN AFTER THAT?
What disrupted the established system was the sale of Akbank shares, amounting to approximately TL 150 million, made by the Akbank employees’ fund. Investors who saw this institutional sale were already waiting for a return due to the rapid rise, panicked and sales started. Investors who previously lined up to buy shares are now lining up to sell the same shares.
4-This allowed the machine to operate in reverse this time. In other words, the excess collateral that was previously formed while the share price was rising turned into a deficit this time. Brokerage houses asked investors to fill the collateral gap in VIOP. Investors who invested their earnings from VIOP in stocks in the spot market, that is, who did not have enough cash, had to sell their shares in the stock market. Or brokerage houses started to fill their margin gaps by selling the shares of these investors. In the next period, either investors will find cash or their shares will be sold, depending on the day and time of the collateral.
CAN THE ONE WAY EXCHANGE POLICY BE AVOIDED?
So what is expected next? The biggest fear is the spread of the movement, which is limited to a limited number of stocks, especially banking. In other words, the panic of other investors from these declines or the large investors who need cash to sell in other stocks. Another important issue is the obligation to complete these guarantees on bank shares by 30 September. By September 30, investors will either find cash to buy and replace these shares, or sell their holdings and close the transaction. The third possibility is that the investors put these shares on sale in order not to make a loss and to get back the loans they gave. In this process, it is feared that both individuals and intermediary institutions will be in a difficult situation. To put it more clearly, the possibility of some investors going bankrupt and some intermediary institutions incurring huge losses due to these movements is being expressed.
However, it is important how the situation will reflect on other stocks in the stock market. As we wrote above, the risks of investors panicking due to the continuing grassroots movement in some stocks and the fact that large investors in need of cash have to sell their other stocks remain as the biggest problem for us. However, due to the low interest rate and stabilization policy of the economy administration and the cheapness of the listed companies, the number of people who expect the next situation to be good in the stock market is high. On the other hand, based on the statements of Minister Nabati, it is necessary to consider the need to provide a way for the investor who loses in interest and foreign exchange. So to speak, the question of whether the economy administration will easily give up on the stock market, which is shown as the only means of protection against inflation, will determine the next process.
The fact that the Capital Markets Board (CMB) remained a spectator to what happened lastly drew a great reaction. The CMB, which requested an explanation from the company for 2-3 percent rises in some shares, did not ask for any information from the banks while these movements were taking place.