Turkey ETF Outperforming In Emerging Markets

Dec. 6.12 | About: iShares MSCI (TUR)

The iShares MSCI Turkey Investable Market Index Fund (NYSEARCA:TUR) is up 55% this year and the emerging market has earned investment grade status. The pending growth spurt of this developing market has taken root, yet challenges remain ahead.

"TUR, which has nearly $665 million in assets under management, last traded above $63 in June 2011. Buyers are stepping into the ETF even as tensions between Turkey and Syria escalate. On Tuesday, the North Atlantic Treaty Organization (NATO) agreed to send Patriot air-defense systems to Turkey's shared border with Syria," Benzinga reports.

On a year-to-year basis, TUR is up about 30%. Moody's has rated Turkey's government bonds a Ba1 and considers Turkey's economic strength as "moderate to high" in the sovereign rating spectrum. For this reason the ETF is not proposed as a core holding in a portfolio, but can enhance emerging market exposure. The even risk associated with Turkey is "high", according to the ratings company, however, the country has been able to show some resilience to economic and political corruption.

Furthermore, Turkey has been upgraded to an investment grade credit rating. The recent Fitch Ratings gave Turkey's long term foreign currency Issuer Default Rating a BB+ and long term local currency IDR a BB. All of the above ratings are steady and the outlook stable despite recent political unrest. Benzinga reports that TUR, the Turkey ETF, has gathered $38 million in new investment capital since the upgrades.

The largest obstacle for Turkey's stock market is the tensions between secular and Muslim populations. Long time ethnic and regional conflicts will also continue to be problematic. Wall Street Sector Selector reports that Turkey's economic focus is that of service, rather than agriculture, and the country is located in a prime spot to be the center of trade.

TUR weights heavily toward financials, with industrials and consumer staples rounding out the top allocations. TUR's performance has beaten the broad-based Vanguard MSCI Emerging Markets (NYSEARCA:VWO), the largest emerging markets ETF by assets, which has returned 7.8% year-to-date.

iShares MSCI Turkey Investable Market Index Fund

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Tisha Guerrero contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.