NextFin News - Turkey's sovereign wealth fund bought shares in the country's 30 largest listed companies on Thursday, intervening through a state-run exchange-traded vehicle to halt a stock-market rout set off by a liquidity crunch in the domestic fund industry. The Turkish Wealth Fund purchased equities through an ETF managed by Ziraat Portfoy, the brokerage arm of state-owned Ziraat Bank, to lift the Borsa Istanbul 30 Index, and stands ready to keep buying if it sees extreme volatility in the coming days, people with knowledge of the matter said.
The intervention is the state's most direct response to a crisis that began with redemption failures at a handful of portfolio managers and spread into the broader equity market, forcing the capital-markets regulator to order the liquidation of roughly 130 investment funds and convene the government's top financial-stability body. The BIST 100 benchmark triggered a market-wide circuit breaker during Wednesday's session and is on track for its worst weekly performance since March 2025, when the detention of Istanbul's mayor sent the index down more than 9% in a single day.
The Sequence: From Fund Redemptions to a Sovereign Buyer
The trouble started in a narrow corner of Turkey's asset-management industry. Pusula Portföy disclosed that it could not meet client withdrawal requests after investors pulled tens of billions of liras from its funds. A day later, Tera Portföy, which manages about $13.7 billion in assets, said it had defaulted on redemption payments across its money-market and equity funds. In a market where funds are required to meet redemptions promptly, the failures forced distressed selling of the liquid stocks held in those portfolios - and because Turkey's equity market is thin and concentrated, forced selling in a few names quickly became a market-wide problem.
The Capital Markets Board (SPK) responded by suspending trading in funds run by seven portfolio-management companies - Tera, Pusula, Hedef, Atlas, A1 Capital, Pardus and Bulls - on the TEFAS electronic fund platform, and ordered the liquidation of about 130 funds. The affected funds hold a combined 891 billion lira ($21.4 billion) and have roughly 353,000 investors, according to a source with direct knowledge of the matter. The regulator appointed Isbank and Ziraat Bank to oversee the wind-down.
On Thursday, before markets opened, the Financial Stability Committee - Turkey's senior crisis-coordinating body, chaired by Treasury and Finance Minister Mehmet Şimşek - declared the problems "temporary and manageable in nature" and confined to a specific segment of the fund market. The committee said the turmoil posed no fundamental or structural threat to Borsa Istanbul or the wider capital market, and Şimşek later told NTV that 90% of the fund market continued to function healthily.
"There is no widespread systemic risk. There is no structural problem in the stock market or the fund market. 90% of the fund market continued to function healthily," Şimşek said.
Alongside the Wealth Fund's equity purchases, authorities eased trading rules to reduce forced selling. The SPK temporarily lowered the minimum equity maintenance ratio for margin transactions to 20% until October 2, and the banking regulator gave Borsa Istanbul-listed banks temporary flexibility in how they calculate capital adequacy for share buyback programs. The package was designed to break the feedback loop between fund redemptions, forced stock sales, falling prices, and further redemptions.
Why a Liquidity Crunch Became a Market Rout
The key question is why a problem in a few fund managers - a sliver of Turkey's financial system - produced losses across the blue-chip index. The answer lies in market structure. Turkey's equity market is narrow: a small number of large-cap names dominate the BIST 30, and daily turnover, while large in lira terms, is shallow relative to the size of the funds that hold those stocks. When several funds simultaneously face redemption pressure, they all sell the same liquid names. There is no deep pool of buyers on the other side, so prices gap down and the exchange's circuit breakers trip.
That dynamic was visible in the price action. On Wednesday, the BIST 100 closed at 13,122.58 points, down 5.54% - a loss of 769.72 points - with 95 of the index's 100 constituents falling and only five rising, according to the state-run Anadolu Agency. The index traded as low as 12,817.01 during the session, and a market-wide circuit breaker was triggered as the benchmark fell as much as 6%. Daily turnover reached 262.4 billion lira ($5.39 billion), and the total market value of BIST 100 companies dropped to about 12.77 trillion lira ($263 billion).
The concentration risk is structural and long-standing. Turkey's stock market has repeatedly shown that liquidity can vanish quickly when sellers outnumber buyers, because the same handful of banks and conglomerates account for a disproportionate share of index weight and turnover. A fund run that forces coordinated selling in those names does not just mark down a few portfolios - it re-prices the entire market. This is not the first time the exchange has been forced to halt trading during a stress episode; circuit breakers have been triggered in past bouts of currency-driven and political turbulence, a reminder that the plumbing of the market is designed for orderly conditions, not runs.
The Second-Order Problem: What the Wealth Fund Can and Cannot Fix
The intervention addresses the symptom, not the cause. A sovereign wealth fund buying blue chips can provide a price floor and restore confidence in the short run, but it cannot repair the maturity and liquidity mismatch that produced the run in the first place. The funds that failed were offering near-daily liquidity to investors while holding assets that could not be sold quickly without moving the market. That mismatch is a classic source of runs: investors rush for the exit knowing that those who leave first get paid in full, while those who wait face gates, suspensions, or fire-sale valuations. The first-mover advantage is built into the structure, and no amount of state buying changes that incentive once confidence is lost.
The second-order risk is contagion through collateral. When fund positions are pledged as collateral for borrowing, falling asset values trigger margin calls, which force more selling, which pushes prices lower still. This is the channel that turns an isolated liquidity problem into a systemic one. The authorities' easing of margin requirements - cutting the minimum equity maintenance ratio to 20% - is a direct attempt to interrupt that chain by reducing the number of forced liquidations at any given price level. The Wealth Fund's purchases work on the same logic from the demand side: if the state is the buyer when everyone else is selling, collateral values stop falling and the margin spiral loses its fuel.
