Over the past several years, investors looking to profit from
global infrastructure spending announcements, particularly those
coming from the developing world, have been greeted with a
Some have been rewarding while others have been frustrating.
There have been times when
devoted to the emerging markets infrastructure theme have risen
almost immediately following a major spending announcement.
For example, the EGShares Brazil Infrastructure ETF (NYSE:
) surged last August after
Brazil unveild an almost $66 billion
infrastructure package aimed at enhancing its railways and roads
and boosting a sagging economy
There are also examples where the expectations of
infrastructure spending have done nothing to boost a particular
ETF's fortunes. Such is life for the EGShares India
Infrastructure ETF (NYSE:
Most observers of the Indian economy know the country is home
to decrepit infrastructure, even by developing world standards,
yet the anticipation of that scenario improving has done nothing
for INXX. The ETF has tumbled more than 30 percent since August
One ETF that could benefit this year from increased
infrastructure spending is not an infrastructure fund at all, but
it is a familiar name to emerging markets investors: The iShares
MSCI Thailand Investable Market Index Fund (NYSE:
THD, which is hovering just pennies away from its all-time
high, is already a juggernaut among emerging markets ETFs. The
fund is up more than 30 percent in the past year and is one of
the top-performing ETFs of any kind since the March 2009 market
After soaring in 2012, some market participants said THD would
retreat this year if for no other reason than that the ETF looked
overbought and Thai stocks appeared expensive. To that, THD has
said "no way" and returned over five percent since the start of
A potentially positive catalyst may be emerging to help THD
run higher, that being massive infrastructure plans by the Thai
government. The Financial Times puts the price tag
of the Thai infrastructure plans at $67
A day after the FT story ran, Thailand Business News reported
the government there is looking to complete 55 projects at a cost
almost $76.3 billion by 2020
It is possible Thai infrastructure largess could be a boon for
THD. The ETF allocates 18.5 percent of its weight to energy names
and another 10.6 percent to the materials sector. Telecoms and
industrials combine for another 12 percent, so it is fair to say
THD offers some level of intimacy to increased infrastructure
On a superficial level, THD could also benefit as investors
take a close look at what Thailand is planning to spend billions
and billions of bahts on. Tourism is a vital element of the Thai
economy. Not surprisingly, upgrades are planned for the Bangkok
airport. High-speed rail projects are also expected to be on
Improvements to Thailand's railways are important for reasons
beyond tourism. The country is an export-driven economy and is
located at the heart of the
booming ASEAN region
. Yet the country only has 3,900km of single-track railways, as
the FT reported.
Combine that with sub-par roads, and Thai exporters face
significant logistical challenges just to get their products out
of the country.
Help may be on the way. Four high-speed rail projects valued
at over $30 billion could be among the first projects Thailand
embarks upon once policymakers approve the spending package,
Thailand Business News noted.
Naysayers or those with a vested interest in seeing THD
decline, will say Thailand risks hurting its balance sheet with
these spending plans. The country had a debt-to-GDP ratio of 41.7
percent at the end of last year,
according to the International Monetary Fund
. That is pristine compared to much of the developed world.
Thailand has an investment-grade credit rating of BBB+ on the
Standard & Poor's scale and it is not unreasonable to assume
the government does not want to risk a downgrade, which would
lead to higher borrowing costs.
Not surprisingly, Thailand is courting foreign investors from
China, Japan and others to invest in its infrastructure
endeavors. That could mean increased foreign direct investment, a
number that is often pivotal in the analysis of emerging markets
Obviously, the long-term impact of Thailand's infrastructure
spending on THD cannot yet be measured. However, it is worth
noting that the ETF is up 2.25 percent this week after news of
the infrastructure package hit the wires on Monday. Maybe that is
a coincidence. Maybe it is not.
For more on ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
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