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This article was originally written for Türkiye Today’s weekly economy newsletter, Turkish Economy in Brief, in its Sept. 28 issue. Please make sure you are subscribed to the newsletter by clicking here.
Turkish capital markets remain under scrutiny as the fallout from problems involving several investment funds continues to draw attention and keep the issue high on the country’s economic agenda. The case centers on a major liquidation process involving 131 funds managed by seven portfolio management companies.
According to data released by the Capital Markets Board of Türkiye (CMB), the funds have 455,758 individual investors. The portfolios being placed into liquidation are estimated to be worth around ₺800 billion ($16.3 billion), putting the scale of the case in sharp focus.
As the relevant institutions continue working on the matter, investors affected by the fund liquidations are focused on finding answers to questions such as "When will the payments be made?" and "Will we be able to recover all the money in our accounts?"
The process will proceed under the method set by the CMB: the fund's assets will be converted into cash, and the proceeds will be distributed to investors according to their respective shares.
The CMB has extended the liquidation period from three months to six months, citing the need to take all investors' interests into account and allow fund assets to be sold under the most favorable market conditions possible.
Meanwhile, a Bloomberg report claimed that authorities were considering pooling the assets of the 131 investment funds ordered into liquidation into a "common pool" to manage repayments. No official statement has been made on the matter.
The Central Securities Depository (MKK) said that for transactions where a sell order had been executed before the liquidation decision but settlement had not yet been completed, the fund price on the day of the sale would be used as the basis.
Meanwhile, shares held in the portfolios of the troubled funds continued their run of daily limit-down moves last week. These market movements directly affect the value of the funds' assets.
The Borsa Istanbul index fell another 2.90% last week, following an 8.18% decline the previous week. As the stock market fell to its lowest levels in six months, selling pressure also continued in many shares unrelated to the troubled funds. Weekly losses exceeded 30% for 55 stocks.
The BIST 100 index closed last week at 12,899.35. Market analysts identify 12,800 as a critical support level for the index and warn that selling could accelerate if the level is breached to the downside.
Money market funds also saw notable outflows. In the week ending Sept. 18, the size of money market funds fell by ₺456 billion ($9.31 billion) to ₺1.68 trillion. Most of the money leaving these funds appeared to move into TL deposits.
The legal process is also continuing. Justice Minister Akin Gurlek announced the latest figures related to the investigation. According to Gurlek, legal action has been taken against 76 suspects, while 45 people have been arrested. Measures have been imposed on the assets of the suspects and their first-degree relatives, while Gurlek stressed that protecting citizens' savings is one of the main objectives of the investigation.
As these developments unfold in Türkiye's markets, only a few weeks remain until MSCI conducts its "2026 Index Review" on Nov. 11.
MSCI is known as a global benchmark institution that assesses which countries and companies around the world are considered "investable." Major funds globally take the MSCI Emerging Markets Index, which includes Türkiye, into account when making investment decisions.
In June, MSCI warned Türkiye about problems related to transparency, coordinated trading, free-float ratios, and price formation. The latest regulation concerning funds, introduced in Türkiye on Aug. 28, was implemented in this context. The latest test facing Türkiye's markets is also critically important for the MSCI process.
Other developments that could be important for Türkiye's markets should not be overlooked. Amid continued uncertainty in the Middle East, oil prices ended last week above $100 in futures trading.
As a result, high diesel product margins and their impact on fuel prices remain important, particularly because of inflationary pressures and monetary policy. With September nearing its end, inflation for the month is expected to come in close to 2%.
Another development concerns U.S. Treasury yields, which are key indicators for global markets. The yield on the 10-year Treasury rose to 5.16% last week, moving toward its highest level in 20 years. With U.S. debt exceeding $40 trillion, selling in Treasuries signals demand for "higher yields."
At the same time, rising energy prices are highlighting the pressure of "higher inflation—higher interest rates." Expectations of another Federal Reserve rate hike in October have also started to rise.
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