Turkey ETF Tastes Bitter Ahead of Thanksgiving: What's Next?
A Thanksgiving spread is dull until the Turkey makes its presence felt on the table. Apart from the bird, another Turkey has been hogging investors’ attention this Thanksgiving. Yes, we’re talking about the country called Turkey.
Let’s look at the investment odds surrounding this country right now and see why it’s not winning favor. This time, the crash in Turkish lira is acting as the key headwind to Turkey investments. iShares MSCI Turkey ETF
High Inflation & Crash in Lira
Inflation in Turkey is now roaming around 20% (well above the central bank’s mid-point target of 5%), making its local currency brutally devalued. This is happening amid massive rate cuts by the Turkish central bank. The Central Bank of Turkey cut its one-week repo auction rate by 100 bps to 15% during its November meeting,
The Turkish lira has declined almost 11% in November. The monetary policy committee expects the fleeting effects of supply-side factors and other factors beyond monetary policy’s control on price increases to continue through the first half of 2022. In any case, global economies are grappling with high inflation due to COVID-19-led supply chain issues.
Turkey’s lira slumped to a record low of 13.44 to the dollar on Tuesday, a level unacceptable and well past what was just last week thought to be the “psychological” barrier of 11 to the dollar,
The Turkish market specifically crashed and the currency nosedived after president Erdogan (who is a long-time proponent of easy money policy) reiterated his view that higher interest rates don’t lower inflation. He also vowed to fight for lower rates.
Investors fear the limited power of Turkey’s central bank, whose monetary policies are seen as being largely governed by Erdogan,
Any Bright Spots?
All in all, tensions persist in the country and it’s better not to get a taste of this ETF right now as it will take more time to get properly cooked. If you have a strong stomach for risks, then only one should go for bottom fishing and taste the Tukey ETF This Thanksgiving. Below we highlight the key details of the fund.
TUR in Focus
The iShares MSCI Turkey ETF provides a pure play exposure to 50 Turkish stocks. The fund is highly concentrated on its top 10 holdings which make up for nearly 60% of assets. Industrials dominates the fund’s returns with about 22.5% of the portfolio while financials, materials and consumer staples take double-digit exposure in the basket.
iShares MSCI Turkey ETF charges 59 bps in annual fees from investors and yields 3.72% annually. TUR has a Zacks ETF Rank #5 (Strong Sell) with a ‘High’ risk outlook.
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