iShares Turkey ETF Continues to Shine But Is The Rally Sustainable?

Screen Shot 2013-05-15 at 2.07.06 AMShares of the iShares MSCI Turkey Investable Market Index Fund (NYSE: TUR) has soared throughout 2013 and has even hit its 52-week highs trading at $77.38. Turkey as a whole has been experiencing robust growth as the Borsa Istanbul National 100 has surged to its highest levels in the past 25 years. We have been huge supporters of TUR dating back to August 8th, 2011 when we issued our first ‘BUY’ rating for the ETF in our article ‘iShares Turkey ETF (TUR) Poised for Success‘. Since then, TUR has appreciated +69.67% over the past 22 months.

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What Attracts Investors to TUR

Screen Shot 2013-05-15 at 2.07.34 AMInvestors looking to play the Turkish markets have few options. iShares MSCI Turkey Investable Market ETF (TUR) originally launched in 2008 is the only option available to investors seeking a pure play exposure in the Turkish equity space. TUR is also the only ETF with dedicated Turkish exposure. The banking sector also plays a prominent role in the investable market in Turkey and TUR has a high concentration of financials in its portfolio.

What To Expect Going Forward

When it comes to Turkey, it has been the talk of a higher sovereign debt rating that has been lifting TUR, the lone ETF devoted exclusively to the country. Turkey, which has been engaged in a multi-decade conflict with Kurdish militants in the Southeast part of the country, is working to end the conflict. The government there is in negotiations with Abdullah Ocalan, the jailed leader of the Kurdistan Workers’ Party or PKK, in a bid to end the bloodshed.

Just last month, Moody’s Investors reported that Turkey’s ongoing efforts to bring an end to the conflict could be a positive credit step. Fitch Ratings upgraded Turkey’s long-term foreign currency Issuer Default Rating (IDR) to BBB- from BB+ back in November and the Long-term local currency IDR to BBB from BB, this is huge news as it’s giving Turkey its first investment grade ratings in nearly two DECADES.

Screen Shot 2013-05-15 at 2.06.53 AMThis has been great news for investors as the speculation of a possible credit rating upgrade has lifted Turkish banks shares. TUR is heavily centered on the Turkish financial sector with 51.9% of its holdings in financial services stocks, quadruple its next largest sector weight, industrials.

Turkish Outlook

Turkey’s economy has some good signs heading their way. Beyond this falling inflation rate, investors should note that Turkey has seen a plunging growth rate as well.

Turkey has good medium-term growth prospects and a diverse economy. The nation’s debt-to-GDP ratio stands at 39.9%, much lower than the debt-to-GDP ratio of many developed economies. On top of this, the country has a low employment rate, government reforms, strong, solid banking system, and improved credit rating. Adding all these solid growth factors together and Turkey could prove to be a great investment market in Europe for years to come.

If you have any further questions on either TUR, Turkey’s economy or any investment at all don’t hesitatet to contact us at all by emailing us at jameshartje@StocksonWallStreet.com or Follow our Contact Form

Also make sure to tune in later this week for our long-term outlook on TUR along with more detailed analysis on both Turkey and other emerging markets.

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