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Time To Talk Thailand

The iShares MSCI Thailand Capped ETF (NYSE: THD), the lone U.S.-listed exchange-traded fund dedicated to Thai stocks, is up about 12 percent year to date. While that performance lags the returns of the MSCI Emerging Markets Index, that sentiment should diminish the potential offered by THD.

THD is more than 9 years old and follows the MSCI Thailand IMI 25/50 Index. The ETF holds nearly 130 stocks and is widely viewed as the go-to fund for U.S. investors looking to gain exposure to the Southeast Asian economy.

Although it is an emerging market, Thailand is a mere blip on the radar for major developing world benchmarks, such as the MSCI Emerging Markets Index, the country is one of the more advanced in its region and home to a relatively diverse economy.

Seeking Diversity

“Unlike Vietnam, the underlying Thai market is much more diversified in comparison with one hundred twenty-nine individual names, compared to Vietnam’s twenty-six,” said Street One Financial Vice President Paul Weisbruch in a note out Monday. “When we look at how THD is invested in terms of sector allocations we see the following breakdown: 21% weighting to Financials, 17% allocation to Energy, 12% to Industrials, 11% to Consumer Staples, 10% to Basic Materials, and lesser weightings to other industry sectors.”

Over the past year, THD has sharply outperformed the equivalent Indonesia, Philippines and Vietnam ETFs, all markets that are frequently measured against each other and Thailand.

Another advantage of THD is that its three-year standard deviation of just over 13 percent is well below the comparable metric on the competing Indonesia and Philippines ETFs.

Docile, But Well-Timed

THD has not seen much in the way of inflows or departures this year ($17 million in outflows), but there are other reasons to consider the ETF.

“Interestingly, this piece may be timely, because the ASEAN (The Association of Southeast Asian Nations) is actually celebrating its fiftieth birthday this month and on the whole, many of the member countries sport some of the most impressive growth rates in the world in terms of their local economies,” said Weisbruch. “Thailand was one of the five founding members of ASEAN along with Indonesia, Malaysia, the Philippines, and Singapore.”

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