Turkey's Sovereign Fund Steps In to Prevent Stock Market Crash
According to reports from Bloomberg and other media, Turkey's Sovereign Wealth Fund (Türkiye Varlık Fonu, TVF) bought stocks primarily consisting of BIST 30 blue-chip shares through an exchange-traded fund (ETF) managed by state-owned brokerage Ziraat Portföy on Thursday, September 17, to curb the sharp decline in the Turkish stock market the previous day.
The immediate trigger for the crash was the asset management company Pusula Portföy's failure to timely pay investors who requested redemptions. According to Fintables data, investors have withdrawn approximately 129 billion lira (about $2.7 billion) from Pusula's funds since late August; on Wednesday, September 16 alone, the total redemptions faced by the Turkish fund industry reached about $1 billion, directly igniting panic selling in the market.
As a result, Turkey's benchmark stock index BIST 100 opened down 0.2% at 13,868 points on September 16, hitting an intraday low of 13,053 points at one point, with losses expanding to 6% in the afternoon, triggering a circuit breaker. More than 570 stocks were temporarily suspended from trading that day, including 45 BIST 100 component stocks; during the morning session, only 3 BIST 100 component stocks recorded gains before also turning to losses, with bank and industrial stocks dropping more than 5% at one point.
The Turkish Capital Markets Board (SPK) immediately announced on Thursday, September 17, that it would order the liquidation of 130 investment funds and suspend trading of products from seven asset management companies, including Tera, Pusula, Hedef, Atlas, A1, Pardus, and Bulls, while temporarily freezing subscription and redemption functions on major national electronic fund trading platforms. The Turkish central bank simultaneously provided 300 billion lira (about $6.2 billion) in seven-day repurchase loans to the banking system and raised the interbank lending limit to ten times the original amount to stabilize liquidity.
The root cause of this crisis is the institutional trigger from the SPK's new regulations introduced in late August, which required funds to reduce their concentrated holdings in stocks of related companies, forcing several asset management companies to sell off previously highly concentrated related shares, leading to a chain reaction of redemptions and sell-offs. As of August, Pusula managed approximately $13 billion in assets, while Tera managed a total of about $27 billion; the SPK has referred 38 individuals to prosecutors, accusing them of manipulating the stock prices of Katılımevim, Gündoğdu Gıda, and Destek Finans Faktoring, with related personnel receiving a two-year trading ban, and Pusula's chairman Muhammet Yariz being arrested after appearing in court in Muğla province; Pusula Finans Holding is still in discussions with Tera Group regarding acquisition matters.
The buyer of this round of market rescue funds is the Turkish Sovereign Wealth Fund, acting in a typical policy-driven, event-driven manner, aimed at hedging the systemic risks of fund industry redemptions spilling over into the entire stock market; the sellers are the fund managers forced to sell concentrated holdings to cope with redemption pressures. The intervention had an immediate effect: bank stocks rebounded 8.9% on Thursday, and the ETF tracking Turkish bank stocks and the BIST 30 index saw a net inflow of 405 million lira (about $8.3 million), the largest single-day inflow since April 2025. Beneficiaries include blue-chip and bank stocks directly supported by the sovereign fund's purchases, as well as the overall liquidity of the fund industry; the pressured parties are the involved asset management companies like Pusula and Tera and their investors, whose assets remain in freezing and liquidation processes. A source revealed that if market volatility continues to worsen, the sovereign fund "may continue to intervene."
So far, the official spokesperson for TVF has not commented on this operation; the crisis in Turkey's capital market has also exposed the structural risks of concentrated holdings in related party stocks in the fund industry. The SPK's new regulations from August aimed to prevent risks but triggered a short-term liquidity squeeze during implementation.
ABAB AI Insight
Turkey's Sovereign Wealth Fund has historically intervened directly in the stock market during severe fluctuations. Since its establishment in 2017, the fund has been used as a "stabilizer" tool by the government to respond to financial turmoil such as currency depreciation and stock market sell-offs. During previous significant devaluations of the Turkish lira, state funds have also intervened by purchasing shares in state-owned banks and injecting capital to support the financial system. This time, the fund's indirect entry through the ETF managed by state-owned brokerage Ziraat Portföy continues Turkey's established path dependency of "state capital directly intervening to stabilize the market."
The funding mobilization is two-pronged: on one hand, the TVF directs funds through the ETF managed by Ziraat Portföy to support BIST 30 blue-chip and bank stocks, representing a targeted support at the stock market level; on the other hand, the central bank injects 300 billion lira in seven-day repurchase funds into the banking system and increases the interbank lending limit tenfold, representing support at the liquidity level. This "stock market + liquidity" dual approach aims to simultaneously block the transmission of redemption pressures from funds to stock prices and prevent the transmission of stock price declines to credit contraction in the interbank market, thus preventing localized fund industry risks from evolving into a systemic financial crisis.
A comparable historical case is the direct entry of "state team" funds to purchase blue-chip stocks during the abnormal fluctuations of the Chinese stock market in 2015, as well as the operational model of various sovereign funds acting as "last buyers" during extreme market conditions in their own countries; the common characteristic of such interventions is that when private capital is forced to sell off due to liquidity pressures, leading to a failure of the price discovery mechanism, state capital temporarily steps in to stabilize expectations. Currently, Turkey's capital market is undergoing a forced deleveraging and decoupling clearing period following tightened regulations on related party concentrated holdings, with short-term liquidity shocks and long-term governance normalization occurring simultaneously.
The essence of this incident is a chain reaction triggered by regulatory changes: the SPK's new regulations introduced in August aimed to address the long-standing governance risks of "concentrated holdings in related party stocks" in the fund industry (subsequent investigations also confirmed that at least three companies were involved in stock price manipulation, with 38 individuals referred to prosecutors), but the execution of the new regulations forced relevant funds to sell off illiquid related stocks within a short period, triggering a wave of redemptions and stock price crashes, representing a "compliance shock" caused by a mismatch between regulatory intensity and market liquidity capacity. Mechanically, this type of risk occurs because the existing scale of related holdings is enormous (Pusula alone manages $13 billion), and once regulatory requirements force a concentrated clearance in a short time, the market simply does not have enough counterparties to absorb it, ultimately relying on sovereign capital and central bank liquidity interventions to fill this gap.
ABAB News · Cognitive Law
- Governance loopholes will accumulate risks until the day of liquidation.
- The hidden dangers of concentrated holdings are always realized when forced liquidation occurs.
- The last buyer is always state capital.