Turkey may be the strangest market in the global economy.
Led by hardline President Recep Tayyip Erdogan, the country’s inflation has reached 80%, its credit has been repeatedly downgraded and is now at high risk or junk thanks to lower interest rates. Turkey has more than $16 billion of his debt due by 2024, according to. bloomberg.
Still, $277.7 million iShares MSCI Turkey ETF (TUR) It’s up more than 34% this year. This makes Total Markets Country Exchange Traded Funds the best performing of all his US-listed ETFs.
The ETFs closest to the TUR in year-to-date performance are: iShares MSCI Brazil ETF (EWZ), an increase of almost 22%. Even oil-producing countries are not doing so well. iShares MSCI Qatar ETF (QAT) Up less than 11% iShares MSCI Saudi Arabia ETF (KSA) That’s an increase of just 6.53%.
Analyzing the rise in the Turkish market, where the S&P 500 has fallen more than 20%, is a rabbit hole.
Market surges occur amidst economic turmoil. Despite breathtaking inflation, the country’s central bank cut interest rates to his 12% benchmark rate with the support of President Erdogan, ultimately leading to the country’s currency crash. . The rate cut follows several rate cuts that began last year, with the president indicating in late September that he expects rates to be in the single digits by the end of the year.
In fact, the Carnegie Middle East Center reported that at the end of last year, when inflation was already very high, Erdogan believed that higher inflation was due to higher interest rates, and that lower interest rates would benefit domestic investment and exports. Reported.
multiple economic challenges
That said, just a few days ago, Bloomberg reported that the country’s foreign trade deficit widened 300% on an annual basis in September, and Russia’s invasion of Ukraine made the country even more vulnerable as commodity prices rose. In fact, a Bloomberg article notes that Turkey is struggling to pay for Russia’s fuel, with imports accelerating faster than exports.
Erdogan has said inflation is part of his economic plan and will deal with high inflation early next year.
One possible explanation for the apparently meaningless gains is that investors are shielded from the inflationary effects of President Erdogan’s rate cuts. Domestic and foreign investors are buying Turkish stocks: Foreigners poured $366 million into Turkish stocks in the week ending Aug. 19. reported by Bloombergcites central bank figures.
Also, the economy has been growing at a pace of about 6% per year for the past 20 years.
US investors seem unenthusiastic about the market’s unusual performance. Vanguard Total Stock Market ETF (VTI)are down more than 20% year-to-date, and there are few bright spots among the various asset classes. did.
Contact Heather Bell heather.bell@etf.com
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