Turkey Freezes Billions in Trapped Funds as Stocks Plunge Into Bear Market
Turkey's stock market has crashed into bear market territory, with billions of dollars wiped from company valuations as a fund crisis triggers emergency government intervention.
Turkish stocks are heading toward a bear market after a recent fund crisis erased billions of dollars from companies listed in Istanbul [253470]. A bear market occurs when stock prices fall 20% or more from recent highs, and the crisis has shaken investor confidence across the region [253470].
In response, Turkey has created a new board to manage the closure of investment funds holding illiquid stocks, President Recep Tayyip Erdogan announced [253475]. The board will oversee the liquidation process, with Erdogan assigning Vice President Cevdet Yilmaz to lead the effort [253475]. The move follows a crisis involving funds trapped by hard-to-sell assets [253475].
The market turmoil comes as emerging-market assets across the region face mounting pressure. A sharp rise in US Treasury yields is pulling money out of developing-world markets, with emerging-market stocks dropping and EM bonds heading for their worst month since March [252335]. Higher US Treasury yields make safer US assets more attractive, causing investors to sell riskier assets such as emerging-market stocks and bonds [252335].
Government bonds in the US and Europe also deepened their selloff, pushing 10-year Treasury and German Bund yields to their highest levels in years [252256]. The trigger was another setback in efforts to resolve the Middle East conflict, which drove oil prices higher [252256]. Rising oil prices fuel inflation fears, pressuring bond prices and sending yields up [252256].
Stocks fell broadly as a standoff between the US and Iran raised fears that inflation will stay high [252336]. Higher energy prices are the main worry, as they could force the Federal Reserve to raise interest rates more aggressively [252336]. The Fed raises rates to cool inflation, but higher rates make borrowing more expensive for companies and consumers, prompting investors to sell stocks [252336].