Turkey Suspends UBS’s Direct Market Access on Turkcell’s Slump

(Bloomberg) --

Turkey’s capital markets regulator suspended UBS AG London branch’s direct market access to the country’s stock exchange, citing transactions by the firm in Turkcell shares on Tuesday afternoon.

The decision was made “to protect investor rights and benefits,” the regulator said in a statement late Thursday, responding to a momentary plunge in Turkcell shares earlier this week.

UBS’s London branch declined to comment.

Such restrictions aren’t new in Turkey’s equity market. In July, the country banned six foreign banks, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., from betting against the nation’s stocks in a move that appeared to contradict some of the steps to ease such limitations this summer.

Any move to restrict the access of any legitimate market participant is likely to be “interpreted negatively and seen as smacking of dirigisme and manipulation,” according to Investec Bank Plc trader Julian Rimmer. “Hoping to prop up Borsa Istanbul by making it difficult to sell shares will have the opposite effect of that intended, certainly among international investors.”

MSCI Inc. warned in June that it may start consulting on reclassifying the MSCI Turkey Index to frontier-market or stand-alone status if the “already deteriorating accessibility level of the Turkish equity market were to worsen.” After the warning, Turkey’s Capital Markets Regulator removed a short-selling ban on the largest listed companies, easing a blanket restriction introduced in February to help shield the markets from bouts of volatility.

Foreign Selling

Turkcell shares reversed gains to tumble 4.7% in a stroke on the afternoon of Sept. 15. The move was accompanied by a surge in trading volumes and dragged down the benchmark Borsa Istanbul 100 Index. Circuit breakers took effect and trading in the stock was briefly halted before resuming.

“Perhaps there was a transgression from UBS’s side, but if the perception is that the market is not free and transparent, that will undermine investor confidence further,” Rimmer said.

Foreign investors sold $5.6 billion in Turkish equities this year through Sept. 11, according to central bank data, a record amount since at least 2005.

Despite Tuesday’s gyrations, Turkcell shares are up about 1% this week.

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