The iShares MSCI Turkey ETF (NYSEArca: TUR), the lone exchange traded fund dedicated to Turkish stocks, is once again a controversial ETF. As many investors by now know, TUR tumbled during last Friday’s after-hours session, a slide that led to declines of more than 6% Monday, following a failed coup against President Recept Tayyip Erodgan.
Looking to allay foreign investors’ concerns, 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.
However, TUR plunged again Tuesday amid fears the recent coup could stoke further political volatility and strain the country’s already tenuous grasp on its investment-grade credit rating.
“Late Monday, Moody’s put Turkey’s credit rating of Baa3 — one notch above non-investment grade — on review for a possible downgrade,” reports Dimitra DeFotis for Barron’s.
When Brazil lost its investment-grade rating almost a year ago, Turkey, along with South Africa, was widely viewed as one of the emerging markets that could be next to be downgraded to junk status. However, as emerging stocks rallied and the Federal Reserve has consistently passed on raising interest rates, talk of a junk rating for Turkey diminished.[related_stories]