Turkish Bourse to Fund Small-Cap Research as Retail Traders Grow

The Istanbul stock exchange will provide as much as $9,900 of financial support to brokerages for analyst coverage on smaller listed companies in a bid to boost financial literacy among the burgeoning ranks of Turkish retail investors.

Borsa Istanbul will reduce brokerages’ monthly membership fees by 10,000 liras ($1,420) for each report on stocks outside the benchmark Borsa Istanbul 100 Index, according to a note sent by the exchange to brokers and seen by Bloomberg News. The aid will be capped at 70,000 liras for each firm and continue for the rest of the year.

The bourse said earlier this week it would offer financial support to brokerages to increase analyst reports on listed companies, without providing details. The exchange declined to make any further comment.

Borsa Istanbul’s move to boost small-cap research comes as Turkish retail traders are becoming an increasingly powerful presence in the local stock market, echoing a global trend that has seen day traders fueling sharp gains in the shares of a number of U.S. companies such as GameStop Inc. Social media accounts specialized on local stocks have been popular among Turkish day traders. Some of the forums, including paid WhatsApp and Telegram groups, offer price targets and analysis from mostly amateur pundits.

“As the number of retail investors increases, it’s important to publish research reports that cover more companies to encourage the right investment decisions and healthy pricing,” Borsa Istanbul Chief Executive Officer Hakan Atilla said Monday in an emailed statement.

The market regulator and the exchange have previously warned inexperienced retail investors to be careful when picking stocks. Since the end of 2019, the number of active equity investors in the country has jumped by 74% to 2.1 million, according to figures from the Central Securities Depository of Turkey.

The Borsa Istanbul SME Index of small stocks has surged 274% in the past year, featuring wild moves in shares with no analyst coverage. This compares with the 30% gain for the BIST 100 benchmark.

The financial support plan for analyst coverage is subject to guidelines from the Turkish Capital Markets Association, which include:

  • Brokerages must set out their policies and procedures for analyst reports on their websites by April 30
  • Research reports must be posted on brokerage websites to ensure accessibility
  • The plan doesn’t cover research on initial public offerings, periodic bulletins, company visits, technical analysis or earnings estimates

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