Turkish President Recep Tayyip Erdogan stated that the government is actively addressing the issues within the investment fund market, which have led to the liquidation of 131 funds with over $18 billion in assets and affecting around 350,000 investors. Erdogan emphasized that the problem is limited to a small segment of the market and does not pose a wider threat to Turkey's financial stability, asserting that the capital markets are resilient and have strong foundations.
Authorities have initiated legal proceedings against individuals involved in alleged market manipulation. The Istanbul chief prosecutor's office recently lifted asset freezes against 46 companies following new assessments, although investigations into share transactions between July and September 16 are ongoing. Justice Minister Akin Gurlek and Treasury and Finance Minister Mehmet Simsek provided updates on these measures.
In response to the crisis, Turkey is considering pooling the assets of the 131 liquidated funds to repay investors, with two of the country's largest banks, Turkiye Is Bankasi AS and state-run Ziraat Bankasi AS, appointed to oversee the liquidation process. These banks will convert fund holdings into cash and distribute proceeds to investors, a process expected to take about three months but may be extended.
The market volatility has seen Turkey's BIST 100 index fall 2.7%, extending a 2.9% decline from the previous week, and the five-year credit default swap spread rose to approximately 254 basis points, its highest since May. President Erdogan is scheduled to meet with economic officials to discuss further steps and implement administrative and legislative measures to prevent similar issues in the future. The turmoil also saw the resignation of Fatma Betul Sayan Kaya, a deputy chair of Erdogan's ruling AK Party, amid allegations of share trading before the market sell-off.
