Many emerging markets held up quite well on the initial news of
the Fed QE taper, with several rising on the day despite worries
over reduced demand. However, the first full day of trading
following the report that the Fed would be curtailing bond
purchases by $10 billion wasn't as kind to these markets, sending
many sharply lower.
Broad funds like
were both down more than 1.6% on the session, while some country
specific funds struggled even more. While several BRIC
markets-especially India-were hard hit, one of the biggest losers
on the day was clearly the
iShares MSCI Turkey Index Fund (
TUR was down about 4.4% on the day, as emerging market tapering
concerns weighed heavily on this high beta-and financial
heavy-market. And though taper worries played a big role in TUR's
decline, political issues also played a huge part in the Turkey ETF
drop in Thursday trading (read
Should You Stuff the Turkey ETF into Your
Political Woes in Focus
Some believe a new political crisis is brewing in Turkey, following
up the issues that hit the country earlier in the year. This time,
a clash appears to be
building between the Prime Minister and an Islamist
, with dozens being arrested.
This is somewhat of a surprise as the both the Prime Minister and
the Islamist movement-the Hizmet Movement-were on the same side.
However, they have been opposing each other lately, especially
after a recent decision from the Prime Minister which impacted a
key source of Hizmet's revenue and recruitment,
according to CNN
Given this rift, as well as upcoming elections in 2014, many are
becoming a little more bearish on Turkey. And when you add in the
taper and what this means for emerging markets, it becomes pretty
clear why Turkey sold off so heavily in Thursday trading (also see
3 Currency ETFs Crushed in Emerging Market Rout
Turkey ETF in Focus
It also doesn't help that TUR has such a heavy financial component,
with the sector comprising more than 45% of the fund. This,
combined with a beta vs. the S&P 500 of 2.15, helps to explain
why Turkey has struggled so much during the last few months.
After all, financials have been among the most impacted by taper
concerns in the U.S., and stand to lose the most from currency
weakness as well. Plus, with the high beta nature of the Turkish
market, the country tends to lead on the way up, and on the way
And, thanks to the latest move lower, TUR is once again within
striking distance of its 52 week low. The ETF has lost about 20% in
the past three months, and about a quarter of its value in the YTD
time frame, suggesting that the momentum isn't looking very good
for this fund possessing a Zacks ETF Rank #3 (Hold).
Turkey has experienced a very rocky 2013 thanks to a struggling
currency, broad emerging market woes, and vast political risks.
While some might have hoped that this would end with the year, a
new crop of issues-and a fresh political rift-could suggest that
more worries are ahead for TUR (see
all the Broad Emerging Market ETFs here
So, investors might want to hold off on this high beta ETF until
there is some political certainty following the elections in 2014.
Until then though, it could be a very rocky road for the Turkish
equity market, especially if broad emerging market concerns press
down on volatile funds like TUR.
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ISHARS-EMG MKT (EEM): ETF Research Reports
ISHRS-MSCI TURK (TUR): ETF Research Reports
VANGD-FTSE EM (VWO): ETF Research Reports
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