Latest / The Emerging Markets Podcast with Fexingo: Developing Economies, Growth, and Investment / Why Thailand Is the Emerging Market Outperformer in 2026
Transcript
- Lucas: If you scroll through the big emerging market ETFs this week, you see a lot of red. Brazil's down four percent. India's off nearly three. But then there's this bright green outlier: Thailand. The iShares MSCI Thailand ETF, ticker E-W-T, is up more than four percent in the last five days. That's the best performance of any major EM country fund right now. Luna: That's striking when you think about how much of the EM narrative lately has been about China's struggles and India's slowdown. Thailand doesn't usually lead the pack. Lucas: Right. And I think that's exactly why this is interesting. Thailand has been a bit of a wallflower in emerging markets for the past decade. You had the military coup in 2014, then a slow recovery, then COVID absolutely crushed its tourism-dependent economy. But now, in 2026, a couple of things are lining up. Luna: Let's start with tourism. That's the most obvious driver, right? pre covid, Thailand welcomed nearly 40 million international visitors a year. That number collapsed to almost zero in 2020. Lucas: Exactly. And it's been a slow climb back. But as of early 2026, arrivals are running at about 80 percent of pre-pandemic levels. That's not a full recovery, but the momentum is strong. Chinese tourists, in particular, are returning. And that matters because Chinese visitors were about a quarter of all arrivals pre covid. Luna: So the China reopening story actually benefits Thailand more than most. Not just through tourism, but through trade too. Lucas: That's the second piece. Thailand is a major exporter of electronics, automotive parts, and agricultural goods. And its biggest trading partner is China. So as the Chinese economy stabilizes — and you see that in the latest PMI data — demand for Thai exports picks up. The Bank of Thailand actually revised its GDP forecast up last month, to three point six percent for 2026. Luna: Three point six percent isn't blowout growth by EM standards. Vietnam's growing at six plus. But it's steady. And steady looks pretty good when India's industrial output is missing estimates and Brazil is dealing with fiscal headaches. Lucas: Yeah, exactly. I think that's the real story here: relative stability. Thailand's current government, led by Prime Minister Paetongtarn Shinawatra, has actually been fairly market-friendly. They've kept fiscal policy disciplined, inflation is under control at around 1.5 percent, and the central bank has held rates steady. That's a stark contrast to, say, Turkey or even Brazil. Luna: And the currency reflects that. The Thai baht has strengthened about three percent against the dollar this year. That's unusual for an emerging market currency in a strong-dollar environment. Most EM currencies are under pressure. Lucas: Right. And a stronger baht actually helps attract portfolio flows. Foreign investors have been net buyers of Thai equities for five consecutive weeks now. That's the longest streak since 2022. So you've got tourism recovering, exports ticking up, a stable policy backdrop, and foreign money coming in. That's a pretty neat package. Luna: It also helps that Thailand isn't in the headlines for the wrong reasons. You don't hear about political chaos or debt crises. That's a kind of quiet confidence. Lucas: Exactly. And I think that's a really useful way to think about emerging markets more broadly. The countries that get the most attention — China, India, Brazil — aren't always the ones delivering the best returns in any given year. Sometimes it's the quieter markets like Thailand, or Malaysia, or even Poland. Luna: Speaking of which, if this kind of conversation helps you make sense of the EM landscape, the way these episodes stay ad-free and independent is through listener support. If you found today useful, buy me a coffee dot com slash fexingo. That's buy me a coffee dot com slash fexingo. Keeps the lights on without any sponsors. Lucas: Yeah, and we really appreciate that. So back to Thailand — one risk I want to flag is that the rally might be getting a little crowded. The E-W-T ETF is up almost 15 percent year to date. That's a lot. Valuations aren't cheap anymore. The price to earnings ratio on the Thai index is around 18 times, which is above its five-year average. Luna: So is this a momentum play, or is there still fundamental upside? Lucas: I think the fundamental case rests on whether tourism fully recovers. If Chinese arrivals get back to pre covid levels — and we're not there yet — that alone could add another half a point to GDP growth. Plus, Thailand is seeing some interesting investment in data centers and electric vehicle manufacturing. Chinese EV makers like BYD are setting up factories in Thailand as a base for Southeast Asia. Luna: That's the longer-term story. But for the near term, the big question is whether the global risk appetite holds. If the US dollar strengthens again, or if there's a shock, EM flows can reverse fast. Lucas: Absolutely. And that's the thing about emerging markets — you can have a great six months and then a terrible two weeks. But I think Thailand in 2026 is a good example of why you can't just buy the whole asset class. You have to be selective. And right now, Thailand is earning its place in that selective basket. Luna: So if someone wanted to look at this more closely, what should they watch? Lucas: I'd watch the weekly tourism arrival numbers — the Ministry of Tourism publishes them every Monday. And the trade data, which comes out monthly. If exports to China keep accelerating, that's a good sign. Also, keep an eye on the baht. If it starts weakening, that could signal a shift in sentiment. Luna: Good concrete indicators. I think a lot of listeners are looking for ways to track EMs beyond just the index level. Lucas: Yeah. And that's the kind of thing we'll keep doing on this show. Next time, we might look at another overlooked market — maybe Egypt or the Philippines. But for today, Thailand is the standout. Luna: And a reminder that in emerging markets, the best story isn't always the loudest one.