Thailand (THA) : A powerfull bearish gap

The THA ETF (Lyxor UCITS) created in 07/2011 and which is listed in Euro on Euronext replicates the SET 50 Net Total Return index, denominated in Thai Baht (THB). The SET 50 Index is the benchmark of the Thai Stock Exchange consisting of the top 50 values ​​in terms of float and liquidity-adjusted market capitalization.

ETF fees are 0.45% while AUM amount to € 41m. The replication method is indirect (via a swap) and there is a dividend capitalization policy.

Alternative ETFs: THD (iShares in USD)

 

Latest developments

The performance of THA in 2017 was + 16.5%, after an increase of + 27.1% in 2016, which reflects an economic growth of about 3.6% in 2017.

In 2018 the index is flat while the Baht is down sharply against the USD, implying that the economy could suffer from capital outflows and a possible trade war that could affect the country's major trading partners, namely China, the USA and Mexico.

The Thai economy also remains dependent on the price of oil and raw materials, and should therefore benefit from the strong momentum especially for oil and cotton. For 2018 growth is expected to reach around 3.7%, in a context of strong global growth and without taking into account a possible slowdown in China. The strength of the USD and US 10-year interest rates, which have been rising sharply since the beginning of the year, are a drag to the Thai economy, through the fall of its currency which could end up turn into inflation.

Moreover, Thailand is a country with a very open economy and highly dependent on international trade, so very sensitive to the theme of protectionism and trade wars.

 

Index & components

THA replicates a rather deep index but of which almost 2/3 of the capitalization depends on 4 sectors: energy (23.1%), financials (17.1%) followed by industry (12.3%) and basic materials (10.7%).

The top 10 stocks, where there are many industrial stocks and some banks account for almost half (48%) of the index's capitalization.

This tracker naturally embeds the risk related to the baht, more volatile than the reference currencies. Thailand is the second largest economy in Southeast Asia (after Indonesia), with a GDP of nearly $ 400 billion for 68 million people - a population comparable to France -. Despite the many shocks collected (political crises, economic, natural disasters) the Thai economy is showing great resilience. Growth increased by around 3.2% in 2016.

Thailand is an emerging economy, which is highly dependent on exports, accounting for more than two-thirds of GDP. Thailand, an active member of ASEAN is very open to international trade, its main customers are the United States, China and Japan. Mainly exported goods are electrical and electronic products, machinery, vehicles, rubber and plastics. Its main suppliers are China, Japan, the United States, Malaysia and the United Arab Emirates.

The Thai economy is heavily based on agriculture, which contributes about 11% of GDP and employs more than 40% of the labor force. The country is one of the main producers and exporters of rice, the other crops being rubber, sugar, maize, jute, cotton and tobacco. Fishing is also an important activity, with Thailand being a major exporter of farmed shrimp. The manufacturing sector accounts for just over 37% of GDP and is well diversified. The main Thai industries are the electronics, steel and automotive industries.

Thailand is an assembly center of international car brands. Electrical appliances and components, computers, cement production, furniture and plastic products are also important sectors. The tertiary sector, including tourism and financial services, contributes over 53% of GDP and employs almost 40% of the population. After nearly three consecutive years of decline, Thailand's exports have returned to positive growth in 2016, which was confirmed in 2017.

The factors contributing to Thailand's export growth are rising world prices. fuels and the devaluation of the Thai baht which now stands around 32.35 baht per US dollar. However, measures taken by the US administration could result in trade restrictions on goods from China and Mexico and indirectly affect Thailand, with China being one of the country's major trading partners.