Turkey ETF Outperforming in Emerging Markets
December 6th 2012 at 8:41am by Tom Lydon
The iShares MSCI Turkey Investable Market Index Fund (NYSEArca: TUR) is up 55% this year and the emerging market has earned investment grade status. The pending growth spurt of this developing market has taken root, yet challenges remain ahead.
“TUR, which has nearly $665 million in assets under management, last traded above $63 in June 2011. Buyers are stepping into the ETF even as tensions between Turkey and Syria escalate. On Tuesday, the North Atlantic Treaty Organization (NATO) agreed to send Patriot air-defense systems to Turkey’s shared border with Syria,” Benzinga reports. [Tom Lydon, Chuck Jaffe Talk ETF of the Week: Turkey]
On a year-to-year basis, TUR is up about 30%. Moody’s has rated Turkey’s government bonds a Ba1 and considers Turkey’s economic strength as “moderate to high” in the sovereign rating spectrum. For this reason the ETF is not proposed as a core holding in a portfolio, but can enhance emerging market exposure. The even risk associated with Turkey is “high”, according to the ratings company, however, the country has been able to show some resilience to economic and political corruption. [Large-Cap ETFs on a Roll]
Furthermore, Turkey has been upgraded to an investment grade credit rating. The recent Fitch Ratings gave Turkey’s long term foreign currency Issuer Default Rating a BB+ and long term local currency IDR a BB. All of the above ratings are steady and the outlook stable despite recent political unrest. Benzinga reports that TUR, the Turkey ETF, has gathered $38 million in new investment capital since the upgrades. [Turkey Leading ETFs After Credit Upgrade]
The largest obstacle for Turkey’s stock market is the tensions between secular and Muslim populations. Long time ethnic and regional conflicts will also continue to be problematic. Wall Street Sector Selector reports that Turkey’s economic focus is that of service, rather than agriculture, and the country is located in a prime spot to be the center of trade.
TUR weights heavily toward financials, with industrials and consumer staples rounding out the top allocations. TUR’s performance has beaten the broad-based Vanguard MSCI Emerging Markets (NYSEArca: VWO), the largest emerging markets ETF by assets, which has returned 7.8% year-to-date.
iShares MSCI Turkey Investable Market Index Fund
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.