Turkish stock market is realm of few large investors, report shows

Dunya Executive - - COMMENTARY -

Perhaps because the stock market sees the biggest fluctuations in prices, it gets a lot of attention. The emphasis might make it seem as if the bourse were at the center of our economy. In reality, Turks have far less to do with stocks than we might think.

A report from the Turkish Capital Markets Association (TSPB) reveals that a significant portion of stocks traded on Borsa Istanbul remain in the hands of a small number of investors, mainly foreigners.

This isn’t new and it’s not unique to Turkey. But the report reminds us that just 5 percent of Turks’ assets are invested in equities. Savings accounts in lira and foreign exchange account for the predominant investments. While Turkish portfolio investments are largely in government domestic bonds, those securities are held primarily by banks and few individual investors prefer this vehicle.

The TSPB’s annual report for 2016 shows that 1.04 million investors are in the market, of which 1.03 million, or more than 99 percent, are domestic investors, while just 900,485 are foreign investors, indicating a large imbalance in the profile of the investors.

Foreign investment Yet this imbalance is thrown into even sharper relief when we con-

sider that the average domestic investor owns just 88,000 lira worth of stock, while foreign investors’ portfolios average 14.8 million lira, according to the report.

And that’s just the tip of the iceberg. Portfolios totaling 95.6 billion lira are owned by 1,924 foreign investment funds; of that, 10 funds own 21 billion lira. In other words, these 10 overseas funds’ share of a market worth 231 billion lira is 9 percent.

Some 1,400 foreign investors make up just a third the number of Turkish investors, who stand at 4,696, and yet the former’s portfolios are worth 60 billion lira, or twice the size of domestic investors, who own 29 billion lira worth of stock.

Furthermore, the Top 10 foreign companies own portfolios worth 26 billion lira, or 10 percent of total portfolios.

Ten foreign companies and 10 foreign funds own 19 percent of stocks traded on Borsa Istanbul. The top 100 foreign companies and 100 foreign funds own 44 percent of shares.

Individual investors

If we are to look at individual investors, we again see there is little change in recent years. According to TSPB data, 1.03 million retail investors are in the market, with an average portfolio value of 46,000 lira, or a total of 47.3 billion lira.

Even though they account for 98.6 percent of investors, in terms of their numbers, they own a combined 20.5 percent of equity traded at Borsa Istanbul.

Delving deeper into the numbers reveals a massive imbalance here too. The average value of the portfolios owned by 771,000 investors is 1,000 lira, and their combined investments are worth 842 million lira. Investors who own more than 1 million worth of stock number 4,472 people, but they own a combined 47 billion lira worth of stocks. So while they account for just 0.4 percent of investors, they control 57 percent of the bourse’s valuation.

The 10 richest individual Turkish investors own shares worth a combined 5.2 billion lira, or an average 516 million lira each, amounting to 11 percent of the stock market’s value. The next 90 biggest investors average 85 million lira in shares.

The Top 100 investors own 27 percent and the Top 1,000 own 44 percent of shares traded on Borsa Istanbul. That leaves the remaining 1.025 million people with 56 percent of shares.

Let’s take a look at the other end of the scale. Some 500,000 individual investors own 16 billion lira worth of shares at Borsa Istanbul. This amounts to an average of 32 lira worth of stock. (No, this is not a misprint, the figure is 32 lira.) These are likely people who own penny stocks with inactive accounts.

The TSPB report shows how just a handful of investors dominate the Istanbul stock exchange. As I’ve said, this is not new, and the 2016 data does not reveal an improvement nor a regression. But it is important to remember that the Turkish people are far less intimately acquainted with the stock market than many analysts, and even newspaper columnists, might lead us to think.

Alaattin AKTAS

Economist

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