2023-10-11 09:35:01 ET
Summary
- iShares MSCI Turkey ETF has performed well since July, making it an interesting satellite equity play.
- TUR provides targeted access to Turkish stocks and is ideal for investors looking for exposure to the largest Turkish companies.
- Despite political risks, the ETF presents a compelling contrarian opportunity with potential for growth if inflation is controlled.
Why have abs when you can have kebabs? - Anonymous
You don't often hear about investing in Turkey, but the iShares MSCI Turkey ETF (TUR) has done really well since July.
More room to run? Maybe. Despite unavoidable political risks associated with the country, this ETF could be an interesting satellite equity play, if anything because no one is paying much attention to it.
Overview of iShares MSCI Turkey ETF
TUR is an exchange-traded fund designed to track the performance of the MSCI Turkey IMI 25/50 Index. This index is a free float-adjusted market capitalization index, primarily focused on equities traded on the Istanbul Stock Exchange. TUR provides targeted access to Turkish stocks, allowing investors to capture the performance of a broad range of companies in Turkey. This ETF is ideal for investors looking to express a single country view, as it provides a simple way to gain exposure to the largest Turkish companies.
Holdings of The Fund
TUR is composed of 74 holdings, all equities listed on the Istanbul Stock Exchange. The top five holdings include Turk Hava Yollari AO A, KOC Holding A, Bim Birlesik Magazalar A, Turkiye Petrol Rafineleri A, and Akbank A. The top 10 holdings makeup nearly 50% of the overall portfolio - somewhat to be expected given the depth of Turkey's own stock market.
The sector composition of TUR is diversified and clearly fits in the value style. Industrial stocks lead the allocation at 28.84%, followed by Materials at 16.02% and Financials at 15.88%. Note this fund pretty much has no allocation to Technology stocks, which from my perspective is actually not a bad thing given how extended US Tech is (and by extension anything else globally that co-moves with the Magnificent 7).
It's worth noting that there aren't any real pure-play funds to access Turkey's market outside of TUR. Broad based emerging market ETFs typically have some exposure, but there really is not a pure competitor to TUR. Oddly enough, I think this is a plus. Why? Because copycat funds are launched after a substantial period of strong performance in that which is being copied. This is more of a sleeper equity allocation which makes it an interesting contrarian play, and with a P/E of 9, it's hard to argue against the fund even with political risks.
Speaking of that, the political and monetary landscape in Turkey has a significant impact on the performance of TUR. The country has severe inflation, but it looks like the central bank is intent on breaking it. In September, Turkey hiked domestic rates from 25% to 30%. I recognize this is a big risk economically, but any progress on the inflation front likely benefit the equity side further.
Conclusion: An Overlooked But Worthy Consideration
Despite inherent risks and market volatility, the iShares MSCI Turkey ETF presents a compelling contrarian opportunity. It offers exposure to a wide array of Turkish companies, allowing investors to gain from the performance of some of the largest and most successful firms in the country. Although political risks cannot be overlooked, the potential is real if indeed the country is on a better inflation path, and the lack of sizeable investor interest means it could be a sleeper hit longer-term as part of a broader equity allocation.
For further details see:
TUR: An Overlooked Opportunity