Turkey’s Stocks Took The Crown This Year

Turkey’s Stocks Took The Crown This Year
Luke Suddards

about 1 year ago1 min

Turkey’s currency, the lira, may be about as valuable as one-ply toilet paper, but its stocks are more like caviar. The iShares MSCI Turkey ETF (ticker: TUR; expense ratio: 0.57%) returned a ridiculous 94% this year, meaning you could’ve turned a $10,000 investment into almost $20,000 if you’d invested a year ago. What’s more, because those gains are in US dollar terms, the lira’s roughly 40% loss against the dollar is already accounted for. All in all, Turkey’s thrust leaves many other developed markets – most of which are in the red for this year – eating dust.

As for what’s behind those stratospheric gains, a lot of it comes down to Turkey’s hyperinflation – it’s sitting around 84%, if you want to get precise. In a bid to protect their savings from going up in flames, Turkish residents flocked to stocks. In fact, Turkey’s Central Securities Depository estimated that retail investors in Turkey opened 32% more stock-trading accounts this year, bringing the total count to just over 3 million as of mid-November. That souped-up demand has lit a fire under stocks, and the unorthodox decision to cut interest rates in the face of sky-high inflation – in turn, boosting stock valuations and making them look better than bonds – has only added gasoline to the mix. The stock frenzy may also be down to a switch toward short covering, with the short selling ratio falling from 20% in March to a puny 1.4% in October. Now, Turkish stocks could be in for a bumpier ride next year, as fears of a global recession ramp up and political risk comes to the fore with Turkey’s general election. But without any tangible alternatives to hedge against inflation, Turkish citizens may choose to ignore those risks.

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