iShares MSCI Turkey ETF

TUR

Market cap $158M

The ratings agency said Friday it lifted the country's long-term foreign currency sovereign-credit ratings and local currency issuer ratings to Ba3 from B1.

iShares MSCI Turkey ETF offers diversified exposure to Turkey's high-growth sectors—industrials, financials, and consumer defensives—positioning it for potential upside amid economic reforms. Risks like currency depreciation, high inflation, and political instability remain significant and could undermine returns for USD-based investors. TUR's lower expense ratio and broader diversification make it more appealing than ITKY, but concentrated holdings and low liquidity add to the risk.

A surprise Israeli strike on Iran sent oil prices soaring. This may prompt sharp reactions in country ETFs such as ENOR (upside) and INDY (downside).

Since President Trump's second term began with the Inauguration on January 20th, the S&P 500 ETF (SPY) is down 16.5% compared to a 6.2% drop for the all world ex US ETF (CWI). It's early, but the rest of the world is solidly beating US markets so far under Trump 2.0. The average country ETF is down exactly 10% in the two and a half trading days since Trump's "Liberation Day," and the only two down less than 5% are India (INDA) and Turkey (TUR).

The iShares MSCI Turkey ETF faces significant challenges, including a volatile Lira, high inflation, and recent political instability affecting market confidence. Inflation in Türkiye has been a major issue, reaching 85% YoY in 2022, but has shown signs of stabilizing with key interest rates falling. A recent 12% plunge in TUR's price was triggered by high-profile arrests, causing market uncertainty and potential continued sell-offs.

Since December 2023, the iShares MSCI Turkey ETF has experienced a volatile journey while eventually underperforming global markets. Looking ahead, we feel quite ambiguous about TUR's prospects as the macroeconomic backdrop, the valuation picture, and the technicals all provide a conflicting image. Turkey's GDP prospects look underwhelming, but inflation appears to be trending lower, and the central bank has just kickstarted a movement of interest rate cuts that could persist through this year.

US equities have outperformed the rest of the world for a long time now. While the US is up 58% on a total return basis during the current bull market, the rest of the world is up 13.5 percentage points less at +44.5%. Looking at the international dividend ETF over a longer time frame, over the last five years, it's up 20.6% in price and more than double that on a total return basis.

Turkish banks will pay the price throughout next year as challenges linger from the country's economic turnaround, the chief executive of lender Isbank said in an interview, adding he expects the central bank to begin cutting interest rates this November.

iShares MSCI Turkey ETF invests in Turkish equities with a high expense ratio of 0.59%. Despite the high expense ratio, the fund remains popular for those speculating on Turkish stocks, with $223 million in assets. TUR saw a significant increase of over 100% on a total return basis from late 2022 to present, after a period of stagnation.

International economies have returned much lesser than the U.S. market. Still, these country ETFs gained more than 10% in the past three months.