Thailand is located in the centre of mainland South East Asia wholly within the tropics. It encompasses diverse ecosystems, including the hilly forested areas of the northern frontier, the fertile rice fields of the central plains, the broad plateau of the northeast, and the rugged coasts along the narrow southern peninsula.
Thailand formerly Siam, was primarily known towards the mid part of the 20th century as an agricultural country, however in the 1960s increasing numbers of people started moving to more urban areas such as Bangkok, the capital, and to other prominent cities. Although the greater Bangkok remains the pre-eminent urban centre in the country, there are other sizable cities, such as Chiang Mai in the north, Nakhon Ratchasima (Khorat), Khon Kaen, and Udon Thani in the northeast, Pattaya in the southeast, and Hat Yai in the far south whilst islands such as Phuket have become popular places for tourists and ex-pats over recent years.
According to the World Bank, over the last four decades, Thailand has made remarkable progress in social and economic development, moving from a low-income to an upper-income country in less than a generation. As such, Thailand’s has been a widely cited development success story, with sustained strong growth and impressive poverty reduction.
Thailand’s economy grew at an average annual rate of 7.5% in the boom years of 1960-1996 and 5% during 1999-2005 following the Asian Financial Crisis. This growth created millions of jobs that helped pull millions of people out of poverty. Gains along multiple dimensions of welfare have been impressive: more children are now getting more years of education, and virtually everyone is now covered by health insurance while other forms of social security have expanded.
The economy of Thailand is dependent on exports, which accounts for more than two-thirds of the country’s gross domestic product (GDP). Thailand itself is a newly industrialized country, with a GDP of 16.316 trillion baht (US$505 billion) in 2018, the 8th largest economy of Asia, according to the World Bank. As of 2018, Thailand has an average inflation of 1.06% and an account surplus of 7.5% of the country’s GDP. The Thai economy is expected to post 3.8% growth in 2019. Its currency, the Thai Baht, ranked as the tenth most frequently used world payment currency in 2017.
The industrial and service sectors are the main sectors in the Thai gross domestic product, with the former accounting for 39.2 percent of GDP. Thailand’s agricultural sector produces 8.4 percent of GDP—lower than the trade and logistics and communication sectors, which account for 13.4 percent and 9.8 percent of GDP respectively. The construction and mining sector adds 4.3 percent to the country’s gross domestic product. Other service sectors (including the financial, education, and hotel and restaurant sectors) account for 24.9 percent of the country’s GDP. Telecommunications and trade in services are emerging as centers of industrial expansion and economic competitiveness.
Thailand is the second-largest economy in Southeast Asia, after Indonesia. Its per capita GDP (US$7,273.56) in 2018, however, ranks in the middle of Southeast Asian per capita GDP, after Singapore, Brunei, and Malaysia. In July 2018 Thailand held US$237.5 billion in international reserves, the second largest in Southeast Asia (after Singapore). Its surplus in the current account balance ranks tenth of the world, made US$37.898 billion to the country in 2018 Thailand ranks second in Southeast Asia in external trade volume, after Singapore.
Thailand has also joined the World Bank Group’s Partnership for Market Readiness, a global climate change alliance of more than 30 nations, to reduce greenhouse gas emissions and energy consumption. Thailand also received a grant of $3.6 million from the World Bank’s Forest Carbon Partnership Facility to manage and protect its forest.
If you are looking at investment then the easiest way to invest in Thailand is using exchange-traded funds or ETFs, which offer instant diversification in the U.S. traded security. With nearly $500 million in total net assets, the iShares MSCI Thailand Capped ETF (NYSE: THD) represents the most popular option for U.S.-based investors to gain exposure to the Thai economy.
The fund holds over 120 different securities weighted primarily in financials and energy, with its three largest holdings accounting for more than 20 percent of its portfolio. With an expense ratio of 0.62 percent, the ETF is cheaper than many actively managed mutual funds.
Investors should look at the fund’s equity beta, concentration risks, and other factors before adding it to a portfolio. Historically, international ETFs focused on emerging markets have had higher beta coefficients than domestic ETFs, which means that they may be riskier for investors.
Investors looking for more direct exposure may want to consider purchasing American depository receipts or ADRs, which are U.S.-traded securities representing foreign equities like those in Thailand. While they are not as diversified as ETFs, they represent a way for investors to purchase individual stocks to capitalize on more specific opportunities.
Popular Thailand ADRs include:
- Siam Commercial Bank (SMUUY)
- Advanced Info Service PCL (AVIFY)
- Bangkok Bank (BKKLY)
Investors should keep in mind that ADRs may have less liquidity than their domestically traded counterparts on foreign exchanges. While the many UK and European ADRs have a lot of volume, emerging market ADRs—like Thailand’s ADRs—may have significantly greater liquidity risk. Investors may also have to build their portfolio of ADRs for well-rounded exposure, which can be challenging when dealing with emerging market companies.