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 several funds managed by seven portfolio management firms, according to the report.
Reuters said the affected portfolios totalled TRY891 billion, or $21.4 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. An accessible Capital Markets Board bulletin setting out the full scope of the measures was not available at publication time.
LIQUIDITY SUPPORT ACCOMPANIED TRADING RELIEF
The Capital Markets Board suspended trading in the affected funds and ordered their liquidation on the TEFAS platform, Reuters reported. It also reduced the minimum equity 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 recovering 2.6% on Thursday, Reuters reported. It remained 6.9% lower over the week, while the banking index gained about 8% on Thursday. The moves showed that the policy response restored part, but not all, of the broader market loss.
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. That was the authorities’ assessment as the central bank and market regulators implemented the support package.
The next milestone is the progress of the ordered liquidations and whether market conditions stabilise before the temporary margin concession expires on 2 October. Further notices from the Capital Markets Board or central bank could clarify the timetable and full affected-fund list. Until then, the final impact on investors remains unresolved.