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IShares MSCI Turkey ETF: Macro Outlook 2019


  • Weak economic fundamentals between high inflation, GDP contraction, wide fiscal deficit, and political instability highlight challenges of investing in Turkey.
  • Turkish Lira has stabilized in recent months but remains vulnerable to renewed depreciation and represents main risk for ADR investors.
  • TUR is a good option for investors seeking to gain exposure to local equity market and macro themes but is highly speculative given economic uncertainties.

iShares MSCI Turkey ETF (NYSE:NASDAQ:TUR) is a single country exchange traded fund that tracks the performance of a basket in Turkish stocks. Turkey has been a curious case among emerging markets, always seen as representing enormous potential but more recently plagued by political instability. Occupying its unique place at the crossroads of Europe, Asia, and the Middle East; Turkey was making progress to officially join the European Union until the process largely abandoned since the election of President Recep Tayyip Erdoğan in 2014. The current government has been criticized for perceived human rights violations with turmoil accelerating since a failed coup d'etat attempt in 2016. Following years of strong growth over the past decade, the economy has become more volatile with GDP expected to contract in 2019. This article highlights some of the current macro themes and risks investors should be aware when looking at TUR.

iShares MSCI Turkey ETF monthly price chart. source: finviz.com

Turkey Economic Outlook

GDP is projected to contract by (-0.4%) in 2019 according to the OECD forecast, before a potential rebound to 2.7% in 2020. These numbers are in stark contrast to a growth rate that averaged over 5% since 2010. GDP growth was as high as 11.1% in 2011 at the peak of the commodity bull market and emerging market sentiment. Looking at the projections below, the fall in private consumption by 4.1% this year is set to have a very real impact to the real economy and is already effecting the labor market as unemployment approaches 13%. Gross fixed capital formation, the investment component of GDP, is set to fall 5.6% in part due to pullback from global investors given the greater instability and political environment. With the current pace of a still early-stage recession, the bearish case for Turkey can very well envision these estimates being revised lower.

This article was written by

Dan Victor, CFA profile picture

15 years of professional experience in capital markets and investment management at major financial institutions. 

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Analyst’s Disclosure: I/we 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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (6)

A lot of banks in the the turkey etf index and some industrials. I bought the dip in aug 2018, had a nice run and sold it early jan. Worried there is more bad news for investors in the short term (Erdogan wantig to nationalize banks and rob investors). I think there are more safe EM plays out there. But high risk and possible high reward in this one. Might get back in if the price drops ....lira is double edged sword...
Today TUR looks good (-0.64%) vs Germany (-2.34%) and Eurozone I shares (-1.75).
I agree that TUR is a risky play. I got in mid-24s. My strategy is core I plan for a long term hold (TUR is set to have better long term growth than other EMs like brazil) and a second long position paired with covered call selling. Currently, I am short 30$ May 17 calls. I assume that IMF talks will begin after local municipal elections at the end of March. These talks should provide downward pressure on TUR, allowing me to buy the calls back at a lower price.
Dan Victor, CFA profile picture
i'm looking at it as a complete outsider, investors that have a good feel for how the situation will play out have an advantage here.. just feels like there's another shoe to drop at any time. i agree that Turkey "should" have better long term growth but political situation keeps me from taking a bullish position.
Turkey economy will improve due to falling dollar, which will make it easier to finance its debt, and low oil prices. Turkey will be able to reduce its rate from 24%, which is bad for consumption.
The problem could come from a weak europe, since it export large portion to Germany and
UK. Just my opinion.
Dan Victor, CFA profile picture
Good point about Europe.. i'm still not convinced on the Lira strength though.. will be difficult to break the 5.00 level against USD
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