Last week [March 26, 2012], the Turkish stock market witnessed two surprisingly large sales. One involved a dumping of shares amounting to 10% of Akbank’s total stock options. The other was the sale of 12.5% of the country’s largest and most established industrial corporation, Erdemir. The total market value of the sales was about 3.5 billion Turkish liras ($1.9 billion).
Naturally, the news of the sales led to serious dips in the share prices of both companies. However, it did not have a major effect on the market as a whole. This demonstrated the maturity of the Turkish stock market, a positive development.
One might ask, “If there is confidence in Turkey and its economy, why these sales?” One must look at the reasons given by foreign shareholders.
Citibank, which unloaded the Akbank shares, is not doing so in Turkey alone. Citibank failed its most recent banking stress test. To boost its capital and improve its balance sheet, it decided to sell off all of its equity except for its controlling shares. One of those institutions in which it chose to relinquish shares was Akbank. It will reduce its 20% share in Akbank to 10% and use the acquired liquidity to improve its balance sheet.
Arcelor and Mittal were both interested in Erdemir even before they merged [into ArcelorMittal]. They entered the bidding for Erdemir’s public shares as soon as they began to be auctioned. They didn’t win, but did not lose interest after Erdemir became part of Oyak. By collecting shares from the market and institutional investors, they became the second-largest shareholder of Erdemir with a 25% stake in the firm. However, any regret at losing control over Erdemir’s management was allayed by ArcelorMittal’s success in improving its balance sheet.
Another reason behind the sales was the liquidity of the Turkish market; it is one of the easiest markets to leave. Although these firms made their profits from their operations and their equity in Turkey, they are leaving the market in which they made that profit, and which has proven easy to do.
Perhaps what is interesting — and what led to conspiracy theories — was the coincidence of the sales. I don’t think that there is any such conspiracy.
These two big sales might have some negative short-term effects. As capital leaves the country, it may cause problems in terms of financing the current deficit. However, it also means that the probability of one of Turkey’s biggest banks and key industrial corporations becoming foreign-owned is now much smaller, at least in the short term. This is not bad for the Turkish economy or investors in the least.