Top Turkey ETF sees first quarter outflows of $100mn

Top Turkey ETF sees first quarter outflows of $100mn
By Akin Nazli in Belgrade April 1, 2020

The most popular Turkey exchange-traded fund (ETF), the Nasdaq-listed and USD-denominated iShares MSCI Turkey ETF (TUR), saw outflows of $99.6mn in the first quarter, the highest figure recorded since Q1 2019, BloombergHT reported on April 1.

On January 21, it gained to its highest level since June 2018 at 29.42 but it fell by 29% to a historical low of 17.72 as of March 20. The ETF saw its all-time high of 79 in 2010. It gradually bounced into the 20s by March 26 but was in the 18s as of April 1.

Major concerns driving renewed selling pressure on emerging markets assets are not going away.

Bloomberg on March 30 ran a story entitled “Unknowns Await Emerging Markets After Biggest Moves Since 2008”.

‘It’s too early’

It's too early to buy stocks, Hugh Gimber of JPMorgan concluded on March 31.

There was no sustainable faith in the moderate rally seen in US equities. Investors took advantage of the slight comeback by resetting hedges in the options market, rather than adding to longs, Mandy Xu of Credit Suisse said on March 31.

The current rebound in markets may continue for a while following a bout of extreme pessimism, but another rout is imminent, Jim Rogers of Rogers Holdings told Bloomberg on April 1.

If the 2008 financial crisis is any guide, world markets—which have barely had time to recover from the dollar's 9% surge in mid-March—may be set for another damaging bout of strength in the greenback, Reuters reported on March 31.

Under extraordinary conditions, physical gold prices were disconnected from market prices, Metal Miner reported on March 31.

Further fall in TUR forecast

On March 28, after the TUR closed the week on March 27 at 19.05, Inan Dogan said in an analysis for Insider Monkey that he expected the TUR to decline at least 10% by the end of April due to the spreading coronavirus (COVID-19) pandemic.

TUR’s net asset value fell to $198mn as of March 31 from $380mn as of February 10.

The Berlin-listed iShares MSCI Turkey ETF (ISVZ) was up 1.58% y/y to 25.05 on February 11 while the Mexico-listed MXN-denominated iShares MSCI Turkey ETF (TUR) was up 0.74% y/y to 546 as of January 16.

TUR, the only ETF that offers pure exposure to the Borsa Istanbul, replicates the MSCI Turkey IMI 25/50 Index, which covers around 99% of the free float-adjusted market capitalisation on the exchange.

It has 48 constituents. The weight of BIM (BIMAS) jumped to 11.14% as of March 31 from 7.68% in February, making the hard discount chain the top stock in the fund, while bank Garanti BBVA’s (GARAN) weight fell to 9.91% from 10.45%.

Akbank (AKBNK) took 8.41% (9.05% in February) and Koc Holding (KCHOL) a 5.26% weight (5.47% in February).

The London-listed GBP-denominated HSBC MSCI Turkey UCITS ETF (HTRY) saw £26.6mn ($32.2mn) of outflows in Q1, according to BloombergHT.

It was down 21% y/y to 138 on April 1 while the Xetra-listed EUR-denominated HSBC MSCI Turkey UCITS ETF (H4ZK) was lower by 23% y/y and the Paris-listed HSBC MSCI Turkey UCITS ETF (HTR) was down 23% y/y.

The HSBC MSCI Turkey UCITS ETF replicates the MSCI Turkey Index (MITR00000PTR). It was down 10% y/y as of March 31.

Discount chain is top stock

The weight of BIM (BIMAS) in HSBC’s Turkey ETF jumped to 15.28% as of March 27 from 10.88% in February, making the hard discount chain the top stock in the fund, while Garanti BBVA’s weight fell to 13.09% from 14.92%.

Akbank had 11.37% (13% in February) and Turkcell (TCELL) 9.9% (8.3% in February).

Headlines in the Erdogan media questioning whether banks have any appetite to extend loans are becoming bolder.

Garanti BBVA expects Turkish firms will have serious cash requirements starting from April but Turkish lenders have sufficient liquidity to overcome demand, CEO Recep Bastug said on March 31.

There was no dash by customers to withdraw deposits while demand for consumer loans was down by 50% and credit card spending was also down 30%, according to Bastug.

On March 20, Moody’s Rating Services said that it cut Turkish Airlines’ (THYAO) rating to B2, five notches below investment grade, while it placed the Turkish flag carrier’s ratings on review for a further downgrade.

Moody’s also placed on review for downgrade its ratings on the two Enhanced Equipment Trust Certificates (EETC) of Turkish Airlines it rates: Bosphorus Pass Through Trust 2015-1A ("Bosphorus") rated Ba3 and the Japanese Yen-denominated, Anatolia Pass Through Trust ("Anatolia"), Class A rated Ba3 and Class B rated Ba3.

On March 20, Standard & Poor’s cut Turkish Airlines to B, five notches below investment grade.

The airline was making moves to decrease operational expenses and increase its financial liquidity, it said on April 1 in a stock exchange filing.

Refinery cuts runs

Top refiner Tupras (TUPRS) has cut runs at its refineries as the oil market’s troubles amid a price war do not look resolvable soon.

Borsa Istanbul’s top carmakers Ford Otosan (FROTO) and Tofas (TOASO) have halted production along with other non-listed peers.

On March 31, S&P cut household appliances maker Arcelik (ARCLK) to B+, two notches below investment grade. The company halted operations in its foreign markets.

Retailer Migros (MIGRS) hired 2,200 new personnel for online deliveries. The company opened 1,000 new positions and received 60,000 applications, daily Sozcu reported on April 1. Migros currently has 45,000 employees. It has expanded its online delivery services to 71 cities in Turkey. But customers are facing long delays in securing bookings for grocery deliveries.

On March 30, hard discount chain Sok Marketler (SOKM) said in a stock exchange filing that it launched free delivery services via a mobile application and it plans to hire 5,000 extra staff in 2020.