Why did the stock market crash? – Baris Soydan

Is the fairy tale in the stock market turning into a nightmare? Borsa Istanbul, which has been rising continuously since the middle of last summer and whose annual return has reached 190 percent for a while, closed the day with a 7.37 percent decline yesterday. The BIST 100 Index was cut off twice during the day, in other words, the transactions were suspended due to the sharp decline. Circuit breakers also worked in the giant shares of the stock market.

Is the tale over? We will get the answer to this question today. Since the BIST 100 index closed the day below the support level of 5.200, it is highly probable that the decline will continue. Margin calls for margin traders on the Futures Exchange (VIOP) may also cause the decline to continue. (It is possible to trade on credit in VIOP. However, it is necessary to provide sufficient capital – collateral – for this.)

But we still can’t say for sure, because what’s going on in Borsa Istanbul this year is far beyond market dynamics. I posted a few weeks ago “Is the rise in the stock market hormonal?” In my article titled, I stated that there was talk of a conscious strategy to keep citizens away from foreign exchange before the election, and that there were serious allegations in this direction in Ankara as well. There were also those who said that the Turkey Wealth Fund established the strategy, and there were those who said that public intermediary institutions and some private intermediary institutions were involved.

In that article, I made the following warning: “If the rise is not realized within the dynamics of the market itself, or if it exceeds the dimensions that can be realized within its own dynamics, the wind may change in a sudden as experienced investors will not want to enter the election in stocks/positions.”

That’s what yesterday’s drop is associated with. President Erdogan‘s yesterday “We can delay the election.” statement brought the uncertainty of the post-election period to the agenda.

But that’s the trigger. The main reason for the decline is Borsa İstanbul’s over-inflation. BIST 100 Index has nearly doubled in dollar terms since the beginning of the year. Ratios such as Price/Earnings, Market Value/Book Value, which show whether a company is expensive or cheap in the stock market, have risen to unbelievable levels in many stocks. It was clear that many shares were too expensive. On the other hand, it was normal for the stock market, which had been rising without stopping, to make a correction.

However, as I just said, the stock market has long been out of the “business normal”. Rufais are mixing in Borsa Istanbul! Those who set up the strategy of keeping the citizens away from foreign exchange before the election will try to keep the decline limited.

But on the other hand, there are smart investors who know that the stock market is overblown and that there is great uncertainty awaiting Turkey after the election. They can win the arm wrestling this time. We are in a time when we have to be very careful.