Once Again, Politics Puts Thailand ETF in the Spotlight

Shares of the iShares MSCI Thailand Capped ETF (NYSEArca: THD) are trading lower by 2.3% Thursday , a day after Prime Minister Yingluck Shinawatra was removed from power for reportedly firing a senior bureaucrat in 2011.

Despite a wave of political tumult and mounting evidence of Shinawatra’s vulnerability in elections scheduled for July, the $550 million has been one of the best single-country emerging markets ETFs this year, posting a gain of 20% before Thursday. [Tumult Not Yet Hampering Thai ETF]

The removal of Shinawatra marks the third time in six years a Thai prime minister with ties to the family has been removed, according to the Wall Street Journal. Yingluck replaced her brother Thaksin, who is no longer allowed to enter Thailand.

For the bulk of the younger Shinawatra’s premiership, THD performed well and Thailand was politically stable, but she invited problems by attempting to pass an amnesty bill last year that would have overturned Thaksin’s corruption conviction that prompted his exile from the country. [Political Volatility Hampers Thai ETF]

Thailand’s constitutional court ruled Yingluck abused her role as prime minister by sacking Tawin Pleansri, a security adviser, in an effort to allow her brother to return to the country. Yingluck has also come under fire for trying to fix global rice prices, the Journal reported. Thailand is the world’s largest rice exporter.

“The Thailand SET 50 Index (SET50) is showing the largest negative risk-adjusted return inEquities. The Thai Baht also weakened after the Constitutional Court removed PM Yingluck Shinawatra and nine of his cabinet ministers on Wednesday. The National Anti-Corruption Bureau could rule on charges that the government mishandled its rice-pledging program as soon as today. On Saturday, the ‘Red Shirts’, supporters of Ms Yingluck, will hold a rally in Bangkok, which will be followed by a rally by anti-government PDRC protesters on May 14th, raising the possibility of street clashes,” said Rareview Macro founder Neil Azous in a research note.