5 Utilities Funds To Counter Turkey’s Currency Crisis

Continued tensions over a significant decline in Turkey’s lira against the U.S. dollar continued to weigh on investor sentiment on Aug 13. Lira ended near its record low levels on the day, following concerns over the health of Turkey’s financial system.

Additionally, U.S. sanctions against top Turkish government officials and doubling of metal tariffs against Turkey added to the woes. Amid this turmoil, investors may scurry toward safe-haven sectors, which emerged as investments of choice.

One of the most popular safe-haven sectors is utilities. This sector comprises companies that provide telephone, gas, water and electricity services. In this context, investors looking for stable dividend and interest income can opt for mutual funds having significant exposure in utilities stocks.

Turkey’s Lira Close Near Record Lows

The Turkish lira lost around 20% against the U.S. dollar to around 7.131 lira during the day on Aug 13, reaching its lowest level ever. Although lira recovered slightly at the close on Aug 13, it traded below late Friday’s 6.427 lira to 6.974 lira per dollar.

The slight recovery in the lira is due to the Turkish Central Bank’s promise to offer “all the liquidity the banks need” in its statement. However, the central bank’s effort was not enough to avert the continued decline in lira. One of the key catalysts behind this plunge is worries over Turkey’s capacity to repay foreign-currency debts that rattled global equity markets.

Another was the United States’ decision to increase tariffs on steel and aluminum imports from Turkey. Moreover, Turkish president Recep Tayyip Erdogan said that his country is facing an “economic war.” Also, the European Central Bank, whose leader happens to be Erdogan, has raised concerns about the country’s economic stability.

Buy These 5 Utilities Mutual Funds

Following this development, investors shifted their attention toward safe-haven investments like utilities mutual funds. This is borne out by the fact that Utilities Select Sector SPDR Fund (XLU) has gained 5.3% in the past three months. Additionally, mutual funds related to this sector registered returns of 5% during the same period.