Turkey's stock market is currently under intense scrutiny following a turbulent week, primarily due to investment funds heavily concentrated in illiquid, low-free-float stocks. Regulators are actively addressing these concerns, while index providers have also raised questions regarding the overall market structure. This situation has led to significant volatility and a selloff in the Turkish equity market.
In response to the crisis, Turkish authorities have taken several measures to bolster financial stability. Last week, some investment funds were unable to meet withdrawal requests from almost half a million investors, prompting intervention. Finance Minister Mehmet Simsek is scheduled to hold meetings to discuss the liquidation process of 131 investment funds, which collectively hold approximately $18 billion in assets.
The Capital Markets Board (SPK) has appointed two of Turkey's largest banks, Turkiye Is Bankasi AS and state-run Ziraat Bankasi AS, to oversee the liquidation of these 131 funds. These funds are managed by seven asset management companies, including Tera Portfoy and Pusula Portfoy, and impact around 350,000 investors. The liquidation follows the failure of three asset managers to fulfill redemption requests, which triggered a sharp decline in the Turkish equity market.
Further escalating the response, Turkish authorities have frozen the assets of executives associated with several investment firms. This action is part of an expanded investigation into the fund industry crisis, which has already resulted in redemption failures and arrests. The affected firms include Tera Yatirim Menkul Degerler AS, Pusula Finans Holding AS, Hedef Holding, and Bulls Portföy Yönetimi. Asset transfers involving board members, signatories, and some of their relatives have also been restricted without prosecutorial approval.
