Emerging Markets, Funds / ETFs

Thailand ETF – Investors Love This Year’s Coup

Thailand FlagSince 1932, twelve coups took place in Thailand, with the latest one in May when general Prayuth Chan-ocha overthrew the government of Niwatthamrong Boonsongpaisan and announced a temporary government with himself as a prime minister until the next constitutional elections.

However, Thailand May not actually have elections before 2016. Prayuth left open the possibility that even 2016 might be too soon for elections, or that elections might not happen at all.

There are investors who avoid this country due to the politics dynamics which very often drive a lot of uncertainty and tend to be not not necessarily good for the business climate development.

Investors can access Thailand via iShares MSCI Thailand Capped ETF (THD). As of 27 September 2014, the fund was $514 million in size. The ETF offers a well diversified portfolio of 126 stocks and charges 0.61% expense ratio. The 30 Day SEC Yield, as of the end of September this year, was 2.12%.

So how has Thailand been performing this year vs. the global emerging markets? Let’s have a look.  Below is the price ratio of the THD relative to the iShares MSCI EM ETF (EEM). As a reminder, a rising price ratio means the numerator/THD is outpeforming (up more / down less) the denominator/EEM.

Courtesy of StockCharts

Courtesy of StockCharts

You can easily notice that in May this year, the Thai market underperformed global emerging markets. Investors got nervous because of the coup and during that short period of time the THD lost around 7.4 percent. However, the relative bear relating to the government change appeared to be short-lived and since June this year the THD ETF has been consistently beating global emerging markets expressed as the EEM ETF. Looking at this chart and the relative bull run investors may risk to say the latest coup was a good thing from the perspective of their money. Moreover, the THD ETF remains in a positive relative trend and is about to switch back into a positive momentum mode relative to global EM. That could be a good indication to overweight exposure to the country.

In terms of sector exposure the Thai ETF allocates 50 percent of its assets towards financials and energy. The following four sectors with exposure just above 8 percent each are telecommunication services, materials, consumer staples and industrials.

THD sector allocations

Courtesy of BlackRock (iShares)

The top five stocks comprise almost 33 percent of the portfolio and are dominated by financial and energy companies.

Top 5 companies

Courtesy of BalckRock (iShares)

Source: BlackRock (iShares), StockCharts

Please familiarize yourself with our DISCLAIMERS every time you engage the site: they’re updated constantly without notice. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product. ETFalpha clients own shares of EEM at the moment of writing this article.


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