Destek Finans Faktoring AS, a stock deeply implicated in Turkey's recent investment fund crisis, has been removed from several Borsa Istanbul indices. This move highlights the company's central role in the market turmoil that saw Turkish stocks tumble and prompted a swift regulatory response. The company's shares had fallen 10% on September 16, contributing significantly to the broader Borsa Istanbul 100 Index's more than 5% decline that day.
The crisis unfolded as some Turkish investment funds had heavily invested in illiquid, small-cap stocks like Destek Finans Faktoring AS. These funds allegedly engaged in practices to artificially inflate stock prices, which then attracted more investors seeking high returns. However, new regulations introduced in late August, limiting hedge funds' holdings to 2% to 8% of a single issuer's free float and barring asset managers from investing more than 20% of a portfolio in affiliate products, triggered a sell-off in these small-cap shares. This left funds unable to meet redemption requests, leading to a liquidity crunch.
The removal of Destek Finans Faktoring AS from the indices is part of a broader crackdown by Turkish authorities. The Capital Markets Board (SPK) has already suspended trading at seven asset managers and ordered the liquidation of 131 investment funds worth approximately $18.3 billion. The Justice Ministry has detained five individuals, including chairmen of major financial groups, and imposed travel bans on 51 others. These actions aim to stabilize the market and address the systemic issues that led to the crisis.
