iShares MSCI Thailand ETF

THD

Market cap $302M

iShares MSCI Thailand ETF offers broad exposure to Thailand's stock market, but has a history of poor performance. Despite ongoing political volatility, THD's valuation appears attractive for contrarian investors, with recent market dips becoming shallower. Uncertainty around key economic policies is receding, with clearer paths emerging for initiatives like the digital wallet and visa reforms.

Countries around the world have scrambled to cope with the fallout of the energy shock from the Iran war. This comes as the Iran war stretches into its third week.

ASEAN's dividend opportunity is underpinned by diverse and evolving market characteristics. The FTSE ASEAN Index, which captures the large- and mid-cap companies listed in the five ASEAN markets - Singapore, Malaysia, Indonesia, Thailand and Philippines - has delivered a 10-year average dividend yield of 3.57%. Across multiple market cycles over the past 25 years, a back-test of the FTSE ASEAN ex REITs Target Dividend Index's strategy showed notable resilience during market downturns and lower overall volatility compared with the broader ASEAN market.

iShares MSCI Thailand ETF has delivered a 17% return since August 2024, driven by macro improvements. Thailand's 2026 GDP growth is projected at 2%, lagging the regional peer average of over 4%.

I assign iShares MSCI Thailand ETF (THD) a sell rating due to Thailand's demographic and economic headwinds. Thailand faces a rapidly aging, shrinking population and declining tourism, threatening GDP growth and consumption.

The iShares MSCI Thailand ETF offers broad exposure to Thai equities, including small-caps, and is not overly exposed to any one sector. THD's largest holding, Delta Electronics (DLEGF), which accounts for 15% of the portfolio, could benefit from the ongoing spurt in AI computing workloads, but its valuations are extremely concerning. Thailand's macroeconomic outlook is weak, with sluggish GDP and consumer spending, while its long-term earnings growth profile is less attractive than other Asian EMs.

THD has underperformed the other Asian ETFs, with limited diversification, due to heavy concentration in a few stocks. The Thai baht's strength provided some backwind for THD, but this may reverse in the near future. Thailand's economy faces headwinds from declining tourism, especially from China, weak private consumption, and negative inflation.

Among APAC equity markets, Australia has a higher beta to oil prices while India, Indonesia and Thailand have lower betas. Domestic political uncertainties have been one main reason for the decoupling trend seen in Indonesia and Thailand.

THD has performed very poorly over the past decade, offering a -7% return with dividends reinvested. The ETF is heavily exposed to slower growing sectors and firms, with just a 1% allocation towards technology. Many of the fund's holdings suffer from risks associated with government or controlling family influence.

The S&P 500 (SPY) rallied 5.7% this week but remains down 5.4% since the close on "Liberation Day" on 4/2. The average country ETF is down 4% since 4/2, so SPY has underperformed that since Trump's Rose Garden announcement. Asian countries like Vietnam (VNAM) and Thailand (THD) had some of the harshest reciprocal tariffs announced on Liberation Day, and since the pause, these two have bounced back 16.7% and 14.1%.