Time to Buy Thailand & Philippines ETFs?

RELATED QUOTES

SymbolPriceChange
THD75.73-0.28
EPHE35.61-0.49
EEM41.34-0.30

 

Thailand and Philippines stock markets saw the year’s worst downfall earlier this week. The immediate Cyprus bailout requirement, which has flared up euro zone crisis again, was responsible for the fall in these two Southeast Asian nations.

Thailand’s SET Index dropped 1.8% yesterday – the biggest three-day fall since May 2012. This weak performance also pushed the country’s ETF lower. The iShares MSCI Thailand Investable Market Index ETF (THD), which tracks the MSCI Thailand Investable Market Index, lost 0.80%.

The fund holds 91 securities in its basket that are somewhat concentrated from both sector and individual security perspectives. Siam Commercial Bank, PTT PCL and Advanced Information Service are the top three holdings. Siam Commercial Bank, which was the top loser yesterday, lost 2.7% and it alone makes up for 7.7% of the fund’s assets.

Banks comprise roughly two-fifths of the total assets while energy companies make up another one-fifth. This product has amassed $1.1 billion in its asset base while charging 60 bps in fees per year from investors. (read: Top Ranked Thailand ETF in Focus)

The Philippine Stock Exchange Index tumbled 0.8%, marking the eight consecutive session of decline. It lost 6.4% from the all-time high of March 11. As such, the iShares MSCI Philippines Investable Market Index Fund (EPHE) fell 2.8% in a single trading session. The fund tracks the MSCI Philippines Investable Market Index and holds 42 stocks in its basket.

The lackluster performance of the fund was due to its heavy exposure (42.4%) to the financial sector. Industrials take the second position with 25.4% share while the other sectors make a nice mix in the portfolio.  Further, the product is concentrated in the top 10 holdings with more than 59% of investment .(read: Philippines ETF: Can the Run Continue?)

Among individual holdings, SM Investments Corp, Ayala Land and SM Prime Holdings occupy the top three positions with 11.2%, 8.1% and 6.4%, respectively, of EPHE’s assets. The fund has managed assets worth $388.3 million so far this year while charging 60 bps in annual fees.

Investors should note that both ETFs were on the list of the top performing funds in the emerging market ETFs. THD has added 12.3% in the year-to-date period while EPHE gained 10.1% in the same time frame. (see more in the Zacks ETF Center)

Currently, both ETFs have a Zacks ETF Rank of 1 or ‘Strong Buy’, suggesting that the products are expected to outperform the broad markets over the long term. Given the solid macro views and strong economic growth, Thailand and Philippines appear well poised for future growth.

As a result, investors could treat this temporary sell-off as an attractive entry point. 

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