Turkey is one of the fastest growing emerging markets in the world, but for the last five years, Turkish equities underperformed the S&P 500 Index. The main risks associated with investments in Turkish equity are country-specific risks and currency risks. Based on the current investment climate and economic forecasts, the performance of single factor ETF is not expected to improve. Investing in single factor ETF can be good for the contrarian investor with a long-term investment horizon. Nevertheless, it is reasonable to consider Turkish equity only as part of a well-diversified Emerging Markets ETF.
Turkey has the 18th largest GDP in the world and is classified by MSCI as an Emerging Market and is considered as one of the fastest growing economies in that category.
For the last five years, the MSCI Turkey Index(Bloomberg Ticker: MXTR)underperformed MSCI Emerging Markets Index(Bloomberg Ticker: MXEF) by 3.46% and S&P 500 Index (Bloomberg Ticker: SPX) by 15.92%.
There was no improvement last year – the MSCI Turkey Index underperformed the MSCI Emerging Markets Index by 15.59% and S&P 500 by 2.07%.
Andrii Taranukha is an Asset Management Analyst at Credit Suisse.
