Turkey: When a coup doesn’t de­stroy a mar­ket

Financial Mirror (Cyprus) - - FRONT PAGE - By Paul Au­sick

When told of a failed coup and a round of thou­sands of ar­rests of mil­i­tary, gov­ern­ment and civil­ian peo­ple, most in­vestors might just as­sume that the lo­cal stock mar­ket would be crushed. Re­ports of close to 300 deaths also cir­cu­lated and ar­rests are still be­ing made. Mar­kets hate un­cer­tainty, and the po­ten­tial ouster of an elected gov­ern­ment has to rank up at the high­est points of un­cer­tainty. Still, the failed coup in Turkey some­how is be­ing at least some­what dis­counted, com­pared with other coups and rev­o­lu­tions.

iShares MSCI Turkey (NYSEMKT: TUR) was last seen down 7.8% at $38.35, ver­sus a 52-week range of $33.15 to $46.42. It had $363 mil­lion in as­sets as of July 15. That is based on 8.55 mil­lion shares, and its av­er­age daily vol­ume is un­der 400,000 shares.

The Turk­ish In­vest­ment Fund Inc. (NYSE: TKF) was last seen down 7.8% at $8.22, ver­sus a 52-week range of $7.05 to $9.74. This closed-end mu­tual fund dates all the way back to 1988 and is ad­vised and run by Mor­gan Stan­ley. The fund has an av­er­age daily share trad­ing vol­ume that is far smaller, close to 17,500 shares.

Turk­cell Iletisim Hizmet­leri A.S. (NYSE: TKC), the Turk­ish wire­less and tele­com player op­er­at­ing in Turkey and nearby na­tions, was last seen down 5.3% at $9.06. Turk­cell has a 52-week range of $7.71 to $11.71, and its av­er­age daily trad­ing vol­ume is close to 300,000 shares on the New York Stock Ex­change.

The Turk­ish lira was last seen down less than 2%, but that had been far worse over the week­end and ear­lier on Mon­day. Other coups and rev­o­lu­tions have been much more harsh in the af­ter­math.

Per­haps, this one is dif­fer­ent be­cause the coup failed, and mar­kets often treat an un­pop­u­lar sit­u­a­tion bet­ter than an un­known sit­u­a­tion.

VanEck Vec­tors Egypt ETF (NYSEMKT: EGPT) cratered dur­ing the rev­o­lu­tion in Egypt in 2011. Many of the un­der­ly­ing com­pa­nies were limit down af­ter reopen­ing, and the ex­change traded fund acted like a price-dis­cov­ery mech­a­nism be­cause new units were un­able to be cre­ated and the mar­kets were closed on a lo­cal level.

24/7 Wall St. wanted to see what else was be­ing said, for in­stance by the rat­ings agen­cies on how they see Turkey now. Fitch Rat­ings said:

“The at­tempted coup in Turkey (BBB/Sta­ble) and the au­thor­i­ties’ re­ac­tion high­light po­lit­i­cal risks to the coun­try’s sov­er­eign credit pro­file. Whether this trans­lates into sov­er­eign rat­ings pres­sure will de­pend on the ex­tent to which the gov­ern­ment’s re­ac­tion deep­ens po­lit­i­cal di­vi­sions and weak­ens in­sti­tu­tional in­de­pen­dence. This could un­der­mine pol­icy co­her­ence and heighten the risks that ex­ter­nal fi­nanc­ing stresses ma­te­ri­alise. … Our next sched­uled sov­er­eign rat­ing re­view is due on 19 Au­gust.”

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