Nfter heavy price losses as a result of the earthquake in the Turkish-Syrian border region, the Istanbul stock exchange remains closed. Trading in Turkish stocks, futures and options contracts, which was halted on Wednesday, is set to resume on February 15, Wednesday next week, Borsa Istanbul said.
After the first interruption to trading within 24 years, in 1999 after a severe earthquake near Istanbul, the management also announced that it would reverse all transactions that had been made on Wednesday morning before the business was suspended. The low transaction volume made efficient pricing impossible.
Computer programs had previously stopped the crash of the indices of the most important 100 values, the BIST 100, at 7 percent. Compared to Friday a week ago, the discount was 16 percent, after Wednesday’s cancellation of trades the loss was still 9.9 percent. According to figures from the trade supervisory authority, the trading volume of 2.24 billion trades was well below the average on Tuesday, last Friday it was more than 4 billion.
Extraordinary price movements
The consequences of the earthquake, with tens of thousands of dead, injured and missing, have led to high volatility and extraordinary price movements, the stock exchange operator explained: In order to ensure the reliable, transparent, efficient, stable, fair and competitive functioning of the markets, stocks are traded and derivatives. Before the trading halt, some companies tried to limit the damage to their shares by announcing share buyback plans. These included state-owned Turk Telekom and mobile operator Turkcell.
The earthquake caused major damage to many thousands of houses, roads and technical infrastructure. In many places in the quake area, gas and power lines have been cut. However, a 400,000 barrel-per-day oil pipeline from Iraq has resumed operations at the previously closed Cheyhan oil port. Meanwhile, the Baku-Tbilisi-Ceyhan pipeline coming from Azerbaijan remained out of service. The semi-public airline Turkish Airlines announced flights for tens of thousands on special terms from the earthquake area.
$35 billion price loss
By Wednesday’s trading halt, the benchmark index had lost $35 billion and was heading for its worst weekly result since the 2008 financial crisis. Even after reversing Wednesday’s transactions, the (book) losses from the two-day bear rally after the quake caused $21 billion. After Turkish equities had performed best worldwide in the previous year, they are showing exactly the opposite development after 6 weeks into the new year.
This hits many domestic investors hard, who had seen equity investments as a stable investment in the face of galloping inflation, which is currently still 58 percent year-on-year. International investors had turned their backs on the market because of recurring turmoil and President Recep Tayyip Erdogan’s “unorthodox economic and monetary policies,” which include interest rate cuts despite rising living costs. Local investors last held 70 percent of stock holdings, up from 35 percent in 2020.
Demand for reversal of all transactions
Demands from domestic investors for a reversal of all trading transactions from Monday and Tuesday can also be explained against this background. “We demand the reversal of all transactions that took place on Borsa Istanbul from February 6, 2023 and the closure of the stock exchange during the national mourning period,” reads an online petition that, according to agency reports, attracted more than 10,000 signatures in just a few hours They received approval from Murat Bakan, a member of parliament from the main opposition party, who wrote on Twitter that suspending trading was not enough and that all deals that took place on the Istanbul Stock Exchange after the earthquake had to be cancelled.
In Turkey, a new parliament and a new president are to be elected in mid-May. The economic situation, with food prices doubling and the national currency, the lira, having been further weakened by the earthquake, put Erdogan under political pressure even before the earthquake. There is now growing criticism of the relief measures in the quake area, which started too slowly when the temperatures were below zero. Erdogan doesn’t need dissatisfied investors who are indirectly affected by the quake.