Turkey ETF: Still a Tricky Proposition

“Twelve-month foreign direct investment (FDI) has shrunk to $10.7 billion, the lowest since June 2013. FDI covers only 32% of the current account deficit (the lowest coverage since mid-2015), making Turkey more dependent on hot money even as sentiment on EM sours,” according to a Brown Brothers Harriman note posted by Dimitra DeFotis of Barron’s.

The administration is pursuing those accused of being behind the coup and has arrested thousands of army officers, judges, teachers and prosecutors.

Some market participants believe political risk in Turkey exceeds that of other emerging markets, meaning it is too soon for investors to consider supposed bargains in Turkish stocks.

“The lira has generally underperformed … Turkish equities have underperformed this year after a decent 2015. … This underperformance should continue, as our EM Equity model has Turkey at a VERY UNDERWEIGHT position,” according to the BBH note seen in Barron’s.

For more stories on the lone Turkey ETF, visit our Turkey category.