Turkish authorities introduced liquidity and market measures on 17 September after stress involving investment funds unsettled equities, Reuters reported. The central bank increased repo funding to TRY300 billion and raised banks’ interbank borrowing limits tenfold. The Capital Markets Board ordered the liquidation of 130 funds managed by seven portfolio management firms, according to the report.
Reuters said the affected portfolios totalled TRY891 billion and involved about 353,000 investors, citing a person with direct knowledge. The Financial Times independently reported that Turkey was liquidating funds after the market shock.
LIQUIDITY SUPPORT ACCOMPANIED TRADING RELIEF
The Capital Markets Board suspended purchases and redemptions on the TEFAS platform in all funds run by the seven companies and ordered 130 of them liquidated, Reuters reported. It also allowed brokers to lower the minimum maintenance margin for margin trading to 20% from 35% until 2 October. The banking regulator provided temporary flexibility in capital-adequacy treatment for banks conducting share buybacks.
Turkey’s BIST 100 index fell more than 5% on Wednesday before closing 2.95% higher on Thursday, Reuters reported. It remained lower over the week, while the banking index rebounded strongly on Thursday.
AUTHORITIES DESCRIBED THE RISKS AS CONTAINED
Turkey’s Financial Stability Committee described the problems as concentrated, temporary and manageable and said they did not indicate structural financial risk.
The next milestone is the progress of the ordered liquidations and whether market conditions stabilise before the temporary margin concession expires on 2 October. The Capital Markets Board said the funds would be wound down through a method it would determine and had not announced a payment timetable.