There is also a fiscal and credibility dimension. The Turkish Wealth Fund holds more than $360 billion in assets and ranks among the world's ten largest sovereign wealth funds, giving it the balance-sheet capacity to act. It has used that capacity before: in March 2023 it injected 111.7 billion lira ($5.8 billion) into the core capital of three state-owned banks - Ziraat, Halkbank and Vakıfbank - and it returned to the international bond market in early 2024 with a $1 billion, five-year issue. But every share it buys in this episode is a share of risk transferred to the state. If prices keep falling, the fund sits on mark-to-market losses, and the market begins to wonder how deep its commitment runs. The people briefed on the matter said the fund will intervene again only if it sees "extreme volatility" - a conditional pledge that leaves the threshold deliberately vague.
The macroeconomic backdrop limits how much comfort the intervention can provide. The central bank held its policy rate at 37% at its September meeting, the fifth consecutive hold, as it tries to bring inflation down from 31.51% in August, the lowest annual reading since March. Real interest rates are deeply positive, which should support the lira and anchor expectations - but it also means the economy is running tight, and any sign of financial stress raises the question of how long such restrictive policy can be sustained. The currency, by contrast, has been relatively contained: the lira traded around 48.7 per dollar this week, far from the freefalls of previous crisis episodes. The 10-year government bond yield was 32.62% on September 17, a level that prices stress but not panic.
The Counter-Thesis: This Is Contained, Not a Crisis
The strongest case against reading this as a systemic event is the one the authorities are making: the damage is confined to a small, badly governed slice of the fund industry, and the rest of the financial system is sound. Hasnain Malik, head of geopolitical risk and emerging-market equity strategy at Tellimer, noted that while interconnected lending and collateral linkages are always hard to map, the episode "does not appear to have much to do with macroeconomic conditions and should not create systemic risk." Viktor Szabo, a portfolio manager at Aberdeen, put the conditionality plainly: he is not worried "as long as the FX regime and the econ team are in place - and no early election is called."
That view has support in the data. The BIST 100 recovered 2.95% on Thursday after the intervention package was announced, and the 10-year yield eased from recent highs. The fund industry's healthy majority, representing about 90% of assets, continued to meet redemptions. And unlike Turkey's 2018-2021 crisis years, when the central bank cut rates into rising inflation and the lira lost more than half its value against the dollar, the policy stance is now restrictive, the currency regime is managed, and foreign-exchange reserves are far less strained. The contrast matters: today's shock is a microprudential failure in non-bank finance, not a macroeconomic collapse.
But the counter-thesis rests on one fragile assumption: that the run stops with the seven named managers. If redemptions spread to funds outside the suspended group, or if the liquidation of $21.4 billion in assets hits the market in an orderly-but-continuous drip over coming weeks, the price pressure will outlast the Wealth Fund's initial purchases. State buying can absorb a panic; it cannot easily absorb a slow, scheduled unwind. The falsifying signal is specific: if the BIST 100 fails to hold its post-intervention rebound and posts a weekly loss larger than the roughly 8% decline recorded since the prior Friday - or if redemptions are reported at funds beyond the seven suspended managers - the "contained" narrative breaks down.
What Comes Next
In the short term, the market's direction depends on whether the state's buying is large enough and visible enough to offset the liquidation-driven selling from the wound-down funds. A base case is a volatile but stabilizing market: the Wealth Fund provides a floor around blue-chip names, the margin-rule relief reduces forced selling, and the index trades in a range while the liquidations are executed over coming weeks. The SPK's appointment of two large state-backed banks to oversee the wind-down suggests authorities are prioritizing an orderly process over speed, which lowers the risk of a second disorderly leg but extends the period of uncertainty.
An upside case requires the run to prove truly isolated. If the liquidations are absorbed without further contagion, if inflation continues to moderate toward the central bank's targets, and if the central bank can begin cutting rates later in the year without reigniting currency pressure, Turkish equities could re-rate higher from deeply oversold levels. A downside case is a slow bleed: liquidations proceed gradually but persistently, the Wealth Fund's conditional pledge is tested repeatedly, and foreign investors - already wary of Turkey's governance and legal risk after the March 2025 detention of Istanbul's mayor, which sent the BIST 100 down more than 9% in a day and pushed five-year credit-default swaps to 279 basis points - reduce exposure further.
Three signals will separate those scenarios. First, whether redemptions remain confined to the seven suspended managers. Second, whether the BIST 100 can hold above the 13,000 level that proved fragile this week. Third, whether the central bank keeps rates on hold at its October meeting despite the market stress - a test of whether the anti-inflation regime survives contact with financial instability. A fourth, quieter signal is the behavior of the lira: a currency that stays stable while equities wobble suggests investors still distinguish the fund industry from the state; a currency that weakens alongside stocks would signal that the distinction is breaking down.
The intervention is a reminder of how Turkey's market works: when liquidity evaporates, the state becomes the buyer of last resort. That can stop a panic. It cannot create the depth that a mature market needs, and it cannot substitute for the regulatory enforcement that should have caught the liquidity mismatch before it became a run. The Wealth Fund can buy stocks; it cannot buy trust, and in a run, trust is the only liquidity that matters.
Explore more exclusive insights at nextfin.ai.
