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Thailand Keeps Rates Steady: ETFs in Focus

The Bank of Thailand kept its benchmark policy rate intact at a record low despite signs of rebounding deflation. The central bank left the rate unchanged at 1.5%. All members of the monetary policy committee voted in favor of the decision and all 21 economists surveyed by Bloomberg expected the same.


Consumer prices in Thailand declined 0.05% year over year in June 2017 compared with 0.04% in May. Headline inflation has been predicted to be 0.8% in 2017 compared with its previous estimate of 1.2%. The central bank predicts a 1.6% rise for 2018 compared with its previous estimate of 1.9%.


The country’s GDP grew 1.3% sequentially in the first quarter of 2017 compared with a 0.5% in the previous quarter. The Bank of Thailand expects GDP growth to be 3.5% in 2017 compared with its previous estimate of 3.4%. The central bank predicts a 3.7% rise in 2018 compared with its previous estimate of 3.6%.


The second largest economy of South East Asia is largely dependent on exports. Thai exports comprise around 65% of the country’s GDP. Per Bangkok Post, the central bank expects exports to rise 5% this year compared with its previous estimate of 2.2% (read: Asia Business Optimism at 3-Year High: ETFs in Focus).


In the current scenario, let’s have a look at the Thailand ETF, THD:


iShares MSCI Thailand Capped ETF THD


This fund offers exposure to companies based in the country and is an appropriate bet for investors bullish on Thailand.


It has AUM of $394.99 million and charges a fee of 63 basis points a year. From a sector look, Financials, Energy and Industrials take the top three spots, with 21.3%, 16.83% and 11.26% allocation, respectively (as of July 3, 2017). From an individual holdings perspective, the fund has high exposure to PTT Non-Voting DR PCL, CP All Non-Voting DR PCL and Siam Commercial Bank Non-Voting DR, with 9.03%, 7.21% and 6.35% allocation, respectively (as of July 3, 2017). The fund has returned 16.85% in the last one year and 10.4% year to date (as of July 3, 2017). THD currently has a Zacks ETF Rank 2 (Buy) with a Medium risk outlook.


We will now compare the performance of THD to a broader South East Asia ETF, ASEA.


Global X Southeast Asia ETF ASEA


This fund provides broad exposure to the five members of the Association of Southeast Asian Nations, Singapore, Indonesia, Malaysia, Thailand, and the Philippines. It is appropriate for investors looking for a diversified exposure to South East Asia (read: Malaysia's Inflation at 3.9%: ETFs in Focus)


ASEA is less popular with an AUM of $12.1 million and charges a fee of 65 basis points a year. From a geographical perspective, the fund has 30.64% exposure to Singapore, 22.11% to Thailand, 21.77% to Malaysia, 20.24% to Indonesia and 5.23% to Philippines (as of March 31, 2017).  Financials, Telecommunication Services, and Industrials are the top three sectors of the fund, with 45.10%, 16.05% and 7.86% allocation, respectively (as of March 31, 2017). DBS Group Holdings Ltd, Oversea-Chinese Banking Ltd and United Overseas Bank Ltd are the top three holdings of the fund, with 7.19%, 6.83% and 5.66% allocation, respectively (as of July 3, 2017). The fund has returned 10.37% in the last one year and 18.14% year to date (as of July 3, 2017). ASEA currently has a Zacks Rank #3 (Hold) with a Medium risk outlook (read: Philippines Tax Reform Bill Passed: ETFs in Focus).


Below, is a chart comparing the year-to-date performance of the two funds.


 
Source: Yahoo Finance


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ISHRS-MSCI THAI (THD): ETF Research Reports
 
GLBL-X SE ASIA (ASEA): ETF Research Reports
 
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