The iShares MSCI Thailand Capped ETF (NYSEArca: THD) has had its bouts with political volatility in the past, but the most recent batch of instability in the Southeast Asian country comes at a time when emerging markets investors are taking a cautious approach to higher-risk Southeast Asian markets, of which Thailand is one.

THD, the lone Thailand ETF, has tumbled nearly 7% since Oct. 18 amid escalating Bangkok street protests. Already dealing with downwardly revised growth rates, Thailand’s tourism sector is seen as increasingly vulnerable. In October, Thailand’s central bank pared its 2013 growth estimate for the economy to 3.7% from 4.2%. [Worst-Performing Single-Country ETFs]

Thailand’s current prime minister, Yingluck Shinawatra, is attempting to pass legislation that would provide amnesty for all political crimes committed after the country’s 2006 military coup, a move that would possibly vindicate her brother, former Prime Minister Thaksin Shinawatra.

The fear, and hence the source of the protests, is that would clear the way of Thaksin to return to Thailand and reassume power at some point. Investors have responded by pulling almost $16 million from THD since Oct. 18. The fund has lost almost $70.6 million this year while the comparable Vietnam and Philippines ETFs have seen positive inflows. [Vietnam ETF Rises]

Foreign investors $323 million more Thai bonds than they bought last week and pulled a net $91 million from equities, reports Yumi Teso and Anuchit Nguyen for Bloomberg.

The protests are ill-timed for THD from both a fundamental and technical perspective. Concerning the latter, the ETF recently completed a bullish reverse head and shoulders formation, but since tensions have escalated, THD has slipped below its 50-day moving average.

The fund is 7% below its 200-day line and has not mustered a string of solid closes above that line since early June.

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