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This article was originally written for Türkiye Today’s weekly economy newsletter, Turkish Economy in Brief, in its Oct. 5 issue. Please make sure you are subscribed to the newsletter by clicking here.
Several important steps have been taken by Turkish authorities over the past week as investors caught up in the fund turmoil await a resolution.
The response has taken a more centralized shape with the establishment of the Fund Coordination Board, chaired by Vice President Cevdet Yilmaz.
Rather than having different institutions handle separate parts of the process, the board is coordinating efforts around a common goal: protecting investors’ legitimate rights and ensuring payments are made fairly and as quickly as possible.
The Capital Markets Board (CMB) has also introduced an interim payment mechanism, while special accounts have been opened to facilitate the voluntary return of excessive gains.
Meanwhile, the State Supervisory Council (DDK) has launched an investigation, taking the response beyond the liquidation of the funds and toward examining what further steps may be needed to prevent similar problems in the future.
The decision to make interim payments of up to ₺1 million ($20,355) is perhaps the most tangible development for investors affected by the turmoil.
Under the CMB’s decision, investors whose reconciliation process has been completed can receive an interim payment without waiting for the final liquidation. The amount will later be deducted from the total they are ultimately entitled to receive.
The measure will initially apply to money market funds.
Another step has been the opening of special accounts for those willing to return excessive gains. Separate “Voluntary Return Accounts” have been opened on behalf of the Savings Deposit Insurance Fund (TMSF) for each fund. Any money returned voluntarily will be added to the liquidation assets of the relevant fund and used to make payments to its investors.
The funds cannot be transferred to another fund or account.
Reports have also emerged that former Family and Social Services Minister Fatma Betul Sayan Kaya and her husband, Ilyas Kaya, returned around ₺2.2 billion that they were alleged to have gained from a share linked to the funds.
The DDK’s investigation adds an oversight dimension to the response, opening the way for past transactions in Türkiye’s capital markets to be examined alongside efforts to compensate affected investors.
With 455,758 investors involved, the situation now extends beyond the liquidation of the funds. The measures introduced so far aim to limit losses, speed up payments, recover funds that can still be returned to the liquidation pool, and address the weaknesses that allowed the turmoil to emerge in the first place.
So how have the markets responded?
The BIST 100 index on Borsa Istanbul fell 4.9% last week, closing at 12,270 points and extending its losing streak to three consecutive weeks.
The index fell to around 11,900 points on Wednesday and Thursday before finding what appeared to be temporary support at that level.
In dollar terms, the index also came close to its lowest level in roughly a year, ending Friday at around $250.
Meanwhile, liquidity in the stock market is increasingly concentrated in large-cap stocks. Another point drawing attention is that the BIST 100’s 50-day and 200-day moving averages are converging at around 13,700 points.
Official data, however, shows just how sharply investor sentiment has changed.
According to data from the Central Securities Depository (MKK), Borsa Istanbul’s market capitalization fell from ₺22.91 trillion ($466.33 billion) at the end of August to ₺17.95 trillion ($365.37 billion) on Oct. 3, wiping nearly $100 billion off its value.
Over the same period, the total number of investors registered with the exchange fell from 6.81 million to 6.63 million. That means roughly 180,000 people left the stock market last month.
A note from Goldman Sachs analysts dated Oct. 2 also showed that around $13 billion flowed out of money market funds in Türkiye in September.
About half of that money moved back into TL deposit accounts, while the rest shifted toward foreign currency and gold, according to the analysts.
For now, the picture suggests that investors are turning toward financial assets they see as safer as their first response to the turmoil.
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