The Turkish ETF has been one of the best performing
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
) 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
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 (
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
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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