In an attempt to prevent further declines in the stock market, Turkey’s Sovereign Wealth Fund intends to invest cash in the country’s primary stock exchange through exchange-traded funds. This will be done in an open-ended fashion.
According to individuals who are familiar with the situation, the fund, which is known by its Turkish initials TVF, will first commit at least one billion dollars to ETFs that are managed by a state bank.
This effort is distinct from earlier measures to prop up stock prices that have been made since the Borsa Istanbul began trading on February 6 after being suspended as a result of two terrible earthquakes. After the natural calamity, the government at first invested the money from pension funds in the stock market in an attempt to halt the market’s downward trend.
According to the persons who spoke on condition of anonymity because the topic at hand is sensitive, the strategy calls for the utilization of exchange-traded funds (ETFs) that are now managed by Ziraat Portfoy, the asset-management arm of state lender T.C. Ziraat Bankasi A.S. The performance of the funds is based on a variety of indexes that are associated with the Borsa Istanbul.
On the topic of the anticipated investments, Ziraat Portfoy did not wish to comment, and TVF did not provide an instant response to requests for a remark.
As of 1:20 p.m. local time in Istanbul, trading was relatively unchanged despite the fact that the news caused the Borsa Istanbul 100 Index to recover losses of up to 1.6%. When it reopened on February 15 after being closed for a week because of the earthquakes, the index has increased by more than 12 percentage points.
The assistance from the sovereign wealth fund will be of an unprecedented scale and will arrive in advance of the elections that are scheduled to take place in May. Local investors have sought protection against excessive inflation over the course of the previous several years, which has resulted in domestic investors becoming the dominating force on the Borsa Istanbul. This development has also given tiny local investors political influence in the city.
Borrowing, as well as Dividends
According to one of the persons, the precise size of the fund when it is officially launched won’t be known until all of the TVF companies, such as Turkish Airlines, declare their results for 2022. According to the individual, the cash pool has the potential to progressively increase beyond the predicted starting value of one billion dollars.
The companies in which the TVF invests provide the TVF with cash in the form of dividends at regular intervals. Also, it is involved in the debt markets and has the ability to create new funds by borrowing in both lira and other currencies.
Ziraat offers a number of exchange-traded funds (ETFs) that follow Turkey’s primary stock exchange. Some of these ETFs concentrate solely on significant companies, such as those that are included in the Borsa Istanbul 30 index. According to data collated by Bloomberg, the Ziraat Portfolio BIST 30 Index Fund, which is the largest local exchange-traded fund (ETF) for Turkish stocks, has already had inflows totaling 8.1 billion liras ($430 million) since the 15th of February.
The BIST 100, which is the primary index tracked by the Istanbul Stock Exchange, has a market capitalization of around $220 billion. According to figures provided by Bloomberg, the daily average trade volume over the course of the previous month was approximately $3.8 billion.
According to the persons, the indexes that monitor larger corporations would most likely be the top target for the sovereign wealth fund, and the buying program does not have a termination date.
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