In the good old days for non-BRIC Asian emerging markets ETFs,
a period that end with the start of tapering chatter in the
second quarter, the iShares MSCI Thailand Capped ETF (NYSE:
) was one of the best developing world ETFs.
So impressive were the returns offered by THD and funds such
as the iShares MSCI Philippines ETF (NYSE:
) that it became befuddling to so many professional investors and
pundits spent so much lamenting the poor performances of emerging
markets ETFs earlier this year. All that while THD, EPHE and some
others soared as BRIC ETFs tumbled.
Slide In EM ETF Exposes Country Weight Flaws
Impressive performances by THD were nothing new. From the
March 9, 2009 market bottom through the end of the first quarter
this year, the fund surged nearly 400 percent,
making a mockery of BRIC ETFs
along the way.
Those were the glory days for Thai stocks and THD. Such times
could be seen again, but these days, investing in Thailand
can make a hard man humble
. After posting GDP growth of six percent last year, Thailand has
seen two consecutive quarters of contracting growth, the
definition of a recession.
Obviously, a recession problematic for THD, but the situation
is more confounding than the mere identification of slack
economic growth. Thai exports have been crimped even at a time of
economic recovery in the U.S. and the European Union, two prime
destinations for those exports. Domestic consumption has not yet
picked up the slack for the lost export volume.
Philippine stocks and EPHE have dipped as well and neither are
short of critics, but it is strong domestic consumption that
EPHE remain durable relative to rivals
such as THD.
The end of large-scale government investment projects
following the devastation caused by flooding at the end of 2011
has also been cited as a cause for the fall in domestic
consumption, which accounts for about half of economic output,
according to the BBC
Infrastructure was supposed to be a positive theme for the
Thai economy and THD this year, but political tensions and
allegations of corruption against Prime Minister Yingluck
hampered a $68 billion infrastructure spending
That is unfortunate for THD because nearly 30 percent of the
ETF's sector weight is allocated to groups that would stand to
benefit from increased infrastructure spending.
There is another issue for THD to contend with. Thai banks are
well capitalized. That is the good news, but loan growth has
fallen for two consecutive quarters, coinciding with the
country's entry into recession. THD allocates nearly 37 percent
of its weight to financial services names,
putting the fund among the ranks
of Asia vulnerable to slowing loan expansion.
With Monday's 4.3 percent slide, THD has violated support at
$75 and may not see another support level until the June lows
below $68. And with today's loss, THD is down over 23 percent in
the past 90 days, meaning the ETF is officially in a bear
For more on ETFs, click .
Disclosure: Author owns none of the securities mentioned
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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