The iShares MSCI Turkey Investable Index Fund (NYSE:
) posted a modest gain on Tuesday, but that was enough to have
the high-flying ETF flirting with a new 52-week. One of 2012's
top-performing emerging markets
, the iShares MSCI Turkey Investable Market Index Fund has kept
the good times going in 2013 with a gain of almost 2013.
That run seems and Tuesday's gain seem to indicate Turkey's
flap with ratings agency Standard & Poor's does not mean much
to Turkish equities or investors. On Monday,
that S&P will no longer rate individual Turkish bond issues
as of February 14. From that date onward, S&P will only issue
a rating on the overall Turkish sovereign creditworthiness.
The flap between Turkey and S&P stems from the ratings
agency decision in May 2012 to lower its outlook on Turkey's
BB-rated sovereign debt to stable from positive. Turkey viewed
the move as damaging to its goal of landing an investment-grade
rating, which would lower the country's borrowing costs.
At BB, S&P has the same rating on Turkey that it has on
Costa Rica, Guatemala and financially-challenged Hungary, to name
a few. As is the case with some other
noteworthy developing nations
, Turkey is pressing for an investment-grade rating. And is the
case with some of those other countries, such as the Philippines,
Turkey can make a viable argument for why its sovereign debt is
deserving of a rating above junk status.
The country is
home to favorable demographics and a shrinking
, among other positive catalysts. Last year, JPMorgan raised its
outlook on Turkey to Overweight from Neutral.
Speaking of upgrades, Turkey recently investment-graded
status, just not from S&P. In November,
upgraded Turkey's long-term foreign currency Issuer Default
Rating (IDR) to BBB- from BB+ and the Long-term local currency
IDR to BBB from BB. The outlooks on those ratings are stable.
Fitch also raised Turkey's short-term foreign currency IDR to
F3 from B and the Country Ceiling to BBB from BB. In the wake of
the issues with S&P, Turkish policymakers were quick to point
out the country still has ratings agreements with Fitch and
Moody's Investors Service. Moody's upgraded Turkey's sovereign
credit rating to Ba1 in June 2012.
Regarding bond ETFs that offer exposure to Turkish sovereigns,
the S&P news was equally as inconsequential as it was to TUR.
Turkey is the largest country weight in the PowerShares Emerging
Markets Sovereign Debt Portfolio (NYSE:
), but that ETF only suffered a minor loss on Tuesday. Turkey is
the third-largest county weight in PCY's chief rival, the iShares
J.P. Morgan USD Emerging Markets Bond Fund (NYSE:
). EMB closed slighty higher on Tuesday. Both ETFs offer
dollar-denominated exposure to emerging markets sovereign
The iShares Emerging Markets High Yield Bond Fund (NYSE:
) and the Market Vectors Emerging Markets Local Currency Bond ETF
) feature allocations of 16.5 percent and 8.3 percent,
respectively, to Turkey. Both traded just slightly lower on
In perhaps another sign that S&P's view on Turkish is not
a deal-breaker for investors, this factoid is worth remembering:
TUR had $627.4 million in assets under management as of November
6, 2012. At the start of trading on January 14, that number had
surged to $874.4 million.
For more on ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Gain access to more investing ideas, tools & education.
Get Started on Marketfy, the first ever curated
& verified Marketplace for everything trading.