Travelers Love Bangkok but Investors Dumping Thailand ETF

ETF Trends

Bangkok has become the world’s most popular destination for air travelers but investors are selling the iShares MSCI Thailand ETF (THD) after a strong rally, pushing the fund below a key technical indicator.

The Thailand ETF has been under pressure the past two weeks after hitting multiyear highs earlier in May.

In particular, investors were looking for a bigger rate cut from the Bank of Thailand. [Thailand ETF Falls As Rate Cut Disappoints]

The emerging market ETF is cooling a bit after delivering huge performance in recent years. For example, THD sports a three-year annualized return of about 30%, compared with 5% for iShares MSCI Emerging Markets (EEM), according to Morningstar.

THD has been helped by a rising Thai baht since the ETF does not hedge its foreign currency exposure. The strengthening currency, however, has weighed on the country’s exporters.

Still, Thailand’s booming economy has been one of the biggest success stories in emerging markets in recent years.

For example, Reuters reports that Bangkok has edged out London as the world’s most popular air travel destination, becoming the first Asian city to earn the distinction, according to a ranking by the MasterCard Index of Global Destination Cities.

The Thailand ETF “provides exposure to an emerging market with sufficient infrastructure, a relatively skilled workforce, and a government that generally supports trade and investment,” says Morningstar analyst Patricia Oey in a profile of the fund. Oey notes that exports account for about 60% of Thailand’s GDP.

“The government has implemented programs to stimulate domestic consumption and promote infrastructure spending,” she added. “Thailand has been one of the best-performing equity markets in the world over the past decade.”

THD has slipped about 4% the past week but remains up roughly 8% year to date. Trading volume has bumped higher in recent sessions.

The ETF has fallen below its 50-day simple moving average, which has provided strong support for nearly a year.

iShares MSCI Thailand ETF

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Full disclosure: Tom Lydon’s clients own EEM.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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