Borsa Istanbul suspends trading after heavy losses

ISTANBUL

Türkiye’s main stock exchange suspended trading of stocks and derivatives yesterday, after a steep three-day selloff triggered by back-to-back earthquakes.

The Borsa Istanbul 100 index has tumbled this week as fears about the economic implications of the earthquakes have spilled into financial markets. The index dropped 7.1 percent yesterday before trading was suspended, adding to losses from earlier in the week.

Including yesterday’s early losses, the benchmark index has lost 16 percent week-to-date. That put it on pace for its worst week since October 2008, when markets were rocked by the global financial crisis.

Borsa İstanbul AŞ, the operator of the Istanbul Stock Exchange, didn’t immediately say when trading would resume.

“At times of catastrophes like this, suspending trading in the stock market is a better decision in order to protect investors,” Haydar Acun, managing partner of Marmara Capital in Istanbul, told Bloomberg.

The slump in Turkish stocks is the worst three-day drop since December 2021 and is set to be the worst weekly performance since the 2008 global financial crisis.

Several automatic market-wide circuit-breakers were triggered on Feb. 7 and yesterday after the Capital Markets Board (SPK) eased some of the precautionary measures it took on Feb. 6 in order to limit the fallout.

“There’s a liquidity crunch, so if the market remained open, it would have continued to plummet,” said Gökhan Uskuay, a fund manager at Istanbul-based portfolio manager Allbatross.

“It may be too late for the exchange to cancel Monday’s trades, but it’s possible to cancel trades on Tuesday and Wednesday, and that’s what they should do,” he said.

Meanwhile, most Asian markets rose yesterday but traders remained on edge after Federal Reserve boss Jerome Powell reiterated that inflation was coming down but interest rates might need to go higher than expected to get it under control.

A run of key data in recent months has indicated a series of bumper hikes last year was beginning to pay off, fueling hopes that the central bank could pause its tightening cycle and even lower borrowing costs at the end of the year.

But a forecast-busting jobs report, showing half a million new jobs created in January, dealt traders a heavy blow and stoked speculation that more increases were on the way.

And on Feb. 7, Powell confirmed those fears, telling The Economic Club of Washington, DC that he saw 2023 to be a year of “significant declines in inflation,” but it will only hit the Fed’s 2 percent target next year.

But he warned “we think we are going to need to do further rate increases”, adding that the “labor market is extraordinarily strong.”

“If the data were to continue to come in stronger than we expect, and we were to conclude that we needed to raise rates more... then we would certainly do that,” he said.