23.Feb .2023 12:27

Turkish firms’ stock buybacks top $1.3B after post-quake govt backing

Turkish firms’ stock buybacks top $1.3B after post-quake govt backing
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The repurchase of shares by the listed Turkish companies has exceeded TL 25 billion ($1.32 billion) in more than a week after the government unveiled measures to support the stock market in the aftermath of the devastating earthquakes.

Borsa Istanbul Stock Exchange (BIST) on Feb. 8 suspended trading for five days after steep losses in the wake of the worst disaster in Türkiye’s modern history and canceled trades made that day.

Authorities issued a series of regulations last week to shore up equity markets in the run-up to the reopening on Feb. 14 to avoid a steep decline in stock prices.

The massive Feb. 6 quakes destroyed large parts of 10 cities in Türkiye’s southeastern region, have left at least 42,310 people dead, according to the country's disaster management agency, AFAD, and severely hit neighboring Syria.

Authorities pushed through regulations, including measures incentivizing company share buyback programs and increasing obligatory stock pension fund allocation.

The withholding tax on share buyback programs was cut to zero from an earlier 15%. At the same time, the general assembly decision mandate for share buybacks was also waived, allowing listed firms to start programs with just a management board decision.

Authorities also increased the mandatory allocation of shares in the government-sponsored part of the pension scheme to 30% from 10%, which, according to analyst calculations, was expected to pull TL 8 billion to TL 9 billion into the stock exchange.

The moves prompted Turkish firms, led by state-run companies, to announce new buyback plans, while some increased their existing programs.

Led by flag carrier Turkish Airlines (THY), some 81 listed companies initiated share repurchases worth more than TL 25 billion, a report by Anadolu Agency (AA) said on Wednesday.

Turkish Airlines announced a TL 9 billion repurchase program, followed by lender Işbank with TL 3 billion and Ereğli Demir Çelik with TL 2 billion.

Public lender Halkbank announced it would increase its ongoing share-repurchase program by TL 1.5 billion to TL 2.25 billion. Another state bank Vakıfbank and private lender, Akbank, said they would repurchase shares worth TL 1 billion each.

Aksa Akrilik announced a TL 1.5 billion buyback program.

Share repurchase plans worth TL 1 billion and above accounted for 70% of the overall buyback amount, said the AA report, while 51 companies unveiled programs worth between TL 10 million and TL 100 million.

The suspension came after the stock exchange issued two marketwide circuit breakers after the benchmark BIST 100 index dropped about 7% within the first hour of trading on Feb. 8. The index had fallen to as low as 4,505 points before rebounding to the range between 5,000 and 5,200 after the reopening.

It traded at 5,074 points at around 4 p.m. local time on Wednesday.

President Recep Tayyip Erdoğan has vowed that the state would complete housing reconstruction within a year and said the government was preparing a program to “make the country stand up again.”

Direct costs from destroying physical structures could amount to 2.5% of the growth of domestic product, or $25 billion, according to Wall Street bank JPMorgan, Daily Sabah reports.