Mystery investor rattling Turkish stock traders with massive bets

Traders at the Istanbul Stock Exchange in 2007.
Traders at the Istanbul Stock Exchange in 2007. PHOTO: BLOOMBERG

ISTANBUL (BLOOMBERG) - There's a spectre haunting stock traders in Istanbul that some are calling "the dude."

A mystery investor who first appeared a year and a half ago with US$450 million (S$621 million) of bets on a single day, almost double the market average, is now executing major transactions with increasing frequency, scaring away competitors who can't figure out when he or she will strike next, traders and bankers said.

Turgay Ozaner and his partners at Istanbul Portfolio have been scouring the official daily trading recap for months for signs of the shadowy figure's identity, but it's a code they've yet to crack. Whoever it is seems to have skipped from one local brokerage to the next honing his system and turning the latest, Yatirim Finansman, into the biggest net buyer on the market by far.

"Nobody knows anything for sure," Mr Ozaner said in his office in a picturesque neighborhood on the shores of the Bosporus. "And this is Turkey, where usually we all know what's going on."

At least one European bank's clients have stopped taking short-term positions in Turkish stocks after concluding the investor is using an algorithmic system in which complex formulas decide trades, while others are avoiding the market until they have more information, a person familiar with the matter said.

"Herif," or "the dude," has helped lift the average daily trading volume on the Borsa Istanbul almost 8 per cent this year, compared with a 15 per cent decline on the main exchange in Warsaw and a 27 per cent plunge in Moscow, data compiled by Bloomberg show. The Borsa Istanbul 100 Index has advanced 13 per cent in the period, outpacing Russia's Micex and Poland's WIG20.

Closely held Yatirim Finansman, which handled less than 2 per cent of all trades two years ago, now accounts for the majority on some days.

On Feb 22, for example, the brokerage placed buy orders for 486 million liras (S$232 million) of shares, about 15 times more than Merrill Lynch, the second-biggest dealer that day, according to official data. And in the 16 trading days to March 8, it registered almost 1 billion liras of buy orders for Turkey's six largest banks and Turkish Airlines - helping push the Borsa index to consecutive three-month highs.

In all of January and February, Yatirim Finansman bought a net 1.23 billion liras of stock, almost 70 per cent more than the next largest buyer, UBS Menkul Degerler AS. This is why Istanbul Portfolio's Ozaner said the secretive buyer is now "making the market."

It's not rare in emerging markets for a single player to move an index via short-term trades, especially in countries like Turkey that depend on foreign inflows. But nobody in Istanbul has seen anything like what is happening now.

"There's a giant bull in the china shop," said Kerem Baykal, a fund manager who oversees about US$610 million at Ak Portfoy. "He's got deeper pockets than anyone else in the game and can move the market in any direction."

The exchange declined to comment, as did Yatirim Finansman and two other local brokerages that traders and bankers said the unknown buyer has gone through - Gedik Yatirim and Meksa Yatirim.

The bigger issue may not be who "the dude" is, but what it is, according to Isik Okte, an investment strategist at TEB Invest/BNP Paribas.

One thing the three brokerages have in common is an ability to accommodate high-frequency traders - firms that rely on algorithms rather than humans to execute their trading ideas.

Borsa Istanbul moved its servers to a new data center late last year in the hope of attracting business from automated traders before it restarts its long-delayed initial public offering. HFT firms often place their servers in the same center to get the fastest possible connection to an exchange's computers.

Mr Okte said he's convinced the unknown investor is doing just that.

"This algo guy just discovered a new market and he's running his own show because there's not enough competition, but it will come," Mr Okte said. "We are in the very early stages, but we know from developed markets that machines always win this game."