(Bloomberg) --
Turkey’s stock exchange warned companies with slim free float rates to either increase the portion of their shares available for trading or face being downgrading to a new platform.
Companies with free float rates below 5% may be transferred to Borsa Istanbul’s Pre-Market Trading Platform if they don’t meet the requirement by Jan. 1, according to a statement from the exchange. It called out companies that don’t yet meet the threshold by name, including QNB Finansbank AS and Turkiye Kalkinma ve Yatirim Bankasi AS.
READ: Retail Stock Frenzy Gives Turkish Sweets Maker Seat at Top Table
The warning follows a market frenzy this year, where unprecedented levels of activity by local retail investors made two companies with free float rates below 1% the largest listed Turkish companies by market capitalization. Shares of candy maker Kent Gida have risen 1,930% since the beginning of the year, while lender QNB Finansbank’s stock has risen another 83% after quadrupling in 2019. The Borsa Istanbul Banks Index is down 31% in the same period.
Most of this year’s profitable performances in Istanbul stocks were observed in what local traders call “side stocks,” which fall outside the ranks of the country’s better-known, higher-valued companies. Turkey’s Borsa Istanbul Small and Medium Enterprises Index is up 219% this year, compared to a 2.9% drop for the benchmark BIST 100 Index.
“Some of these companies may opt to sell shares to increase their free floats, and in fact increasing their available shares would be positive for stocks that are not very liquid,” Tera Securities economist Enver Erkan said. “It may not immediately remove all problems related to wild swings, but it’s a good step toward balancing extreme volatility, supporting healthy pricing and protect investors. It is also likely to make market manipulation more difficult,” he said.
QNB Finansbank rose 5.8% as of 10:38 a.m. Istanbul, while Turkiye Kalkinma Bankasi climbed 10%.
(Updates to add economist’s comment in last paragraph)
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