An exchange traded fund that invests in Thailand pulled back Wednesday following its rally after incoming prime minister Yingluck Shinawatra’s Pheu Thai party won the recent general election.
She is the sister of exiled former prime minister Thaksin Sinawatra, and emerged the victor on a platform promising internal improvements and a receptive attitude on foreign investment.
The iShares MSCI Thailand (NYSEArca: THD) was down nearly 2% on Wednesday after rallying about 5% the previous session. The fund is in the red for 2011. [ETF Spotlight]
The Pheu Thai party pledges to raise incomes for low-income workers and boost domestic demand to wean the country off foreign exports, according to a recent Bloomberg report. The economic chief, Suchart Thadathamrongvej, also believes that the party will help keep the country’s currency “competitive.”
The Thai baht currency has appreciated around 4.7% against the dollar over the last year, but it has dropped 3.1% year to date. As the currency drops, exports become cheaper to overseas buyers — export sales make up around two-thirds of Thailand’s economy. Export growth has dropped to 17.6% in May. The central bank, though, raised its 2011 export growth projections to 20.4% from 11% to 14% on increased advance orders.
May manufacturing output was down 3.89% year-over-year, dropping four months in a row after disruptions to trade and the global supply chain due to Japan’s earthquake, but output was up from the previous month, according to Reuters. The Industry Ministry predicts that the dip in output will be short lived and output should bounce back in the third quarter.
For the short-term, the Thai market may be “helped by improved sentiment on overseas bourses and a rebound in global oil prices,” remarked Kiatkong Decho, a strategist at broker CIMB Securities, Reuters reports. “The Greek debt news and end-quarter buying may also help. But recent foreign selling will dampen overall appetite,” Kiatkong added.
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iShares MSCI Thailand
