Turkish stocks experienced a sharp decline on Wednesday, with the Borsa Istanbul 100 Index falling as much as 5.7%. This plunge was triggered by an asset manager's failure to fulfill redemption requests, exacerbating fears about liquidity stress within Turkey's investment fund sector. The two-day cumulative decline for the index reached 6.9%, marking the largest such drop since March 2025. Almost every stock in the benchmark index saw losses, with Destek Finans Faktoring AS falling 10%.
After initially dropping significantly, the Borsa Istanbul 100 Index trimmed its losses and was trading 3% lower by 11:55 a.m. in Istanbul. This market reaction underscores heightened concerns among investors regarding the stability and operational capacity of financial institutions in the country to manage fund redemptions.
The broader context for this market volatility includes high inflation in Turkey, currently around 31.5%, which has driven local investors into equities as an inflation hedge. Despite the BIST 100 trading at a P/E ratio of approximately 5, a significant discount compared to other emerging markets, the recent events highlight underlying vulnerabilities in the market structure, particularly when faced with substantial redemption pressures. Net redemptions from Turkish investment funds reached 550 billion Turkish lira (approximately $1.13 billion) on the day, following an announcement from Pusula Portfoy that its funds could not meet redemption requests.
