Investing in Thailand Amid Political Crisis

Includes: TF-OLD, TTF
by: Steven Towns

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Thailand's GDP Rate Slows As Political Crisis Curbs Growth

  • Summary: The current political crisis and subsequent economic slowdown in Thailand is a good example of the risks involved in investing in emerging markets. A dissolved parliament and a botched election this past April has hurt domestic consumption and investment resulting in slower quarter-on-quarter GDP growth and a lower GDP forecast for the year (4.2%-4.7% from previous forecast of 4.2%-4.9%). One area of strength has been (agricultural and electronics) exports, which jumped 16% in Q2. Thailand's central bank is not seen changing its target rate given a globally rising rate environment and instead has suggested fiscal stimulus. Thai inflation seems to be under control and the Thai baht is seen as stable given the strength of exports and tourism revenue. New elections are scheduled for Oct. 15th but could be delayed.
  • Comment on related stocks/ETFs: Investing in Thailand is not without risk, especially if the upcoming election is delayed and/or is not a success. However, for those interested in Thailand there are two Thai closed-end funds listed on the NYSE: The Thai Fund (NYSE:TTF), which is advised by Morgan Stanley and the Thai Capital Fund (NYSEMKT:TF-OLD), which is advised by Daiwa. Given the comparatively small size of Thailand's economy, the number of holdings in each fund totals 34 and 54, respectively, with both having a majority of assets in their top-10 holdings. Based on their similar holdings the logical choice seems to be The Thai Fund since its expense ratio is 1.76% versus the Thai Capital Fund's 2.46%. The Thai Fund also trades at a 1.8% discount to its NAV whereas the Capital Fund is trading in-line. For more information on these CEFs, see a related post on Seeking Alpha from earlier this year,'s pages on TF and TTF, and The Wall Street Journal's Global Indexes and Thai stock data.