Turkish markets feel heat from asset management meltdown

• Shares drop on fund liquidation
• BIST 100 loses a further 2.5%
• All-share index halves 2026 gain

The Turkish stock market took a further battering on Monday after regulators moved to shut down seven asset management firms over what authorities suspect were Ponzi-like practices.

The country’s Capital Markets Board (CMB) mandated last week that private lender İş Bankası and state-owned Ziraat Bankası liquidate the assets of 131 funds controlled by the seven firms.

The seven, representing more than one-third of the sector, are estimated to have more than $20 billion in assets under management, with about 300,000 mainly local investors unsure whether they will get their money back, publisher Turkiye Today reported.

Concerns have emerged recently – including from global index provider MSCI – over the practices of some Turkish asset managers and a perceived lack of transparency in the market.

These concerns focused on firms buying significant stakes in companies with a relatively small free float, in turn inflating their share price. This gave the appearance of high yields and attracted more investors, generating further funds for asset managers.

The CMB moved to take over the seven and to suspend all trading activity after two leading firms, Pusula Portföy and Tera Portföy, said they could not redeem investors’ requests for payment on their holdings, as reported by Turkiye Today.

On Sunday, the CMB issued a bulletin extending the period allocated to liquidate the seven firms’ holdings from three to six months. The statement acknowledged the difficulties of the operation, saying the decision took “into account the portfolio structures of the funds subject to liquidation and market developments”.

Stock sell-off

Those developments include a sharp sell-off on the stock market, with Borsa İstanbul’s blue-chip BIST 100 dropping 2.5 percent in the first trading session on Monday, taking its overall retreat since the beginning of September to nearly 10 percent.

The impact was felt more on the exchange’s all-share index. The wider gauge was down more than 3.3 percent in morning trading, taking its losses in the month to date to above 13 percent, more than halving the index’s gains since the beginning of the year.

The liquidation extension may cool the heat on some affected shares, said Hikmet Baydar, an economist with 3.Göz Consultancy.

The CMB’s Sunday move “could minimise to some degree the selling pressure on these stocks”, he told AGBI, adding that trust in the markets had to be restored or the sell-off would continue.

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A loss of trust will be among the major fallouts from the crisis, economist Mustafa Sönmez told AGBI, and will have an impact well beyond asset management.

“The liquidation and loss of value experienced even in instruments considered the safest, such as money-market funds, will push savers into the informal economy, foreign currency, or putting their money under the mattress,” he said.

Related losses will flow to the public purse, Sönmez said.

“The liquidity crunch on the stock exchange, the decrease in trading volumes, the disruption of operations for defaulting brokerage firms, and the decline in company value will indirectly lead to a decrease in fees and tax revenues originating from the capital markets,” he said.