Turkish President and the leader of Turkey’s ruling Justice and Development (AK) Party Recep Tayyip Erdogan – Metin Aktas/Anadolu Agency/Getty Images
Recep Tayyip Erdoğan has ordered pension funds to hoover up Turkish stocks in a bid to prop up the market after two devastating earthquakes prompted a massive share sell-off.
All private pension funds that receive public money from a scheme matching individual pension contributions will be required to invest at least 30pc in domestic stocks under new rules introduced by the Turkish government.
The move comes ahead of the reopening of the country’s stock exchange on Wednesday following a sell-off that erased $35bn (£29bn) from the value of Istanbul’s main share index.
Trading was suspended for five days after two earthquakes in southern Turkey left more than 30,000 people dead.
The announcement, which was made in the country’s Official Gazette that publishes new legislation, says pension funds must comply with the new limits “within 10 days at the latest”. The previous requirement was 10pc.
Mehmet Gerz, chief investment officer at financial services firm Ata Portfoy in Istanbul, said the new rules would channel around an extra nine billion liras (£400m) into Turkish stocks.
Turkey’s main index was already the world’s worst performer this year, according to an index compiled by Bloomberg. The decision to halt trading was the first since 1999, after an earthquake in northwestern Turkey killed more than 17,000 people.
The move by the Turkish government forms part of a package of measures designed to prevent further heavy selling.
Officials have also waived levies on share buybacks, temporarily revoking a 15pc withholding tax that listed companies pay when they buy back shares.
Private pension funds will also be allowed to allocate 5pc of their total funds to a single company, up from the current 1pc limit.
Ibrahim Turhan, a former chairman of the Istanbul Stock Exchange, said the move would help to stem a further sell-off in shares that he expects from retail investors when the stock exchange reopens.
“I’m pretty sure that retail investors will lead a significant selling wave when the stock exchange reopens,” he said. “Many are afraid of the current situation.”
However, he suggested that the move requiring pension funds to invest in Turkish stocks “made sense” in the long term because the money would be invested over several decades.
Turkey’s president is trying to ward off soaring inflation rates of more than 50pc as he seeks re-election in May. Turkey’s largest grocery chains have already cut the prices of hundreds of products following pressure from the government, though bosses have warned that cuts can only be temporary given current price pressures.
Mr Erdogan has already announced payments to families affected by the earthquakes, and economists said the country’s central bank may cut interest rates to try to stimulate economic growth, even though inflation remains too high. Mr Erdogan has described high interest rates as the “mother and father of all evil”.
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