Sebnem TURHAN Due to the low interest policy and high inflation, the investor’s search for returns on their savings has made the stock market an investment tool with no alternative in recent years. The breathless rise led by the banking index in recent weeks has reversed before answering the question of why now. It has achieved almost all of its increase of more than 200 percent since the beginning of this year from the end of July to the beginning of this week. Experts emphasized that after the expected sharp correction of this sharp rise, which was caused by leveraged transactions in the futures markets and very high arbitrage opportunities in banking stocks, collateral closure calls accelerated the decline. According to experts, after the anomaly returns to normal, the stock market has the potential to enter an upward trend again. Turkey has been in a low interest rate environment for a while and has been implementing policies to support growth. High inflation also increases company turnover and good balance sheets emerge. These high profits have led the investors, who are looking for returns due to high inflation, to the stock market. However, contrary to the tight monetary policy of Turkey in the world and the surprise interest rate cut in the August meeting, some of the TL deposits in the banks were dissolved, while most of this money went to currency protected deposits, but some of it entered the stock market. And new money inflows and new buyers supported the rise in the stock market. Yesterday, the declining industrial production and then the US inflation data triggered the sale, and the correction of the sharp increase was quite harsh. In Borsa Istanbul, where the transaction volume broke a record, banking shares fell by 7.5 percent and BIST100 by 6.14 percent yesterday. He found 5. BIST100 managed to close the bad day with 0.59% rise with the support of transportation and industry shares. However, the banking index fell 9.39 percent and the two-day drop came to 16.17 percent. The shares of the banks, which have gone to the ceiling since the end of July, have decreased to the floor price today.
It will continue until the end of September
Analysts, who cited the inflow of foreign investors as the reason for the rise that started in mid-July, could not find a solid reason why the breathless rise in the banking index is happening now, despite the cessation of foreign inflows. Analysts pointed out that the transactions in the futures market played a major role in this rise. Futures markets expert and Deriva Consulting Founder Dr. Tolga Uysal explained why VIOP transactions were effective in the rise and fall: “We could not find the answer to the question of why it is going up for a long time. It was not US European funds that entered, but there was an inflow of money into the market. And they took the banks. The situation regarding the futures options market was as follows. Shares are traded on the spot market and share-based futures contracts. There are arbitrage opportunities in futures. An interesting arbitrage began to occur in banking stocks. The bank’s spot share increased from 100 lira to 180 lira in September maturity. If you buy the spot and sell the futures and wait until the maturity date, an opportunity to return up to 80 percent has emerged on the stock you bought the spot. It is a very high earning opportunity today when the interest rate is so low. Arbitage started to pull the spot price up. Those who sold at the same time in VIOP also started to have problems and you have to hold them until the maturity date for arbitrage. When the decline started, the margin call began to come, and the decline accelerated due to the closing of margins in VIOP by selling the shares in the spot to close the position. US inflation was the excuse. We had a solid fall. And it continues to decline. The decline is normal because the fundamentals of the upward trend were not very solid. Okay, our banking sector is solid, but why is it rising now? There was no answer to the question. Arbitrage proceedings will continue until the end of September. Those who stay until September will somehow get the arbitrage profit. The decline will continue for a while. There was an anomaly, now it’s back to normal.”
“Movements with high wavelengths can be seen”
Ergün Tekgül, Deputy General Manager of Meksa Investment Futures and Options Market, stated that for the first time, the markets are trying to adapt in the minus 79 real interest rate environment and that different interest rates emerged in price calculations in VIOP transactions due to the interest rate uncertainty in March-April. Tekgül said: “The futures transactions were priced with 30-40 percent interest calculation, well above the theoretical price. . It’s not an arbitrage, it’s an arbitrage risk-free rate of return. It’s not arbitrage, it’s different, but it’s called arbitrage because it’s a two-legged transaction. The increase in this difference led to the discovery of stock futures in VIOP, and investors looking for returns began to enter risky transactions here. Very hard rising markets can cause sharp movements due to the VIOP leg. Bank pricing played a big role here. Actually, this picture is just beginning here. VIOP has just been discovered, and we may encounter more such movements with higher wavelengths in the future. There were many individual investors who failed in margin calls, but now there are portfolio management companies here. The funds they manage also have positions, so we are seeing an increase in margin calls.”
HOW DID EXPERTS INTERPRET THE STRONG MOVEMENTS IN THE STOCK EXCHANGE?
