Monday, August 9, 2010

Investing In Turkish Economic Delight

For a number of years, Istanbul has been given the cold shoulder with respect to it joining the elite European Union club and there were feelers that Turkey was believed to be too economically backward to qualify for membership. A visit to Turkey today can clearly suggest that the old argument no longer holds good as modern day Turkey is a fast-rising economic power, with a core of internationally competitive companies turning the youthful nation into an entrepreneurial hub, tapping cash-rich export markets in Russia and the Middle East while attracting billions of investment dollars in return. So complete has been Turkey's transformation that about 10 years ago, Turkey which had a budget deficit of 16% of gross domestic product and inflation of 72% is now fulfilling European Union’s fiscal guidelines of a 60% ceiling on government debt, at 49% of GDP, and could well get its annual budget deficit below the 3% benchmark next year.

The Republic of Turkey borders the Mediterranean Sea and its strategic location between Europe and the Middle East brings potential economic benefits. Turkey has a unique economy and a potentially attractive risk and return profile. Turkey, situated at the crossroads where two continents meet, is an ideal center for investors looking for a location at the heart of Euro-Asia. With its dynamic and growing economy, huge market, competitive and skilled labor force, Turkey offers numerous opportunities to international investors.

  • With a population of 73 million with an average age of just 27.7 years, Turkey has a very young population and an increasing consumer purchasing power; Turkey offers a huge and dynamic domestic market to investors. Moreover Turkey's economy has witnessed a growth of an average of nearly 6% between 2002 and 2008.
  • Unlike other emerging markets in Europe, Turkey survived the financial downturn without relying on an emergency bailout package from external lenders. The country now is expected to grow 3.5% to 4% this year.
  • Turkey is located at the gateway of the Middle East, Caspian petroleum and Central Asian natural gas to the west, which are regarded as the future energy reserves of the world.
  • In an encouraging sign, Standard & Poor's raised its long-term foreign currency and local currency sovereign credit ratings to BB and BB+, respectively in February this year.
  • IMF projections for the period 2008-2013 suggest that Turkey would maintain the title of the world’s 17th largest economy until 2013 with gross domestic product reaching $968.2 billion in 2013
  • The Istanbul Stock Exchange’s ISE-100 Index; hit all-time in-session record high at 60,410.11 points earlier this week. The record-breaking performance was attributed to the positive atmosphere in the global markets, positive expectations on European bank stress tests, the possibility of an increase in Turkey’s sovereign credit rating and most of all, foreign investor interest in the bourse.
ETFs Investing In Turkey

1: iShares MSCI Turkey Investable Market Index Fund (TUR) : One of the best ways for U.S. investors to make a play on Turkey is through the iShares MSCI Turkey Investable Market Index Fund (TUR). The fund tracks the MSCI Turkey Investable Market Index, which measures the performance of the Turkish equity market. TUR is heavily focused on financials, which make up 52% of total assets. Additionally, the fund makes large allocations towards the industrial materials (13.6%) and telecommunication (10.4%) sectors.
TUR Top Ten Holdings
1. Turkiye Garanti Bankasi (GARAN): 14.50%
2. Akbank T.A.S. (AKBNK): 9.53%
3. Turkiye Is Bankasi C Share (ISCTR): 8.09%
4. Turkcell Iletisim Hizmetleri AS (TCELL): 6.60%
5. Haci Omer Sabanci Holding A.S. (SAHOL): 4.07%
6. Anadolu Efes Brewery ve Malt Sanayi A.S. (AEFES): 3.91%
7. Yapi Ve Kredi Bankasi (YKBNK): 3.90%
8. Turkiye Halk Bankasi A.S. (HALKB): 3.83%
9. Bim Birlesik Magazalar A.S. (BIMAS): 3.81%
10. Tupras-Turkiye Petrol Rafineleri A.S. (TUPRS): 3.77%

TUR Sector Breakdown
Financials 53.15%
Industrial Materials 13.63%
Telecom 9.47%
Consumer Goods 7.13%
Consumer Services 4.58%
Energy 3.99%
Business Services 3.14%
Media 1.25%
Utilities 1.22%
Hardware 1.02%
Health Care 0.62%

Expense Ratio: 0.63%

TUR Performance
52 Week Return: 43.28%
YTD Return: 13.62%
1 Week Return: 4.61%
2 Week Return: 7.29%
4 Week Return: 10.64%
13 Week Return: -1.95%
26 Week Return: 8.43%
2: SPDR S&P Emerging Europe ETF (GUR): The S&P European Emerging BMI Capped Index is a market capitalization weighted index that defines and measures the investable universe of publicly traded companies domiciled in emerging European markets. The fund has 16.49% holdings in Turkey.

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