All Calm On The Thai ETF Front...For Now

While Americans fire up their grills and throw back a couple of cold ones on Sunday July 3rd in advance of the Fourth of July holiday, another country may be home to fireworks of its own: Thailand. Thailand is one part emerging markets star and one part political hotbed and investors in the Southeast Asian country no doubt remember the 2010 political clash between the Red Shirts and Yellow Shirts that weighed on Thai equities, but also set them up for an epic run in the back half of the year. It doesn't appear as Thailand's election will be as close as Peru's recently was and that's a good thing because opposition party leader, Yingluck Shinawatra, the younger sister of Thailand's prime minister, is well ahead in the polls. This is the candidate the market wants to win. What happens to an emerging markets ETF that is beholden to political risk when voters don't pick the right candidate? Just take a look at the iShares MSCI All Peru Capped Index Fund EPU. A Shinawatra victory all but ensures a similar fate will not befall the iShares MSCI Thailand Investable Market Index Fund THD. THD is up just under 1% today on volume that is about average, impressive considering volume is light across U.S. exchanges today. THD is of course the ETF to watch heading into Thai elections. Analysts have already speculated that energy names and financials should be winners if Shinawatra wins on Sunday and those sectors account for over 60% of THD's weight. Another ETF to consider on the back of Thai politics is the Global X FTSE ASEAN 40 ETF ASEA. Thailand accounts for about 11% of this multi-country ETF. ASEA is a new ETF, but has been an admirable performer since its February debut. Still, volume has remained stubbornly light in this ETF and while ASEA is up 4% this week, the volue hasn't been there to legitimize the move. A favorable result in Thailand on Sunday could legitimize ASEA's recent run and it take it a new all-time next week.