This heavy selling pressure was largely due to Fed tapering talks, and the impact that this could have on emerging market investments. After all, a lot of hot money flowed into developing nations as a result of easy money policies back in the U.S., but with the potential for higher rates and a stronger dollar, there were worries that the appeal of these emerging markets might be reduced.
While this was the broad reason for the decline in emerging markets throughout the year, several individual countries also slid thanks to political strife and concerns about governance. These political woes helped to push some emerging markets far lower—on top of the broader issues—and could weigh on a few markets heading into 2014 as well.
In particular though, three countries stand out thanks to political uncertainty which is causing some volatility in their home markets. Two have been huge losers as a result of this, but one has managed to surge as of late. Either way though, 2014 could be a very important year for any of the following three markets and their ETFs:
It has been an extremely rough year for Turkey, as protests in Istanbul spread across the nation in the summer, and rocked the Prime Minister’s hold on the government. Concerns over the outcome of this uncertain situation also helped to push Turkish stocks lower, and sent the Turkish lira plunging as well.
However, this may have only been the tip of the iceberg, as a new crisis is now brewing in Turkey. The government is now in the thick of a corruption scandal, with many of the Prime Minister’s supporters being arrested, and also some cabinet Ministers resigning as well (see Is The Turkey ETF in Trouble Again?).
Speculation now suggests that elections will be called in 2014, further adding to the uncertainty in the nation. This could be especially true if the ruling party loses its grip on the government, or if a hung parliament that can’t reach a decision is the result of the elections.
The iShares MSCI Turkey ETF (NYSEARCA:TUR) has mirrored Turkey’s struggles in 2013, and it has been one of the worst performing large cap-focused ETFs in the time frame. The first round of losses came during the original protests in May and June, while the latest (December) round has only added to this fund’s woes.