(Bloomberg) — Turkish officials are discussing easing a ban on short-selling of equities in hopes of attracting more overseas capital, people familiar with the matter said.
Turkey imposed the ban early last year after a pair of earthquakes devastated entire regions in the country’s southeast. Officials are now considering easing the ban gradually or lifting it completely, but details haven’t been finalized and could change, the people said, asking not to be named because the discussions are private. The first step may involve the BIST-50 index of the 50 largest listed companies, they said.
Lifting the short-selling ban on Turkey’s BIST-50 is among the options considered to unwind macro-prudential measures, according to a presentation by Treasury and Finance Minister Mehmet Simsek at the Brookings Institution in Washington, DC.
Short-selling stocks is a practice in which investors bet that shares will fall: a short-seller borrows stocks, sells them and then waits for their value to decline. If it does, they can then buy the shares back from the market at a lower price, return them to the lender, and pocket the difference.
Turkey’s Capital Markets Board, known locally as the SPK, declined to comment on whether it was considering lifting the ban.
Policy Reversals
Turkey first imposed a short-selling ban that applied to some stocks in 2020. It later eased it, then strengthened it again to cover the entire market after the earthquakes in February of last year, which led to steep losses in the equity markets.
The benchmark Borsa Istanbul 100 market is up about 18% so far this year but last week entered into a bear market. Fund managers say the ban on short-selling is a hindrance to attracting foreign inflows because it makes it more difficult for investors to hedge their exposure.
Total holdings of Turkish stocks by non-residents stood at about $31 billion as of Oct. 11, according to data compiled by Bloomberg. That’s down from $42.3 billion in May, and from a peak of more than $78 billion in 2013.
Deutsche Bank AG’s DWS Investment this month said it would like to see stronger prospects for interest-rate cuts and more clarity on corporate earnings before allocating new funds to Turkish stocks. Morgan Stanley also said it’s waiting for more attractive levels to enter the market.
(Updates with Minister Mehmet Simsek’s US presentation.)
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