{"id":38915,"date":"2013-06-10T11:24:51","date_gmt":"2013-06-10T15:24:51","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=38915"},"modified":"2013-06-10T11:24:51","modified_gmt":"2013-06-10T15:24:51","slug":"turkey-a-reminder-that-emerging-markets-are-not-always-warm-and-fuzzy","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/06\/10\/turkey-a-reminder-that-emerging-markets-are-not-always-warm-and-fuzzy\/","title":{"rendered":"Turkey: A Reminder that Emerging Markets are Not Always Warm and Fuzzy"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

When you hear a mention of Turkey, it conjures up certain mental images.\u00a0 The Aya Sofya in Istanbul\u2026ships passing through the Bosphorus\u2026mustachioed men selling doner kebabs out of pushcarts.<\/p>\n

And, unfortunately, military coups d\u2019\u00e9tat and baton-wielding riot police.<\/p>\n

Turkey has become a little softer around the edges over the past decade as economic growth and political reform have made the country more Western in many respects. \u00a0And investors had begun to notice.<\/p>\n

In May of this year, Turkey was upgraded to \u201cinvestment grade\u201d by Moody\u2019s<\/a>, the ratings agency, and up until recently the country was enjoying \u201cChina-like\u201d growth rates in the high single digits.\u00a0 Investors had begun to lose interest in the high-profile \u201cBRICs\u201d countries and had started looking elsewhere for growth, and Turkey seemed a fine destination.<\/p>\n

From January of 2012 to the recent high in May of this year, the Turkish stock market was up by more than 80%.\u00a0 And this is even more noteworthy when you consider that the European Union\u2014Turkey\u2019s most important trading partner\u2014has been mired in recession and crisis for most of that time.<\/p>\n

And then it all came crashing to a halt.\u00a0 From its May 22 high, the Turkish market is down nearly 20% and the iShares MSCI Turkey ETF ($<\/span>TUR<\/a>)\u2014<\/b>the primary vehicle for most American investors to get access to the Turkish market\u2014is down further.<\/p>\n

What happened?\u00a0 A series of riots broke out across the country demanding that a popular park be spared from development, and the prime minister\u2014who, though controversial, has up until now been broadly popular\u2014reacted the way you might have expected a Turkish general of old to react: with crushing force.<\/p>\n

Fearing political instability and a return to Turkey\u2019s chaotic past, investors dumped their shares and fled the Turkish markets.<\/p>\n

So what now?\u00a0 After the bloodletting, are Turkish stocks attractive again?<\/p>\n

I would like to say yes.\u00a0 Even after their spectacular gains of recent years, Turkish stocks are among the cheapest in the world, trading at just 10 times earnings.\u00a0 You would have to go to neighboring Greece or to places not known for being friendly to investors\u2014think Argentina or Russia\u2014to find cheaper.<\/p>\n

Yet you don\u2019t want to try to catch a falling knife.\u00a0 If the hot money has decided that the Turkish \u201cstory\u201d is over, then it will take them time to unwind their positions and move on, which will mean more downside pressure in the near term.<\/p>\n

I, for one, still like the Turkish growth story, and I expect that 6 months from now these riots will be a distant memory.\u00a0 But I sold my shares of TUR and I do not intend to buy them back until the dust settles.<\/p>\n

Action to take: Put TUR on your watch list.\u00a0 This is a great long-term growth play.\u00a0 But wait until prices have stabilized to buy.\u00a0\u00a0 Alternatively, you can take a play out of John Templeton\u2019s playbook and place GTC limit orders at prices far below today\u2019s market price.\u00a0 That way, if the market gets pushed temporarily lower due to panic selling, you can snag shares on the cheap.<\/p>\n

This article first appeared on TraderPlanet<\/a>.<\/p>\n

SUBSCRIBE\u00a0<\/b><\/a>to\u00a0Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

\n

Related posts:<\/p>\n