Foreign investors pull back, favor safe assets after Turkish fund turmoil

Foreign investors added $358 million of Turkish shares to their portfolios in the week to September 25, but a wave of fund liquidations is shifting sentiment toward low-risk assets. The Capital Markets Board authorized interim payments of up to 1 million lira per eligible investor in funds managed by Tera, Pusula, Atlas and Hedef, affecting 131 funds that together hold roughly 826 billion lira for 455,758 investors. Zeynel Balcı of Meksa Asset Management warned that the controversy will keep investors wary for some time, elevating the appeal of safe-haven instruments such as bank deposits, which grew by almost 1 trillion lira between September 11 and 29.

He noted limited interest in foreign exchange and only modest gold activity, with some gold sales linked to liquidity needs. The broader market has reacted negatively, with the Borsa Istanbul index down about 20% from its peak and the value of freely traded shares shrinking by trillions of lira, suggesting possible long-term damage if equity-heavy private pension funds are considered.