The exchange traded fund that tracks Thailand's stock exchange, iShares MSCI Thailand Capped Investable Market Index Fund (THD), has dropped about 6% after hitting a resistance line that has been in place since 2010. The $68 billion infrastructure bill could have a negative impact upon the local economy.
"Thailand has been one of the best-performing equity markets in the world over the past decade. The MSCI Thailand Index (in U.S. dollars) had an annualized return of 13.6% over the five years to Dec. 31, 2012, and 23.4% over the past 10 years. However, valuation multiples for the MSCI Thailand index are currently near five-year highs," Patricia Oey wrote for Morningstar.
The Thailand-focused ETF is currently hovering around the lowest levels seen as the country's $68 billion infrastructure spending bill is a controversy. Apparently, the bill violates the Thai constitution along with rumors Prime Minister Yingluck Shinawatra could be indicted. Analysts had previously thought the bill would be a positive sign for the economy and ETF, as THD gives about 40% of the allocation to telecom, energy and utilities, sectors that would benefit from an upgrade, reports Benzinga.
THD has over $1 billion in assets and has had inflows of $180 million in 2013, reports Zacks. THD returned about 37.7% in 2012, and is already up 9.5% year-to-date.
Despite the political battles the country now faces, the Thai economy has grown from solid domestic demand and healthy foreign investment. The economy is expected to benefit from an uptick in tourism, automobile spending and the export market.
Chris Kimble for Kimble Charting Solutions reports that over the past two years, when THD has hit the same resistance line, the S&P 500 has hit a similar line. Furthermore, when THD has hit previous impediments, the SPDR S&P 500 (SPY) has hit a similar line.
iShares MSCI Thailand Capped Investable Market Index Fund
Tisha Guerrero contributed to this article.