ETF Trends
ETF Trends

Oil’s bear market has extended past two years and along the way, there has been plenty of chatter regarding emerging markets and related exchange traded funds that are being hurt by oil’s declines. There has also been plenty of speculation regarding some emerging markets and the relevant ETFs that should be benefiting from lower oil prices.

Broadly speaking, those ETFs have disappointed, but at least one has recently offered notable out-performance of a broader gauge of emerging markets equities. Over the past month, the iShares MSCI Thailand Capped ETF (NYSEArca: THD) is off just 1.9% while the MSCI Emerging Markets Index is lower by 11.9 percent over that period.

“The assets held by Malaysia, the region’s only major net oil exporter, have plunged while Thailand’s have stabilized the past year after waning earlier,” reports Bloomberg. “Malaysia’s international reserves were $95.1 billion as of Jan. 15, a decline of almost 30 percent from the start of 2014, while Thailand’s were $158 billion, down 5 percent. The chart also shows that the trajectory of Malaysia’s reserves has been similar, though less acute, to that of the price of oil, which has plunged by more than two thirds in the period.”

While some observers may believe Thailand is still rife with political volatility, especially after the military took control last year, Thailand’s economy and incomes have historically expanded faster and remained more stable under the three times the military led government, compared to the nine civilian ones. [Thailand Stocks, ETF Flourish Under Military Rule]

Thai stocks could also be supported by the country’s Social Security Office’s bid to up its equity positions while trimming its holdings of sovereign debt. “The fund has overweight holdings on commerce, telecommunication and health-care companies as they’re less affected by energy prices and slower global growth,” according to Bloomberg.

However, some analysts see hurdles facing Thai banks, an important consideration because financial services is THD’s largest sector weight at 28.7% of the ETF’s weight.

“We believe these data points do not change the fundamental view that the loan growth outlook for 2016 is still quite muted and unless we see a sharp turnaround in export and consumption, the sector could continue to lack positive catalysts,” according to Credit Suisse.

iShares MSCI Thailand Capped ETF

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.