Down 14.1% and 24.1% year-to-date, respectively, the iShares MSCI Thailand Capped ETF (NYSEArca: THD) and the iShares MSCI Turkey ETF (NYSEArca: TUR) are lagging the MSCI Emerging Markets Index in significant fashion. The emerging markets benchmark is down just under 10% this year.
However, some investors see opportunity in downtrodden Thai and Turkish stocks and that could spell relief for THD and TUR.
“Notwithstanding … difficulties, financial flexibility and a strong balance sheet position has allowed emerging market economies to withstand an important adjustment, which includes a currency depreciation of more than 20% in the past year … valuations in emerging markets look attractive against developed markets in the context of the U.S. economic recovery,” according to a BlackRock note posted by Dimitra DeFotis of Barron’s.
In the note, BlackRock sounded a bullish tone on the fundamentals of Thai and Turkish equities.
While TUR has joined in on the emerging markets bounce in recent days, the long-term outlook for the once vibrant Turkish economy is, in the eyes of some market observers, unsettling.
Global investors are dumping Turkish bonds, making the lira one of the worst-performing emerging currencies against the dollar this year. The central bank is under increased pressure to act in order to assuage market fears and prop up the quickly depreciating lira currency, especially in an uncertain political climate where there is rising risk of a snap election – President Tayyip Erdogan could call for a snap election on August 23 if a coalition government has not formed. The government has been the most vocal about cutting interest rates to stimulate growth. [Central Bank no Help to Turkey ETF]