Turkish stocks experienced a sharp decline on Wednesday, with the Borsa Istanbul 100 Index falling as much as 5.7%. This extended its two-day cumulative drop to 6.9%, positioning it for the largest such decline since March 2025. The sell-off was triggered by a portfolio management company, Pusula Portfoy, announcing its inability to fulfill investor redemption requests, leading to defaults and raising broader concerns about liquidity in the Turkish fund sector.
The benchmark BIST 100 index initially opened 0.2% lower before sliding to an intraday low of 13,095 points. The market reaction saw nearly all stocks in the index decline, with Destek Finans Faktoring AS falling 10%. A circuit breaker was activated after the index's decline reached 5%, and over 350 shares also triggered circuit breakers during the session. All sectoral indices were in negative territory, with banking and industrial stocks also dropping over 5% before paring some losses.
The crisis at Pusula Portfoy follows significant investor withdrawals, with approximately $2.7 billion (₺129 billion) pulled from Pusula funds since the end of August. The turmoil deepened with the arrest of the company's chairman, Muhammet Yariz, amidst an investigation. This situation comes after the Capital Markets Board (CMB) began limiting funds with concentrated positions in illiquid stocks, increasing pressure on Pusula to meet withdrawal demands. The market rout also led to net redemptions of $1.13 billion (₺550 billion) from Turkish investment funds on the day.
Despite the ongoing investigation and the arrest, Pusula Finans Holding was in talks for a planned transfer to Tera Group, another major fund manager. Both Pusula and Tera Group had indicated that these developments had not altered their strategic assessment of the proposed acquisition, which remained in progress as of September 12.
The broader market implications include investor apprehension over liquidity stress in Turkish financial assets, as an ETF focused on Turkey also fell sharply. The BIST 100 index later trimmed its losses, trading 3% lower by 11:55 a.m. in Istanbul, but the initial sharp decline highlighted the fragility within the fund industry.