Credit transaction increased 5 times over the New Year’s
Info Investment Deputy General Manager Mert Yılmaz: There has been a rising market for about 8 weeks. It has been mainly in banks lately. It came to about 2 cents in private and then public banks. After passing 1.75 cents, 2 cents movement was expected. However, everyone’s heart was in their mouths, there was a fear of when the return would happen. US inflation ignited the wick of decline. The biggest risk here is the credit volume of the sector. It has reached up to 5 times the loan volume at the beginning of the year. It was known that the sale, which will be the food of such a fast-rising market, would be tough. Now there will be some margincall issues. I do not think that you will come below 3000 points in BIST100, after a couple of days of fluctuation, the market will stop and turn its direction upwards. Despite all this rise, banks have just come to multiply the banks of developed emerging market countries as a multiplier. There is nothing to worry those with a medium-long-term position. Short-term investors have taken damage, they are more likely to take it, but I think the direction is still up. I think the direction will be up again after this turbulence.
A hard rise will have a hard comeback
Marbaş Menkul Deputy General Manager Soner Kuru: Since the most important rules of the markets, sharp rises have sharp returns. Experts have been warning about the sharp upward movements in Borsa Istanbul in this environment, and yesterday was one of these days. Yesterday afternoon, the inflation figures in the USA were higher than the expectations and the pricing that the FED would increase its hand in the interest rate increase path caused sales in the foreign stock markets. interrupted by the wave. In parallel with the increased risk appetite in this strong rally we followed, the weight of overdraft and limited positions increased. Now, we expect volatility in the market to continue during the liquidation phase of these positions for the next few days. On the other hand, the decline in the exchanges of institutional and foreign investors in the market in the last few years causes the sales to deepen and the index to cut off in such risk-off days. We have experienced similar days before. We continue to evaluate the pullbacks as buying opportunities. Technically, the level of 3.350 is important support today, there is a level of 3.200 below, and the perception of a rising trend above this level will continue to be valid. If there are daily closes below the level of 3.200, then we will find it useful to be more cautious.
An alternative stock market in the medium and long term
Ata Investment Domestic Markets Director Şükrü Cem Kaya: The stock market rose from the lack of alternatives. Against the negative real interest rate and the current exchange rate, investors showed a serious demand for stocks to protect TL against inflation. The new account opened in the stock market and the money inflow show this very clearly. In addition, Borsa İstanbul, which has a serious discount compared to its peers among developing countries and the expectations due to the upcoming election date, made its investors smile with a serious return in the last 2 months. However, this two-month sharp upward trend caused a decrease in risk appetite in the short-term due to stock-based discounts. Especially after the serious upward movement in the banking index, the US inflation data, which came yesterday, caused a sharp sale in the world stock markets, and it became an excuse for a profit realization for us. In the short term, a correction would be very welcome. In the medium and long term, the stock market will continue to have no alternatives. Short-term pullbacks may continue with high volatility. In the medium term, I think the market will stabilize at 3250 levels and the star of our stock market will shine again with the ‘right sector, right stock’.
Banking index locked to the bottom
Seda Yalçınkaya Özer, Integral Investment Research Manager: Borsa İstanbul seems to have taken a break from the rise it started on July 18. The correction movement, which started with the banking index yesterday, continues today and the banking index is locked to the bottom. It is difficult to say the main reason for the rally that started in public banks. In such cases, it becomes difficult to know how much of an uptrend there will be, and from where there will be a breakout. Therefore, there are rapid declines after rapid rises. In the 3rd quarter, we expect strong net profits in line with the 2nd quarter of profitability in the banking sector. As these strong profits come in, the discount rate will increase. However, we do not know if there will be such a rise again. If there is a recovery in the banking index, it supports the index and accelerates the movement towards record levels. The industrial index currently maintains a strong stance and the index is currently supported by the industrial index. If the index rises above the 3500 level again and is successful in its permanent course above this level, record levels can be tested. After all, it is the most powerful medium that responds to the search for returns.
There was a signal that the correction would be strong
Murat Akyol, Senior Manager of ÜNLÜ&Co Research Department: Of course, the extraordinary activity in the futures market has had a large share in the recent rise. However, even when this is left out, it seems to be the best alternative against the depreciation of the TL, its potential to protect against the rise in inflation and attractive levels in dollar terms ensured a strong tendency towards stocks. On the other hand, the fact that the index gained over 40 percent only as of August and the sharp rises in the banking index were giving signals that a possible correction might be strong. However, the absence of an element to trigger this correction maintained the momentum. The CPI figure in the US triggered the expected but untimed correction. When evaluated from a realistic point of view, it will be much healthier for the index to continue on its way by making corrections instead of gaining a breathless value. In the next period, the high risk of recession in the USA and Europe may increase the decreasing correlation with abroad.