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Is the Thailand Military Coup Already Priced Into Markets?

Jon C. Ogg

Thailand is supposed to be a destination for the exotic and for beautiful beaches and great history. Currently, it is under a military coup. The nation's military chief announced in a national address Thursday that a coup has taken place, and also that a curfew would be in place.

The military had previously imposed martial law ahead of this coup. This is culmination of months of tension -- or perhaps years -- and has taken place after rival leadership factions did not reach an agreement on how to govern the nation.

From an outsider's view this seems like just another round of regime changes in Thailand. In recent years it seems to not be stable at all, yet the coups and regime changes have had little effect on foreign interests.

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The military chief said in the address that it should be business as usual for the public. All government workers were told to report for work. Another aim to smooth the situation is that security would be provided for foreigners in Thailand.

There are two investment vehicles for investors looking at Thailand. The reactions here have shown that things might be close to priced in. If not, they have already seen serious drops from their highs.

iShares MSCI Thailand Investable Market Index Fund (THD) was designed to track the MSCI Thailand Investable Market Index. With the exchange traded fund (ETF) trading down 1.2% at $73.59 in mid-day trading on Thursday, its 52-week range is $61.94 to $92.47. This index measures the performance of stocks that trade in Thailand, and it is a free float adjusted market cap weighted index tracking the Stock Exchange of Thailand.

Thai Fund Inc. (TTF) is a closed-end mutual fund tracking Thailand. This fund is actually up a penny at $11.26, against a 52-week trading range of $9.49 to $25.59. The Closed-End Fund Associations website shows that the fund trades at a 12.1% discount to its net asset value and that the fund's current market cap is $166 million. Before thinking this was a panic earlier in 2014 on its chart, there was the equivalent of $8.14 that was paid out in a dividend, as well as $0.92 paid out last September. That would mean that the fund's real 52-week trading range is $9.49 to $16.26 or so.

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As a reminder, historically coups in Thailand have not been the same as coups elsewhere in the world.

We have asked for portfolio managers to comment on this matter and have yet to hear a response. This report will be updated if a response comes.

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