Analyse: Lyxor ETF Turkey (DJ Turkey Titans 20)

Wer heute auf die Türkei setzt, investiert antizyklisch. In diesem Jahr hat der Index um rund 25 Prozent nachgegeben. Das sehr hohe Gewicht von 50% in Finanzwerten sollte allerdings beachtet werden.

Rolle im Portfolio

The Lyxor ETF DJ Turkey Titans 20 provides equity exposure to Turkey, the largest economy in emerging Europe. As is the case with all ETFs offering single country emerging market equity exposure, the Lyxor ETF is best deployed as tactical tool within a well diversified portfolio. The ETF can also be deployed as a core holding complementing exposure to emerging markets in Asia and Latin America. The index’s low to moderate correlations with international stock markets indicate that this fund could provide diversification benefits when added to an existing equity allocation. Over the last three years, The DJ Turkey Titans 20 Index correlated 35% with the MSCI EM Asia Index and 35% with the MSCI World Index.

The ETF is also suitable for investors with a bullish view on the Turkish stock market. However investors should be aware that the DJ Turkey Titans Index is not the best proxy for the Turkish economy. The index is heavily biased towards financials (51%), whereas the sector represents less then 5% of GDP.

Before considering an investment, investors should review their portfolio for existing exposure to the Turkish stock market through other holdings to avoid unintentionally over weighting this region. For instance, Turkish equities represent around 10% of the MSCI EM EMEA Index.

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Fundamentale Analyse

Structural reforms implemented during the last decade–a requisite of the stand-by agreement signed with the IMF in the early 2000s–set Turkey on a solid economic policy path, allowing it to rebound strongly from the global financial crisis. More recent rounds of reform and consolidation have focused on strengthening the banking sector. Growing confidence in the country’s economic prospects has led to strong growth in private sector credit to levels that could put smaller banks at risk if the recovery were to weaken. As a result, the Central Bank has intervened with the aim of curbing credit expansion by raising reserve requirements.

Turkey finds itself in a challenging position, located between a still struggling Eurozone and a political turbulent Middle East while dealing with social problems of its own. After four years of strong growth, the economy slowed down in 2012, with GDP growing by 2.2%, below the government’s 4% forecast. However, GDP grew by 4.4% y/y in Q2-13 - the 15th consecutive quarter of expansion – well above analysts’ expectations for 3.5%. The main driver was improved domestic demand, with private consumption up by 5.3% y/y and government spending by 7.4% y/y. Having expanded 3.7% y/y in H1-13, the government now expects full year growth of 4% y/y and a higher 5% in 2014. The IMF has marginally lowered its 2013 growth forecast for Turkey to 3.4% from 3.5%, while expecting 3.7% in 2014.

Despite the good GDP readings, the economy faces challenges ahead as indicated by its current account position. Its strong reliance on imports and foreign capital makes Turkey heavily exposed to external shocks. While exports rose by 1.2%, imports jumped by 11.7% in Q2-13, resulting in a ballooning current account deficit. Moreover, the country’s total foreign debt almost has tripled to $350bn over the last decade and over half of it must be either repaid or rolled over within the next 12 months. As a result, short-term liabilities represent about one quarter of GDP. In itself a challenging task; it has been made the more difficult by the fact that the Turkish Lira has lost about 13% versus the USD in the first 8 months of the year.

Despite a depreciating lira, a ballooning current account deficit, and high inflation (e.g. 8.8% in July) the Turkish Central Bank refused to hike rates for most part of the year. Eventually it raised the interest rate corridor ceiling by 0.5% to 7.75% in August - the highest since February 2013. However, this was seen as too little by most market analysts. In a further attempt to support the currency, the bank announced that it will sell a minimum of $100 million a day until further notice. In addition, the bank continues its usual tightening in order to force policymakers to lend only at the top end of the range.

Many market participants are urging the bank to focus more on inflation, fearing a weakening currency would weigh on sentiment and further spur inflation – a self-fulfilling cycle. In addition to the ballooning current account deficit and the depreciating currency, three elections until 2015 and the conflicts in neighbouring countries – not to mention any potential resurgence of internal social tensions - could also weigh on the economic outlook going forward.  


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The Dow Jones Turkey Titans 20 Index provides equity exposure to the 20 largest and most liquid stocks in Turkey. The index’s prospective constituents include all stocks traded on the Istanbul Stock Exchange whereby every share that has not been traded for 10 days during the previous quarter will be excluded. The Dow Jones Turkey Titans 20 Index is a float-adjusted market capitalisation index, capping each constituent’s weight at 10%. The index is reviewed on an annual basis whereas the index component weights are rebalanced quarterly. Each month, the index provider populates a list of the 20 current component stocks and the 20 largest non-component stocks. This list suggests possible additions or deletions for the next review. As of writing, the index is biased towards the financial sector (51% of the index’s value), followed by consumer goods (13%) and telecommunications shares (12%). In addition, the index is heavily top weighted as the top 5 holdings represent about 50% of its value.

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The Lyxor ETF DJ Turkey Titans uses the synthetic replication to track the DJ Turkey Titans 20 index. To achieve this performance, the fund holds a basket of blue chip shares and enters an un-funded swap agreement with parent bank Societe Generale. The bank then gives away the performance of the DAX (net of fees) in exchange for the performance of the fund’s holdings. According to UCITS III regulations, individual counterparty risk exposure is limited to 10% of the fund’s NAV at any point in time. However, Lyxor has a daily target of zero swap exposure. Swaps are reset whenever their value becomes positive. They may sometimes have a negative value (between -2% and 0%), which would mean in this case that the fund owes the counterparty money. The fund’s holdings consist of highly liquid equities from OECD countries, the large majority of which are European. Lyxor does not engage in securities lending within the fund, which helps to minimise overall counterparty risk.

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The fund levies a total expense ratio of 0.65%, which is in the upper of the range for ETFs tracking Turkish equities. Other potential costs associated with holding this fund which are not included in the TER include swap fees, bid-ask spreads and brokerage fees.

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As of writing, there are five other ETFs providing equity exposure to Turkey. The largest in terms of total assets under management is the iShares MSCI Turkey (IE) ETF. The ETF from iShares uses full replication and offers very similar market exposure in terms of sector breakdown and number of holdings. The iShares fund levies a total expense ratio of 0.74%.

Investors preferring a more diversified approach to investing in the EMEA region might consider the db x-trackers MSCI EM EMEA ETF. This ETF uses synthetic replication to track an index that is biased towards South Africa (42%), followed by Russia (35%) and Poland (10%). On a sector level, the MSCI EM EMEA Index is biased towards financials (29%) and energy (27%).

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Über den Autor

Gordon Rose, CIIA, CAIA,

Gordon Rose, CIIA, CAIA,  ist Fondsanalyst bei Morningstar.

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