The Turkey ETF Is Cooking

by on March 7, 2012 | ETFs Mentioned:

Investors have been gradually increasing their risk appetite since the start of 2012 thanks to improving economic data and renewed optimism in the global recovery. Likewise, emerging markets are off to a strong start this year and one particular country-specific ETF has attracted serious interest from investors. The iShares MSCI Turkey Investable Market Index Fund (TUR) is up an impressive 20% year-to-date, and even more impressive are the trading volumes over the past few days [see also Doomsday Special: 7 Hard Asset Investments You Can Hold in Your Hand].

This ETF, which offers exposure to Turkish equity markets, has a three month average daily volume of around 290,000 shares; the noteworthy observation is that daily trading volumes in TUR have seen an exponential increase since last week. On 2/29/2012 daily trading volumes topped 1 million shares; the ETF traded over 1 million shares the next two trading days as well. Trading volumes at the start of this week on 3/5/2012 came in at just under 1 million, showcasing the sheer interest in this ETF from traders and investors alike [see also 3 ETF Trades For The Next Euro Zone Crisis].

Technical Glance

Consider the chart below and notice where the spike in trading activity occurred. The first surge in volume happened on the second day (2/29/2012) that this ETF was trading above its 200-day moving average (yellow line). For the next three days trading volumes kept afloat while the share price drifted back and forth; this makes it difficult to interpret whether the surge in volume was merely abnormal trading activity or big investors buying in.

Click To Enlarge

It’s worth noting that the surge in trading volumes happened when TUR was above the $50 mark; this is significant because this price level was previously major resistance for TUR since the start of August in 2011. Given the positive price action in this ETF since the start of the year coupled with notable trading volumes above its previous resistance level, some investors may interpret this as a bullish observation going forward.

The Appeal Of Turkey

Growing interest in Turkey’s economy stems from several fundamental reasons. First and foremost, this nation is dominated by service industries, which separates it from many other emerging markets which tend to be heavily dependent on the production and export of commodities. Turkey is also home a growing middle class and is a center of international trade which connects Europe with the Middle East and North Africa [see Emerging Market ETF Investing: Beyond The BRIC].

TUR offer investors access to this emerging market through a basket of about 100 securities. This ETF has accumulated $433 million in assets under management since launching in March of 2008. Investors should note that TUR’s portfolio is a bit top-heavy; the top ten holdings account for just under two-thirds of total assets. From a sector breakdown perspective financials equities dominate the underlying portfolio followed by consumer staples and telecommunication services. TUR offers investors a fairly equal blend of large and mid cap stocks, giving this ETF a unique risk/return profile since most foreign equity funds are tilted towards giant cap size companies.

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Disclosure: No positions at time of writing.