Turkey’s Capital Markets Board has imposed a sweeping ban on short selling and loosened share buyback restrictions in an effort to stabilise markets following a sharp sell-off triggered by political tensions.
The measures, which take effect from Monday 24 March and will remain in place until 25 April, include a full ban on short selling across all stocks listed on the Borsa Istanbul (BIST), the country’s main equity exchange. Previously, short selling was only restricted to the top 50 listed firms.
The regulator also eased restrictions on share repurchases, allowing listed companies to buy back shares at prices above the most recent closing price. In addition, the minimum equity capital protection requirement for margin trading was lowered from 35% to 20%.
The interventions follow a turbulent week in Turkish markets, sparked by the arrest of Istanbul’s mayor and prominent opposition leader Ekrem Imamoglu on Wednesday. His detention triggered a sell-off in Turkish equities, sent the lira to a record low of 38.00 per US dollar in early Monday trading, and drove bond yields higher.
The BIST banking index posted its steepest weekly decline since at least 2001, prompting the central bank to raise interest rates in an unscheduled meeting on Thursday. On Sunday, the Turkish Banks Association confirmed a “technical meeting” had taken place between central bank officials and commercial lenders to prepare for potential volatility.
Analysts expressed scepticism that the new rules would address deeper investor concerns. Kyle Rodda, a senior analyst at Capital.com, said the market reaction reflected broader unease about political risk and economic policymaking under President Recep Tayyip Erdogan.
“A more autocratic Erdogan increases country risk in Turkey, which will widen credit spreads while raising the possibility of more irrational central bank policy,” Rodda said.
The Capital Markets Board said its measures aim to maintain “a reliable, transparent, effective, stable, fair and competitive environment” for the development of Turkey’s capital markets, and to protect investor rights.
Market observers expect continued pressure on the lira in the near term.
