Shares 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.
What Attracts Investors to TUR
Investors 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.
This 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.
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.
Turkey is now a serious global economic contender. It has weathered the financial crisis very well, is recording strong economic growth and has a public sector debt-to-GDP ratio that’s enviably low. Turkey is increasingly being talked about as one of the next BRICs. The New York Times recently described Turkey as “a fast-rising economic power, with a core of internationally competitive companies turning the youthful nation into an entrepreneurial hub, tapping cash-rich export markets in Russia and the Middle East while attracting billions of investment dollars in return.” Turkey is the world’s 18th largest country by population.
In the past, high inflation and political turmoil kept investors on the sidelines from this “East meets West” market. Today, you’ll find a much different Turkey. Inflation hovers at about 7%. Prime Minister Erdogan’s AK Party has inspired confidence in the Turkish economy. HSBC reckons that Turkey will reach investment grade status following the mid-2011 elections and has recently declared the country to be a ‘preferred emerging market’.
Even better, with a 2011 P/E of 10.7, Turkish equities remain inexpensive compared to the broader emerging markets universe of 11.6 times earnings.
Turkey grew more than 10% in the first half of 2010, rivaling China and has the strongest growth in the region. Over the next couple of years, Turkey is expected to have the highest GDP growth right across Europe, Middle East and Africa: 7.3% in 2010 and 4.5% in 2011.
2010 has been a defining year for Turkey with record tourism numbers and a booming real estate sector. The economy is set to get a boost from tourism revenue, with $22.5 billion in 2010 and predicted to grow between 6-7% in 2011.
Turkish real estate has gone from strength to strength in 2010 with the construction sector posting an impressive 22% growth for Q2 2010. Both domestic and international demand for quality accommodation in cities such as Istanbul, as well as along the Mediterranean and Aegean coasts, seems to be insatiable with over 32,000 Britons already owning Turkish property. Easing regulations on foreign nationals purchasing land in Turkey is predicted for 2011, which could further boost the market, opening it up to increased levels of lucrative Mid-East and international property investors.
Turkey will not be immune to European fiscal crisis. And the Instanbul Stock Exchange (ISE) – which ranks as the 6th most profitable in the world – is top-heavy in real estate and construction. So, expect some volatility over the near-term.
Nevertheless, Turkey’s banking system has been praised for sidestepping some of the worst effects of the global recession and was recently upgraded by international credit ratings agency, Moody’s. Fitch Ratings has raised its outlook on Turkey from ‘stable’ to ‘positive’ affirming them as ‘BB plus’ – further boosting investor confidence. Turkey’s growth story remains strong.
CONCLUSION: High growth projections, a young population and a low P/E make Turkey a definite “buy.” Turkey-specific investment opportunities are few and far between. I like the Turkey ETF, iShares MSCI Turkey Index Fund (NYSE:TUR). HSBC is also likely to launch a Turkey EFT before the end of 2010 –
the HSBC MSCI Turkey EFT (LSE:HTRY) – which will have an attractively low total expense ratio (TER) of just 0.6% that’s below the iShares equivalent.