Turkish market rebounds on plan to compensate fund investors

Turkish stocks rebounded on Wednesday after the country’s markets regulator announced plans to compensate nearly half a million investors affected by the collapse of leading asset management firms.

The Capital Markets Board (CMB) announced it would authorise payouts of up to TL1.0 million ($20,000) to investors in some liquidated funds.

On September 17, the regulator ordered the liquidation of 131 funds managed by seven companies after allegations that they had inflated the share prices of assets under management to attract more investment. Together, the companies are estimated to have had around $20 billion under management.

Although no payout date was set, the CMB said payments would be calculated based on investors’ holdings.

“Investors with a net investment amount below TL1.0 million on the payment date will receive the full amount, while those with TL1.0 million or more will receive an interim payment capped at a maximum of TL1.0 million,” the statement read.

Further reading:

• Turkey’s fund crisis goes beyond Borsa Istanbul
• Turkish stocks extend losses as fund crisis deepens
• Turkish markets feel heat from asset management meltdown

The agency said further payments would be made as the seized funds’ assets were liquidated.

Although it will not fix every problem, the measure announced by the CMB is a positive step and will reduce the number of the 455,000 investors affected by the collapse of the funds, according to 3.göz Consultancy economist Hikmet Baydar.

“It does not mend it all, but this is a right step that will help boost morale in the market at this point in time and push it up after the market has fallen way below its technical value,” he told AGBI.

“Even if other issues may take time to sort out it is important that in areas where there is no risk, such as in the money market, that payment is made rapidly,” Baydar said.

The CMB announcement sparked an early rally on the Istanbul stock exchange on Wednesday, with the blue-chip BIST 100 index rising 2.5 percent minutes after trading opened before gains moderated later in the session.

The all-share index fell by more than 20 percent over the past two weeks.