Turkish stocks rose on Wednesday as the Istanbul bourse reopened following five days of closure and steep losses in the aftermath of the catastrophic earthquakes that prompted measures to avoid a steep decline in stock prices.
Borsa Istanbul Stock Exchange (BIST) opened 5.86% higher on Wednesday and was trading up almost 10% at around noon, as authorities’ measures to prop equities and pledges to safeguard investors to avoid last week’s losses seemed to be working.
Borsa Istanbul halted trading on its equity and derivatives markets two days after the earthquakes on Feb. 6, which struck the southeastern region and severely hit neighboring Syria.
The disaster that razed thousands of buildings across 10 provinces and inflicted massive infrastructure damage has claimed more than 35,400 lives so far.
Authorities issued a series of regulations on Tuesday to support equities markets ahead of Wednesday's reopening, aiming to encourage a cash injection after the Türkiye MSCI index's market capitalization fell some $3.9 billion in two days of trading after the quake, according to Refinitiv data.
"Turkish stocks have benefited from the intervention in the market we have seen from the government there, all designed to prevent a crash following the closure of the exchange a week ago," said Stuart Cole, a head macroeconomist at Equity Capital.
"So far the policy appears to have worked, judging by the performance at the open," he added.
Rapid new regulations
Authorities pushed through new regulations including measures incentivizing company share buyback programs, and increasing obligatory pension fund allocation for stocks.
On Tuesday, the withholding tax of share buyback programs was cut to zero from an earlier 15%, in a move to encourage companies to buy back shares to stabilize their market values in the stock exchange.
The general assembly decision mandate for share buybacks was also waived, allowing listed companies to start share buyback programs with just a management board decision.
Several listed companies, including the flag carrier Turkish Airlines and lenders Işbank, Halkbank and VakıfBank have announced some TL 16 billion (around $850 million) worth of share buyback programs since Tuesday, according to a Reuters tally.
Under another regulation, the authorities increased the mandatory allocation of shares in the government-sponsored part of the pension scheme to 30% from an earlier 10% which will allow some TL 8-9 billion to flow to the stock exchange, according to analysts.
Borsa Istanbul said on Tuesday that order cancellation, price worsening and quantity reduction will not be allowed during the opening.
More support?
Additional measures could still be needed to stabilize the stock exchange, according to Tunç Şatıroğlu, strategist and founder of financial consulting firm Kanal Finans.
Borsa Istanbul canceled trades that took place last Wednesday in response to investor outcry about widespread losses. The cancellations followed multiple market-wide circuit breakers in the two trading days following the earthquake, which failed to halt the slide.
The country's benchmark index had fallen as much as 16% from the previous week's close before trades were canceled. In the two days following the earthquake, the index dipped some 9.9%.
"I expect the stock market to be more stable... The change to the minimum equity ratio of leveraged positions will prevent sales that brokerages can make ex officio" said Serdar Pazı, research director at Trive Yatırım.
Stocks would maintain a positive outlook in the medium-long term as the gap between inflation and alternative capital market instruments continued, Pazi added.
Local government bonds broadly held steady with the 10-year yield at Tuesday's closing level of 11.21%.
The Turkish central bank said on Wednesday it would purchase up to TL 8 billion worth of government bonds and sukuk in a move aimed at balancing government bond sales by pension funds now raising equity allocations.