Turkish stocks are on track to enter a bear market after a fund crisis erased billions from Istanbul-listed firms. The Borsa Istanbul 100 Index fell as much as 1.7% to 12,084 points early on Wednesday, down 20% from early May highs, putting it into bear territory if markets close at such levels. In dollar terms, the BIST 100 is already down about 25%.

Turkish markets have been in turmoil since a crisis began with liquidity problems at investment funds holding large positions in relatively illiquid stocks. As funds run by Tera Portfoy Yonetimi AS and Pusula Portfoy Yonetimi AS failed to meet redemption requests, the selloff rippled across the Borsa Istanbul despite steps from regulators and the central bank. Since then, 131 funds have been liquidated, while several financial industry executives have been detained or arrested.

Turkey has created a board to oversee the liquidation of investment funds caught up in the crisis. The board will be under Turkish Vice President Cevdet Yilmaz. President Recep Tayyip Erdogan said the government will swiftly introduce administrative and legal changes aimed at making capital markets operate on a sounder footing. The rout, which has erased $100 billion from the Turkish market’s value in September, has shone a spotlight on risk-taking in some corners of the country’s fast-growing fund industry. The index has lost more than 15% in September, making it the worst month since 2020.

At the end of August, regulators had already tightened rules on funds holding concentrated bets in companies that only have a small proportion of publicly traded shares. However, many investors say these steps came too late, given ample warning of abnormal gains at some asset management firms.