Turkey ETFs lure a net $90 million since October despite poor performance

Turkey ETFs, which provides exposure to Turkish equities have attracted over $90 million of new money since October end. That comes as a surprise considering the economic train wreck Turkey is facing, characterized by a falling local currency (Lira or TRY), high inflation, rising borrowing costs, and correspondingly rising loan defaults.

The turmoil was translated in performance drop of the ETF line-up, including the iShares MSCI Turkey ETF – ARCX:TUR (-27% in USD), iShares MSCI Turkey UCITS ETF – ITKY (-17% in USD), Lyxor MSCI Turkey UCITS ETF – MTAA:TUR (-20% in EUR), HSBC MSCI Turkey UCITS ETF – HTR (-21% in EUR) and Finans Asset Management Dow Jones Istanbul 20 Equity Intensive ETF – DJIST (-22% in EUR), with majority of the plunge attributed to currency exchange losses.

Market jitters struck recently after the central bank intervention in currency markets failed to stem the lira's decline. The Borsa Istanbul 100 index, Turkey's Benchmark Index lost -20% (in TRY terms) since last Thursday after gaining 54% in 2021 (Jan 4th,2021 – Dec 16th,2021). 

One might speculate that the positive inflows could be an indication of investors buying dip with hopes of an economic turnaround before the 2023 General and Presidential elections.

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