TUR iShares MSCI Turkey ETF

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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