Prior to the recent rally, only a handful of global stock markets were trading in positive territory. You now hold three of them in your current Global Bull Market Alert portfolio — the iShares MSCI Chile Investable Mkt Idx (ECH), the Global X/InterBolsa FTSE Colombia 20 ETF (GXG) and the Market Vectors Indonesia ETF (IDX). All three hit record highs this week. In contrast, defensive positions like your bet on gold through the SPDR Gold Shares (GLD) have fared poorly, and you hit your stop of $115 yesterday, exiting at a loss.
This special Global Bull Market Alert pick adds to this list of top-performing markets of 2010 with the iShares MSCI Thailand Investable Market Index Fund (THD). A top performer since January, Thailand has been an exceptionally strong performer since the start of the summer. Just yesterday, Thai stocks hit a 26-month high — a far better performance than almost any other stock market in the world. And here’s why I think the Thai market’s strong performance is set to continue.
Since its economy was crushed in the Asian currency crisis of 1998, Thailand has staged an impressive comeback, transforming itself into a magnet for foreign investment. U.S. giants Ford and General Motors recently announced plans to expand their production facilities there. Japan’s Mitsubishi Motors also has assembly plants in Thailand, and Toyota is making the country the company’s export base for all of Asia and the Middle East.
Thailand is positioning itself as a leading destination for multinationals that are abandoning China. Many European, U.S. and Japanese companies are moving factories to Thailand from China to avoid labor strikes, higher prices, corruption and a generally unwelcome atmosphere of the Beijing government. Thailand is also simply a better deal. The annual salary for a Chinese Honda worker can run as high as $4,500 to $5,500 in China. Salaries are about one-third lower in Thailand.
Thailand’s economy is also on fire. Thai exports rose a stunning 46.3% in June, compared with the same month a year ago. That was not only the fastest pace since the early 1990s, but also eclipsed records set before the global financial crisis. No wonder the Bank of Thailand recently raised its 2010 economic growth forecast to 5.8%. The International Monetary Fund is far more optimistic. It expects the Thai economy to grow at a China-like 8%.
Thailand got some bad press earlier this year, as political demonstrations turned violent in the heart of downtown Bangkok. That said, the bloody political protests have died down and, according to the nation’s central bank, the overall economic impact was minimal.
So, buy the iShares MSCI Thailand Investable Market Index Fund (THD) at market today, and set your initial stop at $45. There are no options on this one.
iShares MSCI Chile Investable Mkt Idx (ECH) hit a record high of $63.83 yesterday. With risk appetite returning to global markets, ECH is a BUY.
iShares FTSE/Xinhua China 25 Index (FXI) continues to be the worst-performing market in the world after Greece in 2010. When global markets wobble, this will fall hard and fast. But with global markets rallying, this bet against China is a HOLD.
Global X/InterBolsa FTSE Colombia 20 ETF (GXG) rose to a record $38.72 yesterday. With the heavily weighted financial sector on fire, GXG is a BUY.
Market Vectors Indonesia ETF (IDX) hit a record high of $77.38 on Monday. As the strongest-performing market in Asia this year, IDX remains a BUY.