Turkey ETF: Still a Tricky Proposition

The iShares MSCI Turkey ETF (NYSEArca: TUR) is one emerging markets exchange traded fund that is probably looking forward to 2016 coming to an end.

As has been widely documented, 2016 has been, broadly speaking, a renaissance year for emerging markets stocks and ETFs.

TUR is an exception as highlighted by the ETF’s 8.5% year-to-date loss. However, the lone ETF dedicated to Turkish stocks is up 5.4% over the past week and that could be luring some investors back to the fund without acknowledging that significant risks remain.

In July, Turkish stocks and TUR tumbled following a failed coup. Turkish markets plummeted on concerns of the implications of the ensuing political turbulence after a failed coup d’etat attempt from the military branch.

In August, Turkey’s central bank lowered interest rates by 25 basis points to 8.75% and said it stands ready to provide liquidity to the country’s banks, if needed, an important factor considering TUR’s weight to financial services stocks is almost 44%, or more than triple the ETF’s second-largest sector allocation.

Following the July coup attempt, S&P Global Ratings cut the country’s sovereign debt rating to BB/B on concerns over an increase in political risk after the failed putsch, reports Bloomberg. Moody’s Investors Service also put a number of companies on review for a downgrade and is reviewing the sovereign for a possible downgrade.