(March 24): Türkiye’s capital markets regulator banned short-selling across all stocks and relaxed share buyback rules in a bid to prevent further equity losses after the country’s benchmark index tumbled last week following the detention of a prominent opposition leader.

The new rules, announced late Sunday, broaden a previous ban that limited short-selling to only the top-50 listed companies. In addition, the regulator has allowed listed companies to repurchase shares at prices above the last market close and reduced the minimum equity capital protection requirement for margin trading to 20% from 35%.

The moves come in the wake of the arrest of Istanbul Mayor Ekrem Imamoglu, a rival to President Recep Tayyip Erdogan. Imamoglu’s detention on Wednesday sparked a market rout, sending the Turkish lira to an all-time low and driving bond yields higher. The banking stocks index posted its steepest weekly drop since at least 2001. In response, the central bank raised a key interest rate in an unscheduled meeting Thursday.

“At the margins, moves by authorities could quell things or stop markets moving in volatile way, but the underlying concerns remain for investors,” said Kyle Rodda, a senior analyst at Capital.com in Melbourne. This “increases country risk in Türkiye, which will widen credit spreads” and raise the possibility of more central bank policy moves.  

The Turkish lira was quoted around the 38 per dollar level in Asian trading Monday, according to Bloomberg’s indicative pricing. The currency closed at 37.73 per dollar on Friday.

There’s a good chance that downward pressure on the Turkish lira will continue for the time being, Kumiko Ishikawa, a senior analyst at Sony Financial Group in Tokyo, wrote in a research note to clients.

Turkish central bank officials held a “technical meeting” with commercial lenders on Sunday to prepare for potential market volatility, according to a statement from the Turkish Banks Association. The central bank also said it will hold a liquidity bill auction with 91-day maturity, the first such action in nearly two decades, aimed at absorbing excess lira.

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