After gaining 52% in 2012, the MSCI Turkey Index has dropped 3.6% in 2013. TheMSCI Emerging Markets Index is essentially unchanged this year.
To get a sense of the turnaround, take a look at the chart below from Barron’s. It shows the MSCI Turkey Index divided by the MSCI Emerging Markets Index. When the line is rising, Turkey is outperforming emerging markets as a whole. When it’s falling, emerging markets are beating Turkey.
So what’s wrong with Turkey? According to the folks at Pavilion Global Markets, much of the forces that propelled Turkey’s stock market higher in 2012 are unlikely to persist through 2013. Take the countries current-account deficit. It improved last year, to a 7% deficit, from a deficit of 10%. That improvement is unlikely to continue.