Istanbul stock exchange defies all woes, search for "The Dude" goes on

By bne IntelliNews April 20, 2017

The Istanbul stock exchange’s benchmark BIST-100 index passed the 92,000-level on April 20 despite the controversial outcome of the weekend’s constitutional referendum and the extensive set of macroeconomic and political worries inherited from the pre-referendum period.

At around 17:00 local time, the index was up 1.24% d/d to 91,931, while the Turkish lira was trading at 3.6399 against the US dollar, down 0.93%.

The jump in the BIST-100 was led by banks, with Garanti Bankasi’s shares up 1.05% d/d and registering the largest transaction volume, followed by the shares of Halk Bankasi (up 4.03%) and Akbank (up 1.64%).

If the index manages to stay above the 91,600 level, its rise might escalate, Istanbul-based brokerage Integral Yatirim said on April 20. If it does not, the selling pressure could strengthen. “The next few days are critical for the BIST-100 index,” according to Integral.

The central bank reported on April 20 that the BIST-100 attracted $173mn worth of inflows during the week ending April 14. Portfolio inflows have thus amounted to $1.19bn so far this year.

Analysts have found it difficult to explain the rally on the Borsa Istanbul seen since the beginning of 2016. It has taken place despite the gloomy macroeconomic outlook, domestic political tensions and regional security threats that, for instance, have undermined Turkey’s tourism industry, a big spinner of hard currency. In early March, Bloomberg reported that a single brokerage, Istanbul-based Yatirim Finansman, had been behind the largest trades on two-thirds of the Borsa Istanbul’s most tumultuous days in the year to date.

In March 2016, Seniz Yarcan, CEO of Yatirim Finansman, told local business daily Dunya that a big fund trading with algorithms was behind the large daily volumes. Local traders have since referred to the large trader in question as “The Dude”.

Also in March last year, local daily Haberturk claimed that The Dude was an Indian and that he was the manager of a London-based hedge fund. In April 2016, Vahdettin Ertas, head of the Turkish Capital Markets Board (SPK), told reporters that the SPK was controlling each transaction on the Borsa Istanbul in accordance with the current applicable regulations. Trying to identify foreign investors coming into Turkey was a shameful activity of the Turkish media, according to Ertas. “No journalist in London asks this question of a regulator,” he said.

Last week, Faik Oztrak, an MP of the main opposition CHP party, directed a written parliamentary question to Turkish PM Binali Yildirim. In it he asked whether The Dude was the Turkish government’s newly-established controversial sovereign wealth fund. Later in the week, Cemil Ertem, a top aide to Turkish President Recep Tayyip Erdogan, told local media that the sovereign wealth fund was yet to buy any shares via the Borsa Istanbul.

Although investors are relieved that the drawn-out referendum campaign is over, and will hope President Recep Tayyip Erdogan and the government can now properly focus on steadying the economic ship, most analysts believe any post-vote rally will be short-lived. With Erdogan’s claim that the voters have narrowly opted to award him an executive presidency under scrutiny from external election observers and even academics who have made preliminary studies of voting patterns, there is some renewed risk that Turkey-EU relations, geopolitical risks and structural economic reforms could face renewed turbulence.

On April 18, Fitch Ratings said Turkey's constitutional referendum amounted to part of a political shift that had proved negative for the country's sovereign credit profile, but that it might facilitate a revival of credit-positive economic reforms.

In contrast, Moody’s Investors Service said on April 19 that the combination of a polarised electorate, a turbulent geopolitical backdrop, ongoing uncertainty in policy and large external financing requirements suggested that Turkey's vulnerability to shocks continued to weigh on the country's creditworthiness.

NON-RESIDENTS' HOLDINGS OF EQUITY AND GOVERNMENT DOMESTIC DEBT SECURITIES ($ mn)
(Market Value) 14/04/17 07/04/17 31/03/17 24/03/17 17/03/17 10/03/17 03/03/17
STOCK              
EQUITY 41,190.80 39,663.90 40,588.40 41,308.00 40,877.40 39,676.10 40,380.00
GDDS (*) 26,812.90 26,209.80 26,253.50 26,442.50 25,503.80 24,917.90 25,329.20
Repo 2,245.70 2,202.70 2,283.20 2,304.00 2,173.10 2,130.80 2,054.40
Private Sector 844.9 833.7 831.5 826 805 881.8 868.5
NET TRANSACTONS (Adjusted for Foreign Exchange and Market Price Effects)              
EQUITY 173.3 116 -101.9 -58.5 44 -94.3 133.5
GDDS (*) 80.2 487.3 149.8 398.8 -58.1 354 -99.4
Repo 5 -35.5 0.9 86.2 -0.3 119.2 0.8
Private Sector 11.2 2.1 5.5 21 -76.7 13.2 -9.4
source: tcmb

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