Turkey Bans Short-Selling in Top Banks as U.S. Indicts Halkbank
Turkey Bans Short-Selling in Top Banks as U.S. Indicts Halkbank
(Bloomberg) --
Turkey’s market regulators suspended short-selling in seven banks including Turkiye Halk Bankasi AS and ordered brokers not to execute orders unless a client has the respective shares in his account. Traders say the moves make it hard to sell shares in the country’s largest banks.
Borsa Istanbul, Turkey’s stock exchange, “temporarily prohibited” short-selling in Halkbank, which is facing a U.S. criminal case, and six other banks, according to a statement published on the bourse’s website early Wednesday.
Separately, Capital Markets Board said the depository rule will be applied to those banks’ stocks and that the sale of their shares will be only executed from the brokers holding their clients’ shares. The brokerages will be held responsible on the execution of the rules, the market regulator said in a statement.
“In addition to the prohibition on short sales in Turkish banks, shareholders can only sell if the executing broker can see the shares in his custody account,” said Julian Rimmer, a trader at Investec Bank in London. “The net effect of this is to make Turkish banks a T+0 settlement and this makes it extremely difficult for an international account to sell shares.”
An index tracking Turkey’s listed banks trimmed drop of as much as 4.1% at the open to 1.8% as of 2:10pm in Istanbul. Shares of Halkbank traded 5.6% lower, after slumping as much as 7.4% earlier. The volume on the Borsa Istanbul Banks Index was half the average of the past 20 days for this time of the day.
The decision came into effect on Wednesday, according to the statement, while no information was given on when the ban would end. The move comes as Turkish authorities attempt to limit losses in Turkey’s biggest banks after the U.S. brought a criminal case against the state-owned Halkbank for allegedly aiding a scheme to evade sanctions against Iran.
The effort may “throw up a whole host of unintended consequences,” according to Rimmer. “The rule potentially makes the selling of bank shares extremely difficult, while it may pressure other large cap stocks.”
An indictment was filed Tuesday in Manhattan against Halkbank, in which prosecutors accused the state-run lender of participating in a wide-ranging plot to violate prohibitions on Iran’s access to the U.S. financial system. The conspiracy involved high-ranking government officials in Iran and Turkey, the U.S. said.
Turkey is in the global spotlight after it started a military operation in Syria. U.S. President Donald Trump on Monday announced a series of sanctions against the country, including raising tariffs on Turkish steel exports and sanctioning three ministers.
The indictment in the U.S. appears to largely repeat allegations used during the trial of former Halkbank executive Hakan Atilla and as part of the sanctions introduced against Turkey’s military operation in Syria, Halkbank said in a public filing on Wednesday. “The bank was not engaged in any secondary U.S. sanctions violations,” it said.
Halkbank shares have slumped 27% this year in Istanbul, heading for its second year of declines. That compares with an 8.5% gain for the 13-member banking index.
Banks affected:
- Akbank TAS
- Turkiye Garanti Bankasi AS
- Turkiye Is Bankasi AS
- Turkiye Sinai Kalkinma Bankasi AS
- Turkiye Halk Bankasi AS
- Turkiye Vakiflar Bankasi TAO
- Yapi ve Kredi Bankasi AS
Despite rallying in September, Turkish banking stocks still accounted for four out of 10 most popular short trades -- bets that benefit from a decline in the stock -- among emerging market banks, according to Markit Ltd. data.
Short sellers targeted state lenders Vakifbank and Halkbank the most among Turkish bank stocks. That said, short interest on Halkbank’s shares fell to 1.1% on Oct. 10, an 18 month-low, before picking up slightly this week.
--With assistance from Taylan Bilgic and Ercan Ersoy.
To contact the reporters on this story: Ugur Yilmaz in Istanbul at uyilmaz@bloomberg.net;Tugce Ozsoy in Istanbul at tozsoy1@bloomberg.net;Asli Kandemir in Istanbul at akandemir@bloomberg.net
To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, Namitha Jagadeesh
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