No One's Business But the Turks
Nick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Like America’s other unsinkable aircraft carriers during the Cold War, Taiwan and South Korea, Turkey has made the most of the stability it received and has steadily and successfully been implementing market reforms. This decade, Turkey is set to surpass anything the Ottoman Empire achieved in its six centuries.
Since 1923 under Mustafa Kemal Ataturk (easily one of the most pivotal figures of the last century – and possibly this one should Turkey’s success continue unabated), the Turkish Republic has been creating a world-class economy from a society born of massive migrations and social dislocations. While a land of contradictions, the guiding principle instilled by Ataturk among every major Turkish faction has been pragmatism. Under the half-Turk, half-Kurd reformer president Turgut Ozal, its economic expansion was kicked into high gear in the 1980s, and was facilitated in 1986 with the founding of the Istanbul Stock Exchange in the heart of what has become the region's ultra-modern business district.
If the inventive and politically astute Father of the Turks was a hybrid of Founding Fathers Franklin and Washington, then Ozal was the love child of Reagan and Thatcher. In this century, modern Turkey continues to never have a dull moment while the secular militarist quasi-socialist old guard monopolists continue to battle with the Islamic capitalist upstart entrepreneurs for control over the nation's destiny and mantle of regional leadership. Still, both sides have contributed in their own way to the forward progress of a country that has managed to become one of the top economies integrated into the digital marketplace.
Of course, this is Turkey where anything is possible, and the robust society that is reclaiming its position as the crossroads of the world would not be complete without one of the only functional communist parties left on the planet. After all, into every success a little Seattle must fall. However, this also means that Turkey has experience hosing down overheated students on an annual basis and has not let the militantly entitled undermine its progress – unlike its European neighbors. Nor has the Turkish leadership been so rigid as to prevent tangible reforms like their Arab co-religionists. Despite recent friction with Israel (until recently a strong ally), history indicates that their Axis of Progress, so vital to the Middle East's future, is likely to remain (if only because events will conspire for both parties to seek tacit solutions that are in their mutual interests).
By every measure, Turkey is an above average proposition for investors, and its inclusion on every post-BRIC acronym out there (The Economist’s CIVETS, Goldman’s MIST…) is no fluke. Unfortunately for Western investors, it can be more difficult to invest in Turkey than the other emerging markets (though Turkey has pretty much emerged). Besides the NYSE-listed Turkcell (NYSE: TKC), the only other stock easily traded by an American is the OTC's Akbank (NASDAQOTH: AKBTY.PK). The bank was also one of the main institutions that not only weathered Turkey's 2001 financial crisis, but led the national recovery (highlighted in a famous Harvard case study). Akbank's continued importance in the Turkish economy is undeniable (it is one of the single most important participants in the Istanbul Stock Exchange) and its inclusion in any Turkey-wide fund is sound decision.
However, for those looking to invest in the most promising sectors of the Turkish economy, there are more exciting subsidiaires of Akbank's parent company, Sabanci Holding, as well as firms operating outside the financials in Turkey's diversified and internationally competitive economy. It would also be wise for investors to consider Akbank's roots. Ak is Turkish for "white" related to its early beginnings servicing the Turkish cotton industry which initially funded Sabanci's growth into the country's most profitable conglomerate. Commodities legend Jim Rogers has been marshalling evidence that the world is on the edge of a boom time for agriculture. Turkey's farms (still accounting for a third of the country's employment) are beginning the final phase of their transition into a competive, modern system and there are plenty of domestic and international public companies circling for the opportunity to join in on the action (with an eye to following the Anatolian businessmen-missionaries from their agricultural heartland into newer emerging markets on three continents).
While some domestic barriers remain, the main complications lay in Western investment services not establishing easy means for their clients to seamlessly invest in the country. In addition to Morgan Stanley's Turkish Investment Fund (NYSE: TKF) which has been trying its best since 1989, currently Americans wishing to gain exposure to the Turkish market have only iShares' MSCI Turkey Investable Market Index Fund (NYSEMKT: TUR). The UK-listed MSCI Turkey (LSE: ITKY) is one of four ETFs offered on other European exchanges, though all of them are scaled down versions of the AMEX-TUR and have yet to perform as well. Although Turkey is often a component of funds like the SPDR S&P Emerging Europe (NYSEMKT: GUR), it makes up only 17% of the fund. Other components like the over-represented Russia (60%) may be a good short-term buy, but most of the others in the mix tend to be an uneven and erratic bunch.
Moreover, Eastern European futures are currently weighed down by the unequal yoke imposed by their EU brethren which makes a mess of the low-cost/high-skilled combinations that would otherwise propel them into the next stage of development and create a more natural economic, social, and political evolution. Putting social democratic cartoons before the economic horse rarely works for an emerging nation. Turkey, on the other hand, has access to the EU market under a special customs union that has been consistently liberalizing for several decades, yet is largely exempt from the more ridiculous mandates of the EU regulatory viziers. (Even Turkish fundamentalists are diehard capitalists – and they don’t rely on Jewish scapegoats for their conspiracies either).
The global recession has given investors a chance to see that Turkey is not just riding a global wave of prosperity. The talent coming out of Turkey has done a better job finding opportunities in adversity. At the same time, Turkish corporations have been demonstrating that they are capable of competing in world markets. Finally, the Turkish government, for all its media theatrics and the less-than enthusiastic foreign press coverage it has received, has in recent years shown itself a sober arbiter of the country's political destiny.
Nick Slepko has no position in any company mentioned here at the time of publication. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.