Market Overview

This ETF Loves Turkish Turmoil

Share:
This ETF Loves Turkish Turmoil
Related EDC
As Emerging Markets Struggle, Two Countries Make Their Claim
As Emerging Markets Struggle, 2 Countries Make Their Claim
August Recap And Outlook: Finding Opportunities In Volatility (Seeking Alpha)
Related EDZ
As Emerging Markets Struggle, Two Countries Make Their Claim
Emerging Markets Bears Prowling With This ETF
August Recap And Outlook: Finding Opportunities In Volatility (Seeking Alpha)

The 11 percent slide iShares MSCI Turkey ETF (NASDAQ: TUR) took on Monday had a sequel on Friday's open, slumping another 5 percent.  The volume from the initial sell off was more than 12 times the daily average as that country's efforts to prop up its flailing currency, the lira, delivered no positive results.

All told, TUR is off 25 percent from its August high. Although Turkey is a negligible part of the MSCI Emerging Markets Index, that benchmark is wilting in the wake of the Turkish turmoil and is off 3.2 percent over the pat week.

What Happened

What is bad for Turkish stocks and the broader emerging markets complex is beneficial to the Direxion Daily MSCI Emerging Markets Bear 3X Shares (NYSE: EDZ). EDZ is designed to deliver triple the daily inverse returns of the MSCI Emerging Markets Index.

On Monday, EDZ jumped 4.8 percent on above-average volume, extending its one-week gain to 9.6 percent. With the entire week's gains, EDZ is up nearly 20 percent this month, making it one of the best-performing inverse leveraged funds in Direxion's lineup.

Why It's Important

EDZ's recent bullishness is important because the slump in Turkish stocks is punishing other emerging markets. For example, Direxion's three worst-performing leveraged bullish funds last Friday were each emerging markets ETFs. On Monday, 40 emerging markets ETFs hit 52-week lows.

“There are only three options to halt the freefall of the Turkish lira,” tweeted Dani Rodrik, an economist at Harvard University. “1. Sell dollars at the expense of using up the central bank’s reserves. 2. Announce a serious rate hike. 3. Capital controls. Choose your poison.”

What's Next

The near-term outlook is murky at best for Turkish assets with few, if any, market observers willing to openly voice bullish opinions. That favors the bearish EDZ, but traders should remember EDZ should be deployed as a short-term trade.

Turkish equities are significantly more volatile than broader emerging markets benchmarks and any snap-back buying there would punish EDZ while favoring the fund's bullish counterpart, the Direxion Daily MSCI Emerging Markets Bull 3X Shares (NYSE: EDC). EDC looks to deliver triple the daily returns of the MSCI Emerging Markets Index.

Related Links:

FAANGs Loom Large For Growth ETFs.

Russia Leveraged ETFs See Volume Spike.

Posted-In: Direxion ETFLong Ideas News Short Ideas Emerging Markets Emerging Market ETFs Trading Ideas ETFs

 

Related Articles (EDC + EDZ)

View Comments and Join the Discussion!

DSW's Increased Competition, New Loyalty Program Is Weighing On Margins

Bluegreen Vacations Interrupted By New Sell-Side Bear