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Being Ready For Fluctuations

From the point of markets, the upcoming period contains a lot of opportunities and risks at the same time. On the one hand the international conjuncture and on the other hand political risks in Turkey have the potential to create quite a lot fluctuation for markets.

When looking at the international conjuncture, it seems very likely that news from the US will be positive in the future, too. An analysis of employment, house prices, credit volume, andrises in markets shows it is unlikely for any extraordinary data –with a potential to change FED’s decision to reduce bond purchases– to appear. But when making this decision, FEDdoes not consideronly the US markets. It also calculates the possible damage from fluctuations to be caused by this decision to international markets, and indirectly to the US economy. For this reason, it refrains from taking severe measures and is preparing a transition periodthat markets can absorb.

So, what will happen to Turkey in this process?When looked from the point of Turkey, the upcoming local election andits consequences are important for both presidential election and general elections. Markets will be dependent on politics for a long time. And dependence of a market on politics means that it is vulnerable to fluctuation upon every kind of news and can be manipulated. In other words, there may be fluctuations with a steep decline upon some news and a massive increase upon other news. The size of the wavelength may lead to bad consequences for many investors who are not ready for it. The primary way of protecting against this is to create a portfolio and distribute your money among various investments and involve in purchases and sales in accordance with wavelength, instead of investing all your money in a single instrument. That is to say, you need help from a professional.

“Professionals are not successful in obtaining high returns, either”

Unfortunately, professionals are not much successful in obtaining high returns, either. Performance of both Type-A funds and portfolio management firms fall short of satisfactory levels. Consequently, investors are forced to manage their own money. Those lacking necessary knowledge and experience end up getting defrauded, deceived, or lose their money due to wrong investment decisions. Those havingknowledge and experience, on the other hand, see their companies and privileges taken away overnight with a sudden decision. Shares are delisted. Unless compensated, such actions will not be forgotten. Managers who use the resources of companies andleave them in a difficult situation, and those causing companies to go bankrupt do not face a tough control and enforcement mechanism. In the absence of immediate intervention and deterrent penalties, managers will continue to rob companies. And the capital market will look for new investors for the sake of a handful of decent and reputable companies.

Apparently,our capital market has too many problems. However, having whole responsibility and burden on the SPK’s (Capital Markets Board) shoulders and trying to create solutions only through controls and sanctions would not be helpful. And it is already useless at the moment. General characteristics of a society also determine the characteristics of a capital market. As investors, we expect high returns in the short run. We base our investment decisions on tips and rumors rather than on knowledge. Small returns are not enough for us. Investors getting returns twice the interest yields say “I lost money in the stock exchange.”On the other hand, stocks belonging to investors who expect reasonable returns saying “I have invested in companies from BIST-30, BIST-100 and hence face low risk” are seized by the state. The real irony starts at this point. When all problems are considered, the recipe for solution appears to be like that:

Lack of institutional investors

In order for the institutional investor base to expand, the number of small investors who invest in these areas has to increase. And this can be achieved throughperformance increase. My solution suggestion is to make such an arrangement: “Those fund and portfolio management companies that obtain returns under the level of related indexes cannot take management fees.”

Delisted shares

We have offered many solutions for this problem, about which investors are completely right. Today, there are solution offers that are supported also by Yiğit Bulut, the chief economy advisor to Prime Minister. This problem should be definitely solved.

Arrangements and sanctions

In order to prevent SPK’s decisions from being returned by courts, arrangements must be made in expert opinion system, and courts must work rapidly and effectively. Financial courts should be put into practice as soon as possible. There must be a mechanism for seriously calling to account those who rob companies, and who conduct mergers & acquisitions based on faulty evaluations and lay the burden on small investors withcapital increase through rights issues. For fighting manipulation, the only solution is to intervene immediately and impose fines. During my presidency of BORYAD, which I have been holding for 12 years, I saw that many problems require political solutions and necessary steps are not taken due to this. I am thinking of entering politics to solve the problem of delisted shares, which I turned into a personal issue, and to refrain from declaring these problems unsolvable.I have received high-level offers for this purpose and I will evaluate these offers. Let’s hope for the best… For this reason, I won’t run for BORYAD’s presidency in the first elections. My dear friends with whom I have started this journey will carry our association to even better levels and I believe in their capacity to do this. As one of the founding members of BORYAD, I will continue to provide all kinds of support to our association…