The iShares MSCI Turkey ETF (NASDAQ: TUR) plunged on heavy volume Monday amid ongoing diplomatic tensions between Turkey and the U.S. Some traders are wagering on more declines for TUR, the only exchange traded fund dedicated to Turkish stocks.
“TUR has been in a downtrend since hitting a two-year high of $47.13 on Sept. 1, down 16.2%. (Monday), the shares have plunged 5.2% to trade at $39.48, slicing through the round $40 region — home to a 38.2% Fibonacci retracement of their 2017 rally — and are on track to close south of their 200-day moving average for the first time since April 7,” according to Schaeffer’s Investment Research.
Last week, Turkish officials arrested a Turkish employee of the U.S. consulate in Istanbul alleging that the staffer has ties to Muslim cleric Fethullah Gulen. Gulen is blamed by the current government for a failed coup attempt last year.
“The U.S. embassy in Ankara condemned those charges as baseless and announced on Sunday night it was halting all non-immigrant visa services in Turkey while it reassessed Turkey’s commitment to the security of its missions and staff,” according to Reuters.
Turkish officials quickly responded with a similar move of their own.
Earlier this year, Turkish voters voted to disband the country’s parliamentary system and install a strong presidential form of government.
Related: Turkey ETF is Vulnerable, Primed to Retreat
Many political analysts and market observers are concerned the decision will give President Recep Tayyip Erdogan more power and turn into a threat to Turkish democracy. Last year, 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. The country is still under a state of emergency related to that coup.
“Below this is the $38 region, which is a 50% retracement of the recent rally, and today’s options traders are bracing for a breach of this level over the next two weeks. Amid relatively low absolute volume, TUR puts are crossing at five times what’s typically seen at this point in the day,” according to Schaeffer’s.
Underscoring the volatility that often comes with Turkish stocks, TUR has a three-year standard deviation of 24.5%, well above the same volatility gauge on the MSCI Emerging Markets Index.
For more stories on the lone Turkey ETF, visit our Turkey category.