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Thailand Stocks, ETF Flourish Under Military Rule


Despite political uncertainty after a military junta assumed control of the country, Thailand stocks and related exchange traded funds have surged, but some are concerned about rising valuations.

The iShares MSCI Thailand Capped ETF (THD) is up 20.6% year-to-date.

“Developments following Thailand’s recent coup shows that this is not a typical Putsch, as it is pro-economic growth and investor friendly,” Daiwa Capital Markets said, Reuters reports.

The military government, who has declared a “war on vice,” is targeting so-called grey industries, or illegal operations, that fuel the country’s underground economy, according to Trebizond Investments.

Consumer confidence is rising as the junta pushes toward a “return to happiness.” The gross domestic product expanded 1% the second quarter over the previous period. The Thai baht currency has also strengthened to its highest level since November.

Additionally, a tepid monsoon season in India has allowed Thailand to reclaim its status as the largest rice exporter, which could help the country offload rice stores.

The latest rally in Thai equities came after the National Council for Peace and Order increased payments of about 92 billion baht, or $2.9 billion, in rice subsidies owed to farmers, and the government planned to speed up infrastructure spending, according to Bangkok Post. [Thailand ETF Stampedes Back to Bull Market]

Nevertheless, potential investors should be aware of some hurdles. For instance, while the economy is expanding, the recovery has been slow going. New governmental policies will take months to implement.

The military action has also driven away tourism, which accounts for 16.7% of the Thailand’s GDP.

Additionally, some argue that valuations are looking pricey. The equity’s index’ price-to-earnings ratio is about 16% above its five-year average. Sukit Udomsirikul, the head of research at Maybank Kim Eng, argues that any upside will be limited as the economy won’t experience high growth until next year.

“We advised clients to begin reducing their holdings to lock in profit,” Chaiyaporn Nompitakcharoen, a strategist at Bualuang, said in the Bangkok Post article. “Share prices have gotten too far ahead of earnings and entered overbought territory.”

iShares MSCI Thailand Capped ETF


For more information on Thailand, visit our Thailand category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.