Five Reasons This Turkey Isn't Cooked (TUR, GUR, DVYE)

As the lone ETF tracking the intriguing emerging market that is Turkey, the iShares MSCI Turkey Investable Market Index Fund

is not lacking for headlines. With average daily volume of almost 306,000 shares and assets under management of $418.6 million, the iShares MSCI Turkey Investable Market Index Fund has also solidified its status as a large, liquid, thriving emerging markets ETF. Those are nice feathers in any ETF's cap, but they're also superficial superlatives. Let's drill down on why, despite already being up more than 23% year-to-date, why the "T" in the

still has significant upside left to deliver.

Many of the most notable emerging markets are heavily dependent on the production and export of raw materials. That's certainly the case with Brazil, Russia and South Africa, just to name a few. That's fine when the risk on trade is really on and investors are convinced the world is heading toward a commodities super-cycle, but the real evolution of an emerging market economy comes through making the move to a more Western, services-oriented economy. That's something Turkey already has. Agriculture is still a significant part of the Turkish economy, but as the CIA World Factbook notes, "aggressive privatization program has reduced state involvement in basic industry, banking, transport, and communication, and an emerging cadre of middle-class entrepreneurs is adding dynamism to the economy." TUR features an allocation of just 8.6% to materials, reflecting Turkey's evolving, free market economy.

Looking at an atlas shows us that Turkey is close to Greece and not all that far from Italy. In other words, some financially-challenged countries are almost in Turkey's backyard. Turkey has its own challenges, namely the world's second-largest

. It is shrinking though, having fallen to $75.2 billion in February from $77.1 billion in January, according to the Financial Times. Economists expect Turkey's deficit/GDP ratio to be significantly trimmed this year.

What's one of the reasons Japan bears always give for avoiding/shorting Japanese stocks? That country's aging population. Well, Turkey enjoys the better side of the demographic coin as half its population is under the age of 29. Estimates show it may be up to another four decades before demographics become a real issue for the Turkish. That's plenty of time to enjoy significant upside in TUR.

There are plenty of Western countries that should be going to great lengths to achieve Turkey's debt/GDP ratio, which was an impressive 40% last year. Yes, Turkey's inflation is high (it checked in at over 10% last month), but criticisms of Turkish inflation need to be taken with a grain of salt. As

Turkey's rate of inflation approached 70% in 2002.

Ben Bernanke, Tim Geithner and friends might want to take note of how monetary policy works in Turkey. Even before Bernanke and Geithner came around, their predecessors waged a war to kill the U.S. dollar. The Central Bank of Turkey does not feel the same way about its lira. The overnight lending rate is 5% in Turkey, but the central bank has been spotted grabbing higher rates to avoid too much cheap money flooding the economy. Other ETFs with significant Turkey exposure: SPDR S&P Emerging Europe ETF

, which has 15.5% exposure to Turkey, and the iShares Emerging Markets Dividend Index Fund

, which has 8.56% exposure to Turkey. To learn more about Turkey and TUR, please click

.