Turkey Bans Six Banks from Short-Selling Local Stocks

Turkey has imposed a ban on six major global banks from betting against the stocks of local companies, in a rule that goes against the country’s recent relaxation against such restrictions.

As reported by Bloomberg, the six banks are Goldman Sachs, JPMorgan Chase, Merrill Lynch International, Barclays Bank, Credit Suisse Group, and Wood & Co., none of which can short-sell shocks of Turkey-listed companies for a period of three months.

The Eurasian country first banned short selling on stocks in February following the slide in the global stock markets with the concerns over the COVID-19 impact on the economy. However, the Turkish capital markets regulator lifted the restrictions on short-selling the stocks of the largest listed companies last week.

Hostility towards foreign investors

The recent bank-specific restrictions clearly show the country’s hostility towards foreign investors.

However, the latest ban has resulted in a jump of the Borsa Istanbul 100 Index by 1.4 percent today.

The ban also echoed an order passed earlier this year by country’s central bank’s barring three banks - Citigroup, BNP Paribas, and UBS - from trading the local currency for a brief period. It, however, was withdrawn within a week.

“When you are not winning the game and you control the rules, you change them,” Hasnain Malik, the head of equity strategy at Tellimer in Dubai, told Bloomberg. “Turkey has been doing that in the currency and equity market over the last year. This will also add weight to fears that an MSCI downgrade is on the way, ultimately.”

The hostile nature of the regulator also compounded the outflow of capital as foreign investors reduced share in the local-currency bond market, touching a record low of less than 5 percent. The investors also pulled $4.4 billion from Turkey’s equity market over the past 12 months, the biggest exodus since at least 2015, the publication highlighted.