Ongoing protests in the capital of Thailand have left many investors wondering if the country will grind to a halt due to political turbulence caused by the Red Shirt movement. The Red Shirters are protesting what they believe is an illegitimate Abhisit government, which came to power via a December 2008 parliamentary vote after a controversial court ruling ousted former Thai leader Thaksin’s allies. Another court decision last month confiscated close to two billion dollars from the former leader, enraging his followers who are largely from the poor rural north and fervently support the populist policies he introduced before being ousted in a 2006 coup. This movement has literally spilled onto the streets of Bangkok; over 100,000 protesters filled plastic bottles with blood and smearing it on properties throughout the capital, demanding new elections to replace the current government.
Despite the protests, which have been primarily non-violent, Thai equity markets have proved resilient in recent sessions, as many investors apparently believe that Abhisit and his government will survive the current crisis. This optimism has translated into big gains for the iShares MSCI Thailand Index Fund (THD), which posted a gain of 3.5% yesterday and nearly 1.5% today. Abating fears over the impact of the protests, as well as a continuation of record low interest rates in the U.S. have combined to push up demand for Thai securities. “Investors have been buying the baht and stocks as nothing serious has happened,” said Tetsuo Yoshikoshi, a senior economist at Sumitomo Mitsui Banking Corp. in Singapore. “Asian currencies and stocks advanced on the U.S. interest rate story and Thailand is not an exception.”
THD is designed to track the MSCI Thailand Investable Market Index, a benchmark that seeks to track the performance of broad Thai equity markets. The fund contains 85 securities and has large allocations to both the financial and energy sectors, which combine to make up more than two-thirds of the fund. For individual holdings, the fund is relatively top-heavy with just over 63% in its top ten. Major holdings include state oil company PPT Public (11.1%) and Bangkok Bank (9.3%), which is the fifth largest bank in the Southeast Asia region. THD charges an expense ratio of 0.65% and is now up nearly 10% in 2010.
Disclosure: No positions at time of writing