Based on solid fundamentals and a robust technical picture, iShares Turkey ETF (NYSEARCA:TUR) formally known as iShares MSCI Turkey Investable Market Index, wins ETF of The Month.
If you had invested in the iShares Turkey ETF (TUR) on October 1, you would have gobbled down some nice gains by now. On October 1, the share price for (TUR) was $56.72. By November 6 the share price was $62.04, approximately 9.4 percent higher than the October 1 price. On a year-to-year basis the ETF has produced gains of approximately 30 percent.
Things have been going well in Turkey. The HSBC Turkey Manufacturing PMI for October advanced to 52.5 from September’s 52.2, providing a fine example of healthy economic expansion. Moody’s Investors Service has given Turkey’s government bonds a rating of Ba1. Moody’s considers Turkey’s economic strength as “moderate to high” in the sovereign rating spectrum. Although Moody’s considers Turkey’s “event risk” to be high, during the past few years the country has developed significant resilience to economic, financial and political vulnerabilities.
On the other hand, the nation does face some political challenges arising from tensions between the secular and the Muslim populations. There are also some longstanding ethnic and regional conflicts within the country. Prime Minister Erdogan has been effective at keeping public sector debt under control. Turkey’s public debt is equivalent to 43 percent of its GDP. The GDP is currently at 2 percent. Turkey’s inflation rate is 9.2 percent. During the past week, Fitch Ratings upgraded the country’s debt to “investment grade”. Standard & Poor’s has already increased Turkey’s debt rating to “investment grade”
Turkey is currently a “candidate country” of the European Union. It is not part of the Eurozone. The country uses its own currency, called the Turkish Lira. Although most emerging market economies are based on agriculture, Turkey has a strong service sector and it is a center of trade.
The iShares Turkey ETF (NYSEARCA:TUR) tracks the MSCI Turkey Investable Market Index. TUR’s holdings are heavily weighted in the financial sector (41 percent), although many of the components are in the industrial (15 percent), consumer staples (12 percent), telecom (6 percent) and materials (7 percent) sectors. iShares Turkey ETF also benefits from low valuation, with a price/earnings ratio of slightly less than 9. The top ten holdings account for approximately 60 percent of TUR’s assets.
A review of iShares Turkey ETF’s chart demonstrates that the share value has been holding well above its 50-day moving average and its average daily volume has been above 200,000, so liquidity has not been a problem. Expense ratio is a reasonable 0.59 percent, a tad lower than average for an “emerging market” ETF and net assets exceed $600 milliion.
chart courtesy of StockCharts.com
The Point and Figure chart (below) indicates that iShares Turkey ETF (NYSEARCA:TUR) has a bullish price objective of $82, some 35% above current levels.
chart courtesy of StockCharts.com
TUR has traded as high as $75 per share (in November of 2011). A review of TUR’s three-year chart suggests that it would not be unreasonable to find TUR filling that gap, based on its current trajectory. Learn More About iShares ETFs
Bottom line: Based upon recent performance and positive news from the credit ratings agencies, iShares Turkey ETF (NYSEARCA:TUR) is ETF of the Month, a quite appropriate choice with American “Turkey Day” now just a few days away.