The following occurrence is an example of why emerging markets exchange traded funds (ETFs) need intense monitoring. Thailand’s new government, which gained power only months ago, drove its country’s financial markets into utter chaos by imposing heavy penalties on foreign investors. According to Brett Arends with TheStreet.com, the Bangkok stock exchange fell 15%, after previously falling 20% due to the spread on other emerging markets. This financial disaster caused investors to pull out $699 million from the Thai stock market in a day!

Thailand’s new laws were designed to cool the stock market which will cause a lot of fund managers to pull out and it won’t stop there. Hedge funds will be forced to sell and the effect will trickle down to all emerging markets. It’s not a matter of "if", it’s "when".

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.