ISTANBUL BLOG: Bourse keeps foot on throat of short sellers on third day of Turkey tumult

ISTANBUL BLOG: Bourse keeps foot on throat of short sellers on third day of Turkey tumult
By Akin Nazli March 24, 2021

Borsa Istanbul on March 24 extended the up-tick rule on short sales to cover the day after the day before introducing it to cover March 23, the stock exchange announced in a statement.

Only BIST-50 index components were available for short sales.

As of March 24, the Borsa Istanbul seemed stabilised until the next shock for Turkey comes along. The stock exchange saw its second 10% descent within two days on the morning of March 23, but by the end of the trading day its main index finished flat. No FX is required by the bourse to achieve such a recovery.

On the London front on March 24, Turkish lira swap rates fell to 50%; still too high but at least down from the 1,000%s seen a day ago. As a result of this change, the USD/Turkish lira (TRY) rate briefly tested over the 8.00-line.

A “teeter-totter formation” is seen here—the USD/TRY rate goes up when lira liquidity is provided to London and, as a result, lira interest rates go down.

Also on the day, the new central bank governor, Sahap Kavcioglu, held a meeting with Islamic banks after holding a call with standard banks on March 21.

Turkish President Recep Tayyip Erdogan was, meanwhile, seen for the first time since the March 19 shock caused by his firing of his central bank chief, appearing for an address to his AKP party’s congress. What he had to say was, just as anticipated, entirely removed from the facts as plainly laid out for anyone to see (in his speech he claimed the market volatility was not a reflection of Turkey’s economic reality, while he urged Turks to sell their FX assets and gold and buy lira-based financial instruments. Not one of his assembled audience fell to the floor laughing. Full marks for discipline in the most trying of circumstances).

Erdogan looks tired. What is going on at the palace in Ankara, or what might come next, remains unknown. Chaos does not carry news value in Turkey but noting how Erdogan’s cops fine people who do not follow the rules for wearing masks on the street, while the Boss holds a party congress may help to gently acknowledge what a perfectly illogical and inconsistent juncture the Erdogan regime has reached.

At least, Joe Biden sent a lifebuoy, with Erdogan’s foreign minister Mevlut Cavusoglu provided with a photo opportunity (see below) with Biden’s Secretary of State Antony Blinken in Brussels during a Nato summit. Biden and Erdogan became acquainted long ago but the US president has pointedly not called the man he’s tarred as an “autocrat” since he entered the Oval Office two months ago.

But perhaps we can assume, at least for now, that Erdogan’s burning of the bridges with the finance industry does not mean he’s burnt the bridges with the Biden administration.

Actually, it seems Erdogan was not even aware that firing central bank governor Naci Agbal would amount to burning the bridges with the finance industry.

In the past couple of years, he’s lopped off two other central bank heads and nothing much happened. He may have thought that nothing would happen again. But talk of the central bank having no credibility left whatsoever, of many cheesed off foreign investors now saying that they will never go back to Turkey again and of Erdogan having finally bitten off more than he can chew is now commonplace among analysts. And that is not a good place to be.

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