At The Edge Of War – Are Turkish Shares A Good Buy?


  • Political tensions remain in Syria at the Turkish border, Turkish shares are falling.
  • Long-term yield of Turkish shares was low but mostly positive.
  • Forward indicators show Turkey is one of the cheapest stock markets.

Turkey, the Turkish operations in Northern Syria and Turkish assets are making headlines again. Last time I wrote about the relatively strong Turkish Lira. But now I’m wondering if the stock market of the country can be a good buy.

The Russian example

High risks often offer high returns or yields. Something similar happened with Russian stock and bond markets. Some years ago they seemed to be outstandingly risky. With political tensions in Ukraine, economic sanctions by the US and the EU, low crude oil prices and slowing economy. But the country is strong today, and the VanEck Vectors Russia (RSX) ETF (exchange-traded fund) yielded 26 percent in three years. Also approximately 22 percent only this year (YTD).

(That doesn’t mean all high-risk investments can be a success, sometimes we will lose it all. But in long term and with proper diversification, the yield can be better than in case of more secure or less dangerous portfolios.)

Scary news

But back to Turkey. The country seems to be at the edge of a war with Kurdish forces, Russian troops stepped closer and the USA is threatening with measures. Only some of the headlines of today by Bloomberg:

Erdogan lays out conditions for an end to the military operation in Syria… Turkey has rejected demands for a cease-fire… Turkish markets are in turmoil as Turkey’s Halkbank faces U.S. criminal case… Vladimir Putin spoke with Erdogan about the need to deescalate… U.S. Vice President Mike Pence will meet Erdogan on Thursday…

Falling knifes

It is hardly surprising that Turkish equities have fallen by almost two percent today. What’s more strange is that the Turkish lira was getting stronger. (It is likely that the government is maintaining the exchange rate so as not to repeat what happened last year. See my other post here.)

But let’s see a bigger picture. If you look at a long-term chart of the iShares MSCI Turkey ETF (TUR), you can see the line only slightly over the 2009 lows. That means, Turkish shares seem to be almost as cheap as in the deepest precipices of the Lehman-crash.

The iShares MSCI Turkey ETF (TUR), in USD, and the iShares MSCI Turkey UCITS (ITKY), in EUR. (Chart:
The iShares MSCI Turkey ETF (TUR), in USD, and the iShares MSCI Turkey UCITS (ITKY), in EUR. (Chart:

In reality, they aren’t. The ETF is distributing dividends, and that was a serious amount. The total dividends of a decade reached 10.162 USD, the shares price is by approximately 23 USD today. That is a huge 44 percent, approximately 3.7 percent yield annualized. (Only dividends, not counting the price changes.)

Fresh indicators

In reality, the price of the ETF fell 50 percent from the October 2009 level and is near the Lehman-bottom. But counting also the dividends, it is not so bad, it is not on decade-lows. Turkish equities, after all, look rather cheap, especially compared to other equity markets. But what do other, fresh, forward-looking indicators show?

  • The Shiller P/E (10 years average of P/E ratios) or CAPE is by 8.3 on the map of It seems not to be very forward-looking. (By the way: Russia can be cheaper with a rate of 7.3.)
  • Bloomberg indicates a ratio of 7.3 of the BIST 100 Turkish index.
  • “Turkey’s Borsa Istanbul recorded a monthly P/E ratio of 10.04 in Sep 2019, compared with 9.12 from the previous month” – wrote
  • It is not always clear if this data is forward or not, which earnings data or consensus is used. Yardeni Research seems to be the more accurate and fresh one on this list. They wrote about a forward P/E of 6.1, compared with 5.5 in Russia, 7.9 in Argentina or 12.1 in Brazil. The lowest value is 5.2 in Pakistan.

Turkey is one of the cheapest stock markets

Conclusion: Turkey is one of the cheapest stock markets in the world, but only one of them. Russia seems to be cheaper and the Russian currency has an inflation rate of 4 percent p. a. Turkey, 9.3 percent. Accelerating inflation or falling currency can put the share yields in danger.

Other risks in Turkey are also extremely high, such as a prolonged war in Syria or a power struggle around the weakened, but mighty President Recep Tayyip Erdoğan. I think I would put only a small part of my portfolio in Turkish shares, and perhaps, mix them with Russian ones. Or, maybe, Russia is the better choice?

Disclaimer 1

I don’t have investments in the mentioned assets at the time of writing.

Dividends of the iShares MSCI Turkey ETF (TUR) 


Disclaimer 2

I’m not a certified financial advisor nor a certified financial analyst, accountant nor lawyer. The contents on my site and in my posts are for informational and entertainment purposes and reflecting my collection of data, ideas, opinions. Please, make your proper research, or consult your advisors before making any investment or financial or legal decisions.

(Photo: Ruins in Syria.

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