More Trouble for the Turkey ETF

Markets ETF Trends

The iShares MSCI Turkey ETF (NYSEArca: TUR), one of this year’s most controversial and volatile single-country emerging markets exchange traded funds, saw more controversy and volatility Tuesday when it slid almost 2.6% after the government there extended a state of emergency.

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In July, Turkish stocks and TUR tumbled following a failed coup. Turkish markets plummeted on concerns of the implications of the ensuing political turbulence after a failed coup d’etat attempt from the military branch. While Erodgan’s swift crackdown after the coup offers stability of sorts, the lingering uncertainty will continue to weigh on investment confidence, writes Swaha Pattanaik for Reuters. Looking ahead, Turkish growth could slow in the wake of the coup attempt. Consumer and business confidence, along with tourism revenue, will likely come under pressure.

SEE MORE: Turkey ETF Tumbles Following Failed Coup

After the coup, the Turkish government declared a three-month state of emergency to in response to the failed coup. The administration is pursuing those accused of being behind the coup and has arrested thousands of army officers, judges, teachers and prosecutors.

“The state of emergency declared after Turkey’s July 15 coup attempt was set to expire Oct. 19, but will be extended by 3 months, the BBC reports. Since the failed coup attempt in Turkey, nearly 13,000 police officers have been suspended, adding to a list of 100,000 Turks who have been fired, suspended or detained, the BBC reports. The reason: alleged ties to a U.S. Muslim cleric, Fethullah Gulen, who the Turkish government alleges is the mastermind behind the failed coup attempt. Gulen denies the allegations. Gulen is the nemesis — and former ally — of Turkish President Recep Tayyip Erdogan,” reports Dimitra DeFotis for Barron’s.

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In August, Fitch Ratings did not downgrade the country’s sovereign credit rating after Moody’s Investors Service’s decided to delay its decision on Turkey’s credit rating. Moody’s announced that decision earlier this month. Moody’s originally put Turkey’s debt on review for a downgrade on July 18 in response to the failed coup attempt that threatened to destabilize the emerging economy.

SEE MORE: Assessing the Lone Turkey ETF as it Tries to Rebound

Also in August, Turkey’s central bank lowered interest rates by 25 basis points to 8.75% and said it stands ready to provide liquidity to the country’s banks, if needed, an important factor considering TUR’s weight to financial services stocks is almost 44%, or more than triple the ETF’s second-largest sector allocation.

For more information on the Turkish markets, visit our Turkey category.

iShares MSCI Turkey ETF

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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