Turkey Rules Out Structural Market Risk After Fund Liquidity Shock

Turkey's Financial Stability Committee said on Thursday that Turkish markets face no structural risks, attributing recent turbulence to credit and liquidity strains at funds run by a small number of portfolio management companies. The committee pledged to take steps to safeguard financial stability, saying the problem is concentrated in one segment of the fund market and is temporary and manageable.

Its measures will focus mainly on easing liquidity constraints and preventing contagion, the committee said, adding that regulatory and supervisory authorities would keep using their powers decisively against anyone found to have taken market-disruptive actions.

The statement followed sharp declines in Turkish stocks and steep falls in investment funds on Wednesday and early Thursday, which had raised concern among regulators and investors.

Tera Portfoy, which manages about $13.7 billion in assets, said on Wednesday it had defaulted on redemption payments in its money market and equity fund, a day after Pusula Portfoy reported similar difficulties. Tera Holding Chairman Emre Tezmen said the firm was facing a planned, deliberate and organised speculative attack and described the liquidity problems as temporary.

Separately, the central bank said it would raise funding through one-week repo auctions, revise banks' borrowing limits and cut collateral haircuts in response to the recent volatility.

Markets turned higher after the committee's statement. The benchmark BIST-100 index reversed early losses to gain 2% by 0815 GMT, helped by a 6% rise in banking shares, while Tera Yatirim Menkul Degerler and Tera Yatirim Teknoloji Holding fell 10% after steep drops in the previous session. Borsa Istanbul's index had closed more than 5.5% lower on Wednesday, its biggest daily loss since May.

In a separate move on Wednesday, Turkey's Capital Markets Board filed criminal complaints against 38 people and imposed two-year trading bans on individuals including fund manager Pusula Portfoy and its executives over alleged manipulation of shares in three listed companies.