Quietly, This Tiger ETF Rises Again

There have been periods of emerging markets ebullience when the iShares MSCI Thailand Capped ETF THD, the lone U.S.-listed exchange-traded fund dedicated to Thai equities, has received ample attention.

At least to this point, 2017 does not feel like one of those periods. Perhaps it is because THD is up 7.5 percent, meaning it trails the MSCI Emerging Markets Index 620 basis points. That scenario could easily prompt some investors to speculate it is better to be diversified in emerging markets rather than trying to time a tactical trade with THD. Year-to-date returns confirm as much.

However, THD was one of a small amount of ETFs to hit 52-week highs Monday. In fact, THD was one of just three emerging markets ETFs to accomplish that feat.

THD And Thailand

Thailand's finance ministry is forecasting GDP growth there this year of just over 3.1 percent, slightly lower than the growth rate of 3.2 percent seen last year.

“These three engines in combination — investment, exports and tourism — should add about 2 percent to GDP growth, with a further 1 percent coming from domestic consumption and service businesses,” according to The Nation. “In 2017, HSBC expects public investment to remain one of the key drivers of GDP although it will likely decelerate after a surge in 2016.”

Financial Services And Interest Rate

As is the case with many single-country ETFs, particularly emerging markets funds, THD is heavily allocated to financial services stocks. The sector represents 26.7 percent of the ETF's weight, or more than 900 basis points above energy, the ETF's second-largest sector exposure. Industrial, consumer staples and materials names combine for almost a third of THD's lineup.

Thailand's benchmark interest rate is currently 1.5 percent, slightly above the record low seen in 2009. The country's central bank has not lowered rates in almost two years and market observers believe Thai rates will be on hold for the foreseeable future. The central bank there meets Wednesday.

“Thailand's central bank on Wednesday will leave its already-low benchmark interest rate where it has been for nearly two years, a Reuters poll showed, letting government spending support a fragile economic recovery while inflation remains benign,” reported Reuters. “All 24 economists in the survey forecast that the Bank of Thailand (BOT)'s one-day repurchase rate will be kept at 1.50 percent when its monetary policy committee (MPC) meets. Thailand's last rate change, a 25-basis-point cut, was in April 2015. The benchmark rate is just a quarter-point above the record low reached in 2009.”

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