Recent changes have nearly made Turkey into a new country while the Istanbul Stock Exchange and Turkey ETF jump ahead. Some, though, are questioning the unusually fast growth.
Emerging market guru Mark Mobius predicts that there will be a 15% to 20% correction on the Istanbul Stock Exchange by the end of the year, writes Donata Huggins for CityAM. IG Index’s technical analysis expert David Jones doesn’t believe there is anything to worry about at the moment but cautions investors to pull out if the MSCI Turkey Index drops to 2,600.
Turkey has recently been upgraded to BB+ from its BBB rating, economic reforms have helped strengthen the financial sector and the country’s demographics is also favoring a surge in young workers.
The five-year credit default swaps on Turkey’s sovereign debt recently traded at a record low of 1.17% – the lower the better since investors are more confident to trade on the economy – reports Taylan Bilgic for Hürriyet Daily News. Benchmark bonds are also trading at an all-time low of 7.62%.
Turkey’s public debt to GDP is around 45% and declining. External debt to GDP is at about 60%. The economy is expected to expand 8% this year. However, unemployment is at around 10%, inflation is over 8% and the current account deficit may hit 5% of GDP this year.
The country is also suffering from a wide income gap, with Süleyman Çelebi, president of DİSK, one of Turkey’s three big labor confederations stating that “the rich became richer, while the laborers paid the price,” which has many observers opining that the AKP policies have favored the rich over the lower classes.
The Turkey ETF is currently in an up-trend and is well above its long-term trend line. As we like to say, you can’t fight the trend. If you want to get exposure to the Turkish economy, this is an efficient way to do it.
- iShares MSCI Turkey Index (NYSEArca: TUR)
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For full disclosure, Tom Lydon’s clients own shares of TUR.Max Chen contributed to this article.