Turkey ETF (TUR) In Focus As Country Flexes Its Diplomatic Muscle

by on June 2, 2010 | ETFs Mentioned:

In recent weeks, Turkey has found itself in the spotlight on the international stage thanks to a deal brokered (along with Brazil) with the government of Iran. Under the deal which, will be submitted this week to the International Atomic Energy Agency, Iran agrees to ship 2,640 pounds of uranium to Turkey for storage. In exchange, Iran would get fuel rods made from 20% enriched uranium, a level that is high of enrichment is high enough for use in research reactors but too low for nuclear weapons. Although Western nations have decried the deal as a ‘delaying tactic‘ of the authoritarian regime, Turkish officials are calling the agreement a “historic turning point” for relations in the Mideast.

More recently, Turkey has also found itself in a rapidly escalating situation with Israel over a deadly attack on a ship carrying humanitarian supplies from Turkey to Gaza. Although the Turkish government gave no official support to the convoy, the country made it clear it backed the Turkish charity’s (known as the IHH) mission. This confrontation could push Turkey closer towards other Islamic countries in the region and help to strengthen relations and extend influence over smaller nations such as Syria. “The significance of this is that we are going to see more and more Turkish pressure to be involved in regional affairs and global affairs,” says Anat Lapidot-Firilla, senior research fellow at the Van Leer Jerusalem Institute. “They are raising the level of their requests and their global aspirations” (also see Israel ETF In Focus As Tensions Flare).

As international outrage over the naval attack and Gaza blockade have grown, many believe that Turkey has come to a position of power. “Turkey’s hand in the region is strengthened now,” said Sami Kohen, a Turkish political analyst. “There is now more reason for Turkey to take a more active part in the events of the Middle East, since it has suffered personally from this attack”.

These attempts by Turkey to play a more active role in its region come after the country has seen its economy grow substantially as other regional powers have weakened. Moreover, Turkey has successfully gained membership into several exclusive clubs including the EU, NATO, and the G-20, and is currently a member of the UN security council (until the end of the year).

These events, along with impressive equity market performance over the last year, have helped to put the fast growing country at the crossroads of West and Mideast on the map for many investors (also read Top Ten Performing ETFs Since The Market Bottom).

Turkey ETF Under The Microscope

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. It’s worth noting that TUR doesn’t cover all corners of the economy; the fund offers virtually no exposure to technology firms, utilities, or health care stocks, which combine to make up less than 5% of total exposure.

Despite the fund’s heavy concentration in a few sectors, TUR is pretty well spread out in terms of market capitalization levels; it has about 54% in large caps, with the remainder spread between mid caps and small and micro cap securities. Despite the country’s proximity to the financial crisis epicenter in Greece, TUR has weathered the storm surprisingly well up to this point. Although TUR is down more than 12% over the past month, it is still up nearly 50% over the past 52 weeks (see Five Country ETFs Heavily Focused On Financials).

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Disclosure: No positions at time of writing.