Shares of the iShares MSCI Turkey ETF (TUR) are lower by 4.7% Wednesday on media reports that a militant faction of al-Qaeda took hostages at a Turkish consulate in Iraq.
“The militants took an unspecified number of hostages at the Turkish consulate in Mosul, Haberturk news channel and Yeni Safak newspaper, Bloomberg reported.
Wednesday’s slump for TUR, the lone Turkey ETF, is the fund’s worst one-day performance since February when Turkish stocks were under pressure due to a rise in political volatility and a falling currency, among other factors. [Political Volatility Hits Turkey ETF]
TUR and the Turkish economy at large have been seen as vulnerable to both domestic and international shocks, leading to the country’s membership in the infamous Fragile Five club. However, TUR has shaken off the controversy to again be a bright spot among single-country emerging markets ETFs.
Following news of the al-Qaeda attack on the Turkish consulate, yields on 10-year Turkish bonds rose 1.72% to 8.87%. The iShares Emerging Markets High Yield Bond ETF (EMHY), which features a 13.8% to Turkish debt, making the country the ETF’s largest geographic weight, is also trading lower today.
The ETF entered Wednesday with a year-to-date gain of 30.6% and the fund had surged almost 50% since its Feb. 3 bottom. TUR has also ranked as one of the 10 best non-leveraged ETFs of any variety for two consecutive months. [Emerging Markets Lead May's Top ETFs]
Investors pulled out of Turkey late 2013, following corruption charges and political uncertainty in the run-up to elections. However, political tensions have eased after a strong showing by Prime Minister Tayyip Erdogen’s ruling AK Party in elections on March 30.
Turkey’s economy is expected to expand 2.2% this year after 4% growth last year. Observers believe that growth could pick up if the central bank cuts rates as political volatility eases.
On Tuesday, the Turkish Statistical Institute said the country’s first-quarter GDP rose 4.3%, topping forecasts calling for a 4.1% increase.
“After the robust growth data, analysts from J.P. Morgan Chase & Co., Citigroup Inc. and Capital Economics bumped year-end forecasts for Turkey’s GDP expansion to a range of 2.5% to 3.5%,” the Wall Street Journal reported.
iShares MSCI Turkey ETF
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