Beyond THD: Other ETFs For Tapping Thailand
The iShares MSCI Thailand Capped Investable Market Index Fund (NYSE: THD) is up slightly today, just few days after Fitch Ratings boosted the country's credit rating to BBB+, citing confidence in Prime Minister Yingluck Shinawatra's government.
While THD's Monday gains are modest, the $1.06 billion ETF earlier touched another record intraday high. Trading above $92, a run to $100 for THD this year is not only possible, it appears highly probable.
Already up about 12 percent year-to-date, THD has defied critics that said the ETF's impressive 2012 performance would not be repeated this year, those that claimed Thai stocks are overvalued and the naysayers that believe when Thai equities are Asian leaders, that a tumble is lurking for the region's major bourses.
Buoyed by a previously announced $67 billion infrastructure spending plan and 2012 GDP growth of 6.6 percent, which easily topped the central bank's estimate of 5.9 percent, THD has continued to flex its muscles as a leader among Asia ETFs. Despite THD's soaring returns and popularity over the past few years, it remains the only ETF devoted exclusively to the Southeast Asian nation.
However, investors looking to mitigate country-specific risk or add Thai exposure to a position in THD have some noteworthy ETF choices. Consider the following.
WisdomTree Asia Local Debt Fund (NYSE: ALD) At the start of this year, ALD was touted as a play on some of Asia's rapidly-growing economies. Of course, that thesis includes Thailand, which is accounts for almost 11.2 percent of ALD's weight making it the ETF's second-largest country weight behind Singapore.
As its name indicates, ALD is a bond fund. In fact, unbeknownst to some that choose to focus on one particular fund being the only actively managed ETF worth paying attention, ALD itself is actively managed. With over $506 million in assets under management, ALD has seen asset growth of about 10 percent since January and is one of the largest actively managed ETFs on the market today.
Why consider ALD? Thailand's local currency debt is up 3.6 percent in the past year and the Thai baht is the best performer in Asia this year among the 11 most active Asian currencies, according to Bloomberg.
As for credit risk, it is quite minimal with ALD. While the ETF does not year reflect the Fitch upgrade to Thailand's credit rating, over 61 percent of ALD's holdings are rated A, AA or AAA.
EGShares Beyond BRICs ETF (NYSE: BBRC) The EGShares Beyond BRICs ETF, which debuted in August, holds true to its name and features no exposure to Brazil, Russia, India or China. That is not a bad thing since major ETFs tracking the BRIC quartet have struggled this year.
Thailand is BBRC's fourth-largest country weight with an allocation of 14.7 percent. That puts the country behind South Africa, Mexico and Malaysia. Among equity-based ETFs that are not THD, BBRC's Thailand allocation is among the largest.
Additionally, BBRC has returned nearly 9.5 percent since its debut, which is far better than some of the more popular diversified emerging markets ETFs. The strike against this ETF is that it is not heavily traded as BBRC last changed hands on March 7.
PowerShares DWA Emerging Markets Technical Leaders Portfolio (NYSE: PIE) Prescient was the prediction that PIE would be one of 2013's top diversified emerging markets ETFs. While other multi-country developing world ETFs have languished this year, the $423.9 million PIE has surged nearly nine percent.
That performance proves there is something to screening constituents based, in part, on relative strength. Said another way, THD, the Market Vectors Indonesia ETF (NYSE: IDX) along with the other two Indonesia ETFs, have been among the best-performing emerging markets funds year-to-date. That is relevant to PIE because Indonesia and Thailand are the ETF's two biggest country weights, combing for nearly 30 percent of the ETF.
Despite the fact that PIE is not heavly tilted toward lower beta emerging markets such as South Korea and Taiwan, the fund's index has been only slightly more volatile than the MSCI Emerging Markets Index and less volatile the MSCI Emerging Markets Growth Index over the past five year, according to PowerShares data.
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