March was a good month for the major indexes and the First Quarter was good, as well, as the S&P gained +5.5% year to date.  But greater gains were possible in the emerging markets and in Turkey in particular, making “(NYSE: TUR) the iShares Turkey Investible Index the top performing Exchange Traded Fund for the month.

(TUR) added a whopping +14.3% for the month and has logged +121% over the last year.  But these kinds of gains have not come without lots of volatility as seen in the chart below:

One can see that (NYSE: TUR) is in a sustained uptrend that started at the beginning of March, following a turbulent beginning to the year.  What’s particularly surprising about this performance is that Turkey is a close neighbor of EU problem child, Greece, and is also considered an emerging economy which could be susceptible to regional economic shocks. 

However, like so many sovereign nations, Turkey’s central bank has reduced interest rates to record lows and so growth has been the outcome with the economy logging gains of nearly 6% annually since 2002.  Standard and Poor’s gives Turkey a BB+ rating on their credit rating and the country has a healthy real estate and tourism market. 

(TUR) focuses heavily on financials with top holdings centered in banks like Turkiye Garanti Bankasi, Akbank and Turkiye IS Bankasi.  Financials represent approximately 50% of the fund’s holdings with Industrials, Telecommunication, Consumer Staples and Materials rounding out its top holdings.

Going forward, Turkey’s economic health will depend upon several factors with some of these being domestic while others are more regionally and globally focused. 

Internally the country will need to deal with growing inflation as the economy continues to improve, and the performance of this ETF is likely to be greatly affected by what happens with its neighbor across the Aegean Sea, Greece, and how its debt problems unfold.  Any kind of significant weakness there or with other “Club Med” countries like Portugal or Italy could easily spill over into Turkey’s developing economy and create a significant setback.  However, barring another global downturn, most analysts expect emerging markets and Turkey to offer performance exceeding that of developed nations.

For investors and traders, Turkey represents opportunity along with risk as it’s a high beta market that will be subject to wider upswings and downswings than the general indexes. As always, markets like this require extensive due diligence and a trading plan that includes suitable entry and exit strategies as well as a methodology to manage quickly changing market conditions.

Written By John Nyaradi From Wall Street Sector Selector

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