Shares of the iShares MSCI Thailand Capped Investable Market
Index Fund (NYSE:
) are off more than three percent Friday and are flirting with
their lowest levels in about six weeks on fears the country's
recently approved $68 billion infrastructure spending bill could
violate the Thai constitution along with rumors Prime Minister
Yingluck Shinawatra could be indicted.
Earlier this week, Thailand's cabinet approved the $68 billion
previously hailed as a potential boon to THD
because the ETF allocates about 40 percent of its combined weight
to sectors that would benefit from improved infrastructure such
as energy, telecommunications and utilities.
The infrastructure programs includes billions to be spent on
railroads, something the Southeast Asian nation is in desperate
need of. The country is an export-driven economy and is located
at the heart of the ASEAN region, yet has less than 4,000
kilometers of single-track railway.
Combine that with sub-par roads, and Thai exporters face
significant logistical challenges just to get their products out
of the country.
Now, the infrastructure plan could be in jeopardy, and
Shinawatra's job could be on the line, but for different reasons.
Just 18 months into her term as Thailand's first female prime
minister, Shinawatra is under fire for issuing a passport to her
brother, former Prime Minister Thaskin Shinawatra. He served as
prime minister from 2001 to 2006 before being overthrown in a
Thaskin's regime was toppled on charges of graft and
corruption and he has been in self-exile for more than six years
since. It is believed that Thaskin still holds sway over the Red
an anti-establishment group
whose protests with the Yellow Shirts weighed on THD in three
In other words, Thaskin Shinawatra can be considered a
polarizing figure in Thailand, but unfortunately for his sister
and THD shareholders, Thaskin is not his sister's only
The current prime minister is also under fire because of
discrepancies in paperwork she submitted to the National
Anti-Corruption Commission upon becoming prime minister.
At issue is the fact that her husband, Anusorn Amornchat,
amassed a position of over 4 million shares in a Thai company
called Ad Index before his wife became an obvious candidate for
The prime minister said she made a loan to the company in
2006, though records indicate no such loans
appear on the company's books until 2007
. Ad Index is not one of THD's 92 holdings.
The loss of Yingluck as prime minister could have near-term
consequences for THD, assuming the worst-case scenario plays out.
Thailand already has a history of political volatility and THD
has shown a penchant for adversely reacting to that
Additionally, it is worth remembering that many market
participants wanted Yingluck to emerge victorious in 2011 because
she was viewed as the pro-business candidate. Investors have been
rewarded as THD was trading in the low $50s 18 months ago. On
March 18, the ETF traded above $93.
THD's Friday decline has taken the ETF below its 50-day moving
average and the ETF could fall another six or seven percent
before finding next support, indicating the fund is at an
important fundamental and technical juncture.
For more on Thailand, click
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