When we look at domestic retail investors investing in the stock exchange, we see a group of people who engage in short-term transactions and act without any information about the company in question. This type of investors cannot help but becoming a prey.
Asthe identity of those operating at İMKB (Istanbul Stock Exchange)are not revealed anymore and sudden changes in exchange transactions have gone away, we began to see players who buy as many shares from a company as its free float rate and sell them in the same day, making huge money in the end.It doesn’t matter whether trading volume is shallow or deep, whenever these players findsuitable conditions they buy and sell and we learn who they are from KAP’s (Public Disclosure Platform) reports. Of course, there is no guarantee these transactions will always generate huge profits. They may end up with big losses at the end of the day, but investors are somewhat attracted to activity and there have been few suffering losses so far. When this phenomenon is looked at from the perspective of manipulation, does not that amount to creating an artificial market and artificial demand?And this we investors don’t know since we cannot see exchange transactions. But I think authorities may be investigating the issue…
In our country where financial literacy is very low, İMKB has wanted to convey the following message with its new initiative: “Pay attention not to news about daily movements of shares but to news about medium-term expectations for shares, about their balance sheets and make your investment in accordance with this information. Investors who are used to knowing who the sellers and buyers are and carrying transactions in line with this information, have fiercely opposed this practice. Actually, there are valid grounds for both İMKBand investors. The stock exchange does not want to see investors tagging along with a speculator or manipulator, suffering huge losses and getting angry with the stock market later.However, authorities have said in their statements that they adopted this upon foreign investors’ demand and foreign investors made sales afterwardbringing down the ratio of their stock ownership. In other words, it seemed as if foreign investors were given an opportunity to sell. Meanwhile, as the character of investors doesn’t change in a few days, the manipulator’s day came. The manipulator buys and sells and preys on investors,who follow him through transactions of intermediary firms, without allowing them to escape. Investors say ‘We want to know who buy and sell as this is the only method of protecting ourselves.’
Rate of financial literacyshould be raised
When we look at domestic retail investors investing in the stock exchange, we see a group of people who engage in short-term transactions and act without any information about the company in question. Since I have been in this business for long, I know it well that our investors do the analysis of stocks not before they buy them but after buying them and ending up with holding them at a high cost. They look at the company’s balance sheet, news about it, and its technical analysis later.The initial decision to buy is generally related with the stock’s movements at the stock exchange. At this point, this type of investors cannot help but becoming a prey. Even if the stock exchange aims to protect investors with this practice, it will cause the great majority to lose their money. Measures should be taken right away to protect these investors and to increase the rate of financial literacy.
The son of a partner of a company that has recently gone public told me he couldn’t feel happy over this situation. I asked why and he replied: “Because we drive my mother’s carnow. Dad said we shouldn’t drive the company’s carfrom now on.”
On the other hand, those investors in search of short-term hit-and-runs are actually interested in hunting, but they must know the biter is sometimes bit. If you invest in the stock exchange with the logic of gambling, no one can help you at all. Neither the SPK (Capital Markets Board), or İMKB, nor BORYAD…
With the start of the Public Offering Campaign, a lot of companies go public. And investors intend to buy stocks and sell them at their first peaks. We read these in their forums. There are those who aren’t happy even when the share hits 3-4 peaks or goes down. I know it very well that it is difficult to win the heart of investors. When buying stocks, investors neither read the prospectus, nor pays attention to the balance sheet and news about the company. And they may get into a rage afterward.Of course, balance sheets matter only to a certain extent. Goodwill of the company’s management, and their targets and expectations for future are important for us. At this point, compliance with corporate governance principles comes to the forefront.One share is one vote, and equal dividend… Recently, privileged shareholders of a company who paid attention also to our warnings have announced they would revoke the privileges without claiming compensation. That development is really important. These shareholders have done this when the free float rate is so high and there is a danger of being taken over.We expect similar announcements from other companies, too.
I would like to tell you about another interesting event as well.The son of a partner of this company that has recently gone public told me he couldn’t feel happy over this situation. I asked why and he replied: “Because we drive my mother’s car now. Dad said we shouldn’t drive the company’s car from now on.”I pay my respects to all companies which see their shareholders as real partners rather than investors buying and selling at the stock exchange or gambling.
Ali Bahçuvan / Economist