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A Small Asian Commodity Play Your Broker Won't Mention

By Ian Davis
Monday, July 7, 2008

It's good to be a commodity exporter these days.
 
Since 2003, the big "ABC" commodity producers – Australia, Brazil, and Canada – have climbed 68%, 338%, and 106%, respectively. These three countries all have huge supplies of metals, energy, and agriculture.
 
Today, though, I'm going to talk about another beneficiary of the commodity boom... one you've probably never considered a commodity play: Thailand.
 
For starters, Thailand has large reserves of iron ore and rubber. China's construction and automobile industry have driven the price of these two commodities through the roof in the past several years.
 
Thailand is also the world's largest exporter of rice, responsible for 26% of all rice exports. Rice has tripled in price in the last four years. It climbed 175% in the first five months of 2008.
 
This is part of the reason Thai stocks have done so well lately. The Datastream Thailand Index has climbed 23.7% in the last year.
 
However, despite their recent gains, Thai stocks are still well below the all-time high they reached in 1996, more than 12 years ago.
 
Out of all the countries effected by the 1997 Asian Financial Crisis, Thailand is the only one that hasn't fully recovered. Take a look:
 
 
 
As you can see, Thai stocks soared in the '80s and early '90s. At the time, Thailand was a "tiger" economy, growing by more than 9% per year. However, by 1997, the economy became overheated, and the Asian Financial Crisis began...
 
So, is Thailand a good investment today?
 
From a trend standpoint, Thailand looks great. Thai stocks have steadily appreciated since 2002.
 
Thailand is also moderately free. It's the 54th freest country in the world (out of 157), according to the Heritage Foundation's Index of economic freedom. This is a measure of how much government control businesses face in a country.
 
However, Thailand has had some trouble lately...
 
Two and a half years ago, Thailand's president was ousted while addressing the U.N. in New York. Coups are never good for business, although this one was bloodless and generally supported by the people.
 
However, the new military-imposed government started off on the wrong foot. It installed controls on foreign capital, which immediately sent the Thai stock market into a tailspin. Fortunately, these restrictions were partially lifted, and the stock market has since recovered (aided by the commodity boom).
 
Finally, Thailand is relatively cheap. Its price-to-earnings ratio (P/E) is 11.4, 12.3% below its median level of 13 (the U.S. market carries a P/E of about 21).
 
You'll need specialized knowledge (and a specialized broker) if you want to buy individual Thai stocks. There are also three Thai ETFs. You can investigate them at www.etfconnect.com. Type "Thai" or "Thailand" into the search box on the top right-hand corner of the web page.
 
Asia's phenomenal growth will eventually produce a new bull market in the region's stocks. If you're looking for a unique way to play it, keep this commodity producer on your radar.
 
Good investing,
 
Ian Davis




Market Notes
Telecom giant AT&T hits a 52-week low... down 23% from its 2007 peak.
 
$146 oil pinches refiners' margins... Tesoro, Holly, Frontier Oil, Alon, and Valero make new lows.
 
Nobody's trading... stock exchanges Nasdaq, InterContinental Exchange, CME Group, and NYSE Euronext at lows.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
Change
52-Wk
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%

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