Turkey’s ETF Heavy In Its Untested Financial System
April 1st at 3:00pm by Tom Lydon
The brand-new exchange traded fund (ETF) iShares MSCI Turkey Fund (TUR) has a heavy weighting in its relatively unproven financial sector.
Gary Gordon for ETF Expert mentions a recent report done by the International Monetary Fund and the World Bank about the stability of the country’s financial system.
On the plus side, Turkey has a private banking sector that has seen a lot of activity with active lending to consumers and businesses. Direct foreign investment into the country has boosted the financial sector tremendously. Regulation is showing signs of sophistication.
But strikes against the system are that investors’ confidence may still be fragile, banks have a large interest rate risk, Turkey’s dependence on capital inflows and the fact that its new, stronger financial system is untested in a crisis.
The fund has a 53.5% weighting in financials, far and away the largest sector representation in the fund. Other sectors are materials (9.2%), telecommunication services (8.3%) and industrials (7.6%).
Turkey’s prospects of joining the European Union are strong and it’s one of the few Muslim-oriented countries that embraces capitalism. If this fund is too heavily skewed toward financials for your taste, there are other emerging market funds available that can help spread out the exposure a bit more.
