The iShares MSCI Thailand Capped ETF (NYSEArca:THD) is up nearly 6% year-to-date, but some market observers are concerned about economic growth in what was once one of Southeast Asia’s steadiest economies. Thailand is the second-largest economy in Southeast Asia behind Indonesia.
A strong currency is part of the allure with Thailand, an important point when considering THD is not a currency hedged ETF, meaning investors should want to see the baht strong against the dollar. 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.
“Gross domestic product probably increased 3.8 percent last year, the fastest pace since 2012, before easing to 3.7 percent this year and to 3.6 percent in 2019, according to a Bloomberg survey. Once prized in Southeast Asia for its economic strength, Thailand’s growth is lagging peers with economies in Vietnam and Philippines expanding more than 6 percent,” reports Bloomberg.
The $420.3 million THD tracks the MSCI Thailand IMI 25/50 Index and holds 125 stocks. THD devotes almost 20% of its weight to financial services stocks and 19.7% of its weight to the energy sector. The industrial, consumer staples and materials sectors combine for 31% of its weight.
“Thailand’s expansion has slowed this decade, averaging 3 percent through 2016 compared with 4.6 percent in the 10 years through 2010,” according to Bloomberg. “Prime Minister Prayuth Chan-Ocha is increasing spending to a record in fiscal year 2018 which started in October while pushing ahead on a $46 billion infrastructure plan including a high-speed rail venture with China and mass transit lines in Bangkok to boost growth.”
THD has a three-year standard deviation of 13.25%, putting it on the lower end of emerging markets single-country ETFs. The ETF has a trailing 12-month dividend yield of 2%.
“The military, which has held power since a coup in 2014, said it’s on course for an election in November, although doubts remain. The Bank of Thailand has held its benchmark rate near a record-low 1.5 percent since 2015 and most economists predict no change through 2018 though some forecast an increase,” according to Bloomberg.
For more information on the Thai markets, visit our Thailand category.
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.