The iShares MSCI Thailand Capped ETF (NYSEArca: THD) is coming off a volatile September.  THD, the lone Thailand-specific ETF, started the hovering near $65 only to finish t $74.56. That sounds great until realizing THD lost 10.5% from its high of the month reached on September 19 through September 30.

Earlier in the month, Goldman Sachs cut its rating on Thai equities to marketweight from overweight. Thailand is in what some observers are calling a “technical recession,” though after two consecutive quarters of contracting GDP growth, the country meets the literal definition recession and that is not good news for a country that could see a higher number of non-performing loans. And that is not good news for an ETF that devotes almost 36% of its weight to the financial services sector.  [Thailand ETF Could be hit by Goldman Downgrade]

As odd as it may sound, THD’s problems are not all of its own making. Thailand is often compared to Indonesia, Southeast Asia’s largest economy. When it downgraded Thailand earlier this month, Goldman also lowered its rating on Indonesia to underweight  from marketweight, saying it expected “significant downside risks” to consensus earnings forecasts for Indonesia. []

In its most recent assessment of Asian markets, Goldman overtly recommended shorting the iShares MSCI Indonesia ETF (NYSEArca: EIDO) though the bank made no such comments about THD. [ETFs for Goldman’s Asia Call]

THD still faces headwinds.  Although the Federal Reserve has delayed tapering of its easing program, Thailand is seen as  vulnerable to the potential loss of the Fed’s ultra-loose monetary policy. Additionally, Thai stocks could be taken to task as investors pare exposure to riskier assets due to the looming U.S. budget showdown.

Foreign investors have recently been net sellers of Thai equities, which are still expensive relative to other emerging markets despite recent losses. And the losses could accelerate on the back of a contentious political environment in Washington, D.C.