Turkey’s Currency-Battered Stocks Have Been Luring U.S. Investors
Turkey’s Currency-Battered Stocks Have Been Luring U.S. Investors
(Bloomberg) -- U.S. investors started adding to their Turkish stock holdings even before a leadership overhaul that boosted the country’s stocks and currency last week.
The New York-traded iShares MSCI Turkey ETF, the largest exchange-traded fund focused on Turkish equities, has attracted fund inflows for five weeks in a row, marking the longest streak since a seven-week series of inflows that ended in November 2018. Investors bought $36.9 million worth of the ETF during the period.
The ETF’s five weeks of positive flows, which included its second and third-best weeks of 2020, suggest that U.S. investors expect this year’s lira slump to eventually force Turkish policymakers around President Recep Tayyip Erdogan to support the currency. It has fallen so far that the central bank will need to step in, likely raising rates “significantly” at this Thursday’s meeting, according to Nigel Rendell, senior analyst at Medley Global Advisors. “We’ve seen that in past years on several occasions.”
Amid disappointment over the Turkish central bank’s reluctance to raise rates at its last meeting, the lira had weakened for 11 consecutive weeks before the exit of central bank Governor Murat Uysal on Nov. 7 and finance minister Berat Albayrak a day later.
Signs of a more hawkish monetary policy have been growing after the surprise overhaul in Turkey’s economic leadership, followed by more market-friendly rhetoric from Erdogan and his new appointees. The changes, adding to a new jump in risk appetite unleashed by vaccine optimism, helped make the country’s stock benchmark the best performer among the world’s primary indexes last week.
Morgan Stanley Says Turkey Can Get Away With Small Rate Hike
The most important thing for Turkish equities now is “taking the steps necessary that will encourage a change of mind toward earning foreign investors’ trust and supporting central bank independence,” said Haydar Acun, managing partner of Marmara Capital.
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