The Turkey exchange traded fund plunged Monday, with Turkish markets experiencing its worst plunge in three years, after the failed coup late Friday.
The iShares MSCI Turkey ETF (NYSEArca: TUR) declined 6.1% Monday, dipping below both its 50- and 200-day simple moving averages.
Meanwhile the 7.1% plunge in Turkey’s benchmark Borsa Istanbul 100 Index was the benchmark’s worst since June 3, 2013 when then-Prime Minister and current-President Recept Tayyip Erodgan clamped down on anti-government protests, Bloomberg reports.
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.
[related_stories]The weakness could force the central bank to ease its monetary policy, which has been frowned upon by investors given the weakness in the lira currency.
HSBC has warned of potential risks in a weakening lira currency over the near-term, Bloomberg reports. Turkey’s banks have about $100 billion owed to foreign lenders and about $20 billion owed to non-bank institutions that will need to be rolled over, which could grow even costlier if the lira depreciates against foreign currencies.
Moreover, asset managers may shun the emerging market if Erdogan uses the failed coup as an impetus to concentrate political power in his office.
“We expect Turkish assets to be vulnerable in the short term. The worst-case scenario has been avoided as a successful coup would have triggered a full-scale sell-off,” Piotr Matys at Rabobank told the Financial Times. “The damage, however, has been done. Turkish bonds and stocks face a turbulent period due to heightened political risk.”
iShares MSCI Turkey ETF