The often controversial and volatile iShares MSCI Turkey ETF (NasdaqGM: TUR) is up nearly 20% over the past month, a noteworthy rally for one of this year’s worst-performing single-country emerging markets exchange traded funds.

TUR is still down more than 45% year-to-date and the Turkish economy faces myriad challenges, including weakness in the banking sector.

Turkey’s central bank has even hiked interest rates 6.25 percentage points to fight the rising inflation and support the weakening lira currency. The Turkish government has also implemented a new economic program with lower growth targets as a response to the current market environment.

“Fitch Ratings has downgraded the Long-Term Foreign-Currency Issuer Default Ratings (LTFC IDRs) of 20 Turkish banks and their subsidiaries. The agency has also downgraded the Viability Ratings (VRs) of 12 banks,” said Fitch Ratings in a recent note.

Why It’s Important

The state of affairs for Turkish banks is critical for TUR because the fund devotes 26.34% of its weight to the financial services sector, its largest sector allocation. Four of TUR’s top 10 holdings are financial services stocks.

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