Turkey ETF Surges on Falling Inflation - ETF News And Commentary

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The Turkish ETF has been one of the best performing ETFs in Europe this year. The fund has also had a solid start to the spring as it was up 4.88% in the last week due to falling inflation rate and thus, is now up 12.65% in the year-to-date timeframe. These returns clearly outpaced the broad market funds (as indicated by SPY ) by a wide margin (read: A Trio of Top Emerging Market ETFs for 2013 ).

Solid Turkish Outlook

Beyond this falling inflation rate, investors should note that Turkey has seen a plunging growth rate as well. Now this GDP figure is down to just 2.2% in 2012 from an 8.5% reported figure the year before.

However, it is worth pointing out that the nation expects to improve its growth rate to 4% in 2013, a huge increase, and especially so when compared to other markets in the region. In addition to the falling inflation level, this has been due to flexible monetary policies and a broader recovery in domestic demand (read: Turkey ETF: Still a Strong Play? ).

The region also 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. So the issue of deleveraging is not a matter of concern for the country suggesting that there are a number of policy avenues ahead for the nation (read: Time to Buy Emerging Market ETFs? ).

Further, the country already has a low employment rate, solid banking system, government reforms and improved credit rating. Given these solid growth prospects, Turkey could prove to be a great investment market in Europe for years to come.

Turkey ETF in Focus

For investors seeking to play the Turkish markets in exchange-traded form, the pickings are few and far between. Launched in March 2008, the iShares MSCI Turkey Investable Market ETF ( TUR ) is the only option available to investors seeking a pure play exposure in the Turkish equity space.

The product has amassed $938.1 million in its asset base and trades in good volume of more than 300,000 shares a day. With holdings of 97 securities, the fund consists mostly of the largest Turkish-listed stocks with a very small allocation made to small and mid cap securities.

The ETF is heavily concentrated in its top 10 holdings into which it puts 62.26% of the total assets. Hence, the returns of the fund are largely dependent on the performance of the top 10 firms (see more ETFs in the Zacks ETF Center ) .

In terms of sectors, more than half of the assets go to financials with three giants Turkiye Garanti Bankasi, AK Bank T.A.S. and Turkiye Halk Bankasi making up combined 30% share.

Other than financials, industrials and consumer staples also get double-digit allocation in the fund with a share of 12.56% and 11.95%, respectively. Other sectors include telecommunication, materials, consumer discretionary, energy, health care, utilities and information technology.

The fund sports a distribution yield of 1.35% and charges 60 basis points in fees and expenses. The ETF could also be a good choice for investors seeking international diversification as it has a three year R-Squared value of just 64% with the S&P 500 which implies that it is not very strongly correlated with the U.S. equity market performance (read: Top Performing Country ETF: Turkey in Focus ).

Looking ahead, we believe that this solid trend can continue for this underappreciated fund. That is why we currently have a Zacks ETF Rank of 2 or 'Buy' on the product, meaning that we are looking for continued outperformance in the rest of 2013 for this Turkey ETF (read: Zacks ETF Rank Guide ).

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SPDR-SP 500 TR (SPY): ETF Research Reports

ISHRS-MSCI TURK (TUR): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: SPY , TUR

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