Investors to become more selective after fund controversy

ISTANBUL

Foreign investors bought $358 million worth of Turkish stocks in the week ending Sept 25.

Recent turmoil among investment funds is expected to drive investors toward safer assets as they take a more cautious stance, an expert noted.

Investors had recently begun diversifying their portfolios across different investment instruments, but would now be much more cautious when making decisions, said Zeynel Balcı from Meksa Asset Management.

He said recent developments would, at least for a while, bring safe-haven assets to the forefront.

On Sept. 30, the Capital Markets Board (SPK) approved interim payments of up to 1 million Turkish Liras per eligible investor in funds established by Tera, Pusula, Atlas and Hedef portfolio management companies that are undergoing liquidation. According to the SPK, 131 investment funds designated for liquidation hold approximately 826 billion liras in assets across 455,758 investors.

Rebuilding confidence in the stock market would take time, said Balcı, adding that trust would gradually be restored through the implementation of necessary measures and the healthy functioning of markets.

The Fund Coordination Board, chaired by Vice President Cevdet Yılmaz, held its second meeting on Oct. 2 to discuss the payment schedule for fund accounts. The board assessed secondary regulations and the payment timetable related to the SPK’s decision on payments, according to the statement released after the meeting.

While describing the latest incident as serious, Balcı noted that similar confidence-shaking events had occurred in Borsa Istanbul in the past and that conditions eventually stabilized. He said investors would be more cautious for some time and would proceed with greater care.

Balcı said a shift toward deposits had already begun, noting that bank deposits, including participation funds, increased by nearly 1 trillion Turkish liras between Sept. 11 and Sept. 29.

According to Balcı, interest in foreign exchange remains limited. He also said there were few signs of a move toward gold and added that reports and market observations in recent days pointed to some gold sales linked to liquidity pressures.

Investors may be selling other investment instruments to meet cash needs and mandatory payments, said Balcı, suggesting that t some consumers could also postpone spending plans.

Balcı said the stock market had already reacted negatively to the developments, declining 20 percent from its peak and approaching levels commonly associated with a bear market.

He added that the selling pressure was not limited to the funds directly involved in the controversy but had spread to other stocks as well. According to Balcı, the market value of freely traded shares has fallen by trillions of Turkish liras.

Balcı also said that if equity-heavy private pension funds are taken into account, it is possible to speak of broader long-term damage stemming from the recent developments.