The iShares MSCI Turkey ETF (NYSEArca: TUR) started this year on a torrid pace, but even with a big drop last month, the lone exchange traded fund dedicated to Turkish equities is up 12.3% year-to-date compared to again of 6.9% for the MSCI Emerging Markets Index.
Earlier this year, Turkish markets rallied after Prime Minister Binali Yildirim stepped up and announced a cabinet that signaled policy continuity, with top members of the economic management team including Deputy Prime Minister Mehmet Simsek, whom was favored by foreign investors as a reformer, Reuters reports.
Investors believe Simsek will maintain fiscal discipline and act as a buffer to Erodgan’s push against orthodox monetary policy.
Citigroup recently had some positive things to say about select Turkish equities.
“More Breathing Room from the Fed last week … is particularly helpful to Turkey, given it allows yield-chasing investors to turn a blind eye (at least for now) to Turkey’s well known vulnerabilities,” according to part of a Citi note posted by Dimitra DeFotis of Barron’s. “Positive Economic Momentum: Unlike other emerging markets (where economic data has in general disappointed), upside surprises have been a consistent story from Turkey over the last year, as economist’s dire predictions on Turkey’s economic picture have failed to materialize.”[related_stories]
Looking ahead, Turkey still faces growing risk from investment outflows as the U.S. Federal Reserve normalizes interest rates.
Related: More Tumult for Lone Turkey ETF
Turkey has been tackling a number of economic issues. The country has been suffering an economic downturn due to greater political instability, a struggle against threats from the Islamic State and a renewed war with Kurdish militants in its southeast, reports Michelle Mark for the International Business Times.
Currently, Turkey is experiencing rising inflation, slowing growth, increased fiscal expenditures, high unemployment and a dip in export competitiveness. The economy is expected to only expand 3% this year. Obviously, TUR is shaking off some of Turkey’s economic headwinds.
“Positive EPS Momentum: Sell side analysts estimates for the earnings of Turkish companies have also been seeing upwards adjustments, as fears surrounding “profits pain” have somewhat faded,” adds Citi. “Turkish equities still trade roughly 10% cheaper than GEM equities on a forward PE basis.”
For more information on Turkey, visit our Turkey category.
iShares MSCI Turkey ETF
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.