Turkish authorities are working on removing the ban on short selling for some of the largest local shares as early as July 1, according to people with direct knowledge of the matter.
The restrictions will be lifted initially for members of the Borsa Istanbul 30 Index, with clearing house Takasbank activating a new automation system to facilitate the move, the people said, speaking on condition of anonymity as the plans aren’t public.
Turkey banned short selling on banking stocks in October after the US filed an indictment against a local lender. The prohibition on betting on share declines was extended to the whole market in February as the spread of the coronavirus caused a rout in global equities.
The curbs have drawn criticism, with MSCI Inc saying last week it may start consulting on a proposal to reclassify the MSCI Turkey Index to frontier-market or standalone-market status if the “already deteriorating accessibility level of the Turkish equity market were to worsen.”
Removing the ban may trigger foreign-investor interest in bank stocks and lead to a more balanced outlook for other sectors, Figen Ozavci, deputy chief executive officer of Istanbul-based brokerage Meksa Yatirim, said by phone. “There have been excessive bubble prices for many stocks because domestic investors have been rushing to buy non-bank equities.”
Foreign investors have been net selllers of $3.85bn in Turkish equities this year. The Borsa Istanbul 30 Index of the market’s most-liquid stocks has risen more than 5% since the broader stock-lending ban was imposed.
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