Turkey steps in to support markets after fund liquidity crunch sparks selloff (updated)

Tera Yatirim Menkul Degerler

17/09/2026 09:20

Adds graphs for total assets under management of seven fund management companies, adds new measures, comment and updates stock market levels
Capital Markets Regulator suspends several investment funds worth combined $21.4 bln
Stock markets claw back some losses on Thursday after financial stability measures
Investors worry about spillover
Analyst says equities turmoil seems contained for now
By Ezgi Erkoyun and Mirac Dereli
ISTANBUL, Sept 17 (Reuters) - Turkish authorities moved on Thursday to shore up financial stability after a small number of funds struggled to meet client withdrawals amid a selloff in the country's stock market earlier in the week. 
The central bank boosted repo funding to 300 billion lira and raised banks' borrowing limits in the interbank money market 10-fold to ensure lira liquidity in the market.
At the same time, the capital markets regulator suspended trading and ordered the liquidation of several investment funds managed by seven portfolio management companies, including Tera Portfoy, Pusula Portfoy and Hedef Portfoy, on the TEFAS electronic fund platform.
The funds slated for liquidation have a combined portfolio size of 891 billion lira ($21.4 billion) and about 353,000 investors, a source with direct knowledge of the matter said.
In a separate measure aimed at supporting markets, the Capital Markets Board cut the minimum equity maintenance requirement for margin trading to 20% from 35% until October 2, allowing brokerages to apply the lower threshold in line with their risk policies.
Analysts said that following changes in fund regulation in August, sharp declines in thinly traded stocks made it difficult for funds holding those shares to obtain liquidity, forcing them to sell their core holdings to raise cash.
Turkey's main stock index .XU100 dropped more than 5% on Wednesday, renewing scrutiny of the country's capital markets and raising concerns that liquidity strains at a handful of funds could spread more broadly through the financial system.
Markets clawed back some of the losses following Thursday's measures, with the main index up 2.6% on the day, though it is still down 6.9% since the start of the week — its weakest weekly performance since 19 March 2025.
Turkey's banking index, which started the day 0.3% higher, accelerated gains during the session and was trading up 8% as of 1207 GMT.
Analysts said it was not yet clear where markets were headed next.
"Such a decisive response by the CBRT (central bank) and Turkish regulators provided stock investors with some respite — it's too early to declare that the selloff has run its course," said Piotr Matys, senior FX analyst at ITC Markets. 
LONGSTANDING WARNINGS
The Financial Stability Committee, Turkey's top coordinating body for financial-sector risks and crisis response, said after a meeting on Thursday that the problems were concentrated in a specific segment of the fund market and were "temporary and manageable in nature", ruling out broader structural risks.
The turbulence has revived longstanding concerns about concentration and trading practices in Turkey's stock market.
Index provider MSCI said in June it remained concerned about shareholder transparency and coordinated trading in Turkey's equity market, adding that a review of the market's treatment could follow if authorities did not make credible progress on reforms.
Tera Portfoy triggered Wednesday's selloff. The company, which manages about $13.7 billion in assets, said on Wednesday it had defaulted on redemption payments in its money market and equity funds, a day after Pusula Portfoy reported similar difficulties. 
Cemal Demirtas, general manager for research at Istanbul-based Ata Invest, said the Financial Stability Committee's message that "markets would not be left to deal with the problem alone" had supported Thursday's rebound, adding that further policy steps would be key.
"What is being done now points to a broader intervention rather than a temporary fix," he said, adding that the process appeared to be moving in a positive direction from an overall market stability perspective.
For investors, the question is how much of a spillover there will be in a country that has seen periods of financial market turmoil before.
"The true extent of interconnected lending and collateral and potential contagion is always hard to predict, but this does not appear to have much to do with macroeconomic conditions and should not create systemic risk," said Hasnain Malik, head of geopolitical risk and emerging market equity market strategy at Tellimer. 
In a separate measure, Turkey's banking regulator allowed Borsa Istanbul-listed banks temporary flexibility in capital adequacy calculations for their share buyback programs.
Viktor Szabo, portfolio manager at Aberdeen, said the equities turmoil appeared contained for now and was unlikely to undermine confidence in Turkey's broader economic policy framework.
"I'm not worried as long as the FX regime and the econ team are in place - and no early election is called."

(Reporting by Ezgi Erkoyun, Can Sezer, Ebru Tuncay and Nevzat Devranoglu, Mirac Eren Dereli, Canan Sevgili and Libby George, Writing by Karin Strohecker, Editing by Alexandra Hudson and Hugh Lawson)
((ezgi.erkoyun@thomsonreuters.com; +90-212-350 7051; Reuters Messaging: ezgi.erkoyun.thomsonreuters.com@reuters.net;))