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Thailand ETF: A Coronavirus Casualty

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By now we know that the impact of coronavirus is not specific to China. With China accounting for about 16% share of the world economy, the extent of financial loss on a global level can be imagined.

Some Asian countries like Thailand, Singapore and Japan have been suffering the most. Recently, Thailand slashed its growth outlook for this year as its tourism-dependent economy took a hit from the spread of coronavirus. There are about 35 confirmed cases in Thailand, the third-highest number after China.

Thailand expects economic growth in the range of 1.5-2.5% this year, down from a previous Thai projection of 2.7-3.7%, per the National Economic and Social Development Council. GDP grew 2.4% in 2019, the slowest in five years and also sharply down from the upwardly revised 4.2% growth registered in the previous year.

Thailand cut its outlook for exports, the main growth driver, to 1.4% from a 2.3% uptick projected in November. The first-quarter growth is expected below 1%. The Tourism Authority of Thailand expects foreign visitor count to decline by 5 million this year and the loss in revenue could be around 500 billion baht. It sees a drop of two million visitors from China, which accounted for about 28% of Thailand's tourism revenues last year (read: Currency ETF Winners & Losers From Coronavirus Outbreak).

Notably, GDP rose 1.6% year over year in the fourth quarter, lower than the 1.9% median estimate in a Bloomberg survey and down from a revised 2.6% in the third quarter. Drought and a relatively strong currency have also been weighing on the economy.

Should You Buy the Dip in the ETF?

On a positive note, GDP should improve in the second quarter, after being battered in the first quarter. Many analysts expect the Bank of Thailand to cut rates to record lows for boosting growth this year. Notably, the Bank of Thailand lowered its policy rate by 25 bps to 1% in its February meeting held earlier in the month (read: Is Coronavirus an "Opportunity" for Emerging Markets ETFs?).

iShares MSCI Thailand ETF (THD - Free Report) looks to track the MSCI Thailand IMI 25/50 Index, which measures equity market performance in Thailand. The fund holds 125 stocks in the fund. It charges 59 bps in fees. The fund has double-digit weights in Energy, Financials, Consumer Staples and Industrials sectors. THD has lost 1.4% in the past five days (as of Feb 19, 2020) and is off 10.3% so far this year (as of Feb 18, 2020).

If the Bank of Thailand cuts rates further, policy easing could drive stocks. The fund has a Zacks Rank #2 (Buy) (read: Safe-Haven ETFs Rally as Coronavirus Cases Surge).

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