A $350 Million Turkey ETF Added Most Since 2018 as Lira Rallied

(Bloomberg) -- An exchange-traded fund focused on Turkish stocks had its biggest daily inflow in more than three years last week, as government measures to shore up the nation’s battered currency prompted the biggest surge for the lira in decades.

The $354 million iShares MSCI Turkey ETF, known as TUR, received $25 million on Dec. 20, the most for any day since August 2018, according to data compiled by Bloomberg. But analysts are divided on whether investors see opportunity following the currency’s recent fall -- or whether brokers are creating the fund for those who want to bet against Turkish companies by selling it short.

“It could be because the market got a little bounce and people are bottom fishing trying to catch the upswing,” Athanasios Psarofagis, an ETF analyst with Bloomberg Intelligence, wrote in an email. But the inflow may also reflect demand from investors who want to short the stock index, he said, a trade known as “create to lend.” 

TUR’s stock price jumped following the government’s announcement on the lira. The currency has weakened more than 20% against the dollar since September, when the central bank began cutting borrowing costs amid soaring inflation. Turkish assets have been on a rollercoaster ride ever since, with volatility last week triggering circuit breakers in the stock market. The Borsa Istanbul 100 Index has lost almost 20% in dollar terms in 2021. 

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“There’s often a need to create new shares of the ETF if you want to short it,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA. “Investors are looking for shares of Turkish stocks, and the ETF owns them.”

In the four trading days since Dec. 20, TUR has seen just over $11 million of outflows.

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