Time To Gobble Up The Turkey ETF (TUR) - Commodity ETFs
November 23 2011 - 6:59AM
Zacks
Although it has been rocky as of late, emerging market investing
has been surging in popularity with investors. While BRIC nations
and their equities tend to dominate the headlines, a number of
smaller countries are also appearing in investors’ consciousness,
helping to diversify portfolios along the way. An increasingly
popular choice in this group is the nation of Turkey, a quickly
growing country at the crossroads of the Near East and Europe.
Many are looking towards Turkey for growth in the broader
European region thanks to the country’s favorable demographic
profile. In fact, nearly half of the country’s 75 million people
are estimated to be under the age of 30, a stark contrast to the
rapidly aging societies in its northern neighbors. Furthermore,
thanks to a charged history with Greece—to say the
least—involvement in the Greek economy remains low, helping to keep
many of the country’s institutions remarkably insulated from
trouble in the neighboring hotspot. This has allowed the nation to
focus in on its growing economy for investment while simultaneously
keeping the national currency, the lira, pretty stable, at least
compared to recent history (see Inside The SuperDividend ETF).
While Turkey definitely has some strong points, it is not
without its issues either. Turkey has one of the highest discount
rates in the world and a very high unemployment rate as well. Youth
unemployment is especially bad, threatening to turn the country’s
demographic boom into a huge burden in the near future. Lastly,
while Turkey’s geographic position is enviable, with the domination
of the key Bosporus Strait and its historical role as a crossroads
of the region, its neighbors aren’t exactly the best you could hope
for. Beyond the economic basket case of Greece, Turkey also shares
a border with Syria, Iraq, and Iran, suggesting that geopolitical
events will never be too far from Turkish minds. As a result,
markets in Turkey tend to be more volatile than similarly developed
emerging markets and can often play off of politics more than other
countries that have the same high level of stability.
Turkey ETF Under The Hood
For investors seeking more exposure to this surging but volatile
economy, there is one quality option available; the iShares MSCI
Turkey Index Fund (TUR). TUR has managed to amass nearly $400
billion in AUM despite having launched a little over three years
ago and trades roughly 62,000 shares a day insuring ample
liquidity. In terms of holdings, the product has just over 100
securities with the heaviest weight going towards the financial
sector. In fact, financials make up nearly 46% of total assets
while another three sectors—consumer staples, industrials, and
telecom—each make up at least 10% as well. As a result, TUR is
relatively skewed towards a few select corners of the Turkish
economy while simultaneously leaving next to nothing in health
care, utilities, and tech, which combine to make up less than 2% of
the total assets (also read HDGE: The Active Bear ETF Under The
Microscope).
Like many emerging market ETFs so far in 2011, this has been a
pretty rough year for TUR. The fund has fallen by about 36% since
the start of January and nearly 41.4% over the past 52 weeks. Near
term performance has not been any better as TUR has slumped by
nearly 10.6% in the past week alone suggesting that the pain may
not be over yet for the nation.
With that being said, TUR still has a great number of strengths
going for it that could make now the time to buy up shares in the
country. According to the iShares website, the product has a very
modest PE of just under 12.8 while paying out a yield of about
2.3%. Given that expenses are currently 0.61% and are in-line with
other products in the space, this could suggest that TUR presents a
decent value to most investors, especially for those in it for the
long haul.
So for investors seeking more emerging market exposure, but are
not scared off by high levels of financials or volatility, TUR
could make for an interesting choice. The nation is holding up
pretty well compared to its neighbors and a lack of Greek banking
exposure could save the financial sector from a great deal of
turmoil in the months ahead. This suggests that the popular product
may have already seen its worst days and could be due to bounce
back in the new year.
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iShares MSCI Turkey ETF (NASDAQ:TUR)
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