Wells Fargo Beats Estimates

Wells Fargo & Co.'s ( 33.48 -0.10 -0.30%) first quarter 2010 operating earnings per share was 50 cents, topping the Zacks Consensus Estimate of 42 cents. Net income applicable to common stock came in at $2.55 billion or 45 cents per share compared to $3.05 billion or 56 cents in the prior-year quarter. This included after-tax integration expenses of $247 million or 5 cents per share.

During the quarter, Wells Fargo earned $21.4 billion (up 2% year-over-year) of combined revenue, driven primarily by 20% growth in trust and investment fees, 7% growth in insurance fees and 14% growth in processing and other fees. While total mortgage banking remained flat, results for mortgage hedging reduced drastically.

Net interest income for the quarter came in at $11.1 billion, down from $11.5 billion in the prior quarter. While earning assets were down at $1.07 trillion, the decline in core loans, the reduction in non-strategic assets and mortgage-backed securities reduced net interest income growth although net interest margin (NIM) increased to 4.27% from 4.16% year-over-year.

However, these declines were offset by significant growth in non-interest-bearing checking and savings deposits and wider new lending spreads, which are expected to be beneficial for net interest income over the long term.

Total non-interest income came in at $10.3 billion, up 7% year-over-year, primarily due to continued strength in trust and investment fees and insurance revenue. This was partially offset by a decline in mortgage banking, card and deposit service charges. Non-interest expense for the quarter came in at $12.1 billion, down from $12.8 billion in the prior quarter.

Total core deposits of $759.2 billion at Mar 31, 2010 were down from $770.8 billion at Dec 31, 2009. Growth in low-cost savings accounts and consumer checking accounts were offset by decline in mortgage escrow deposits.

Credit quality continued to deteriorate, although improvement was witnessed in net charge-offs that declined to $5.3 billion or 2.71% of average loans compared to $5.4 billion or 2.71% of average loans in the prior quarter. However, nonperforming assets increased to $31.5 billion or 4.00% of total loans compared to $27.64 billion or 3.12% of total loans in the prior quarter. Allowance for credit losses was $25.7 billion at Mar 31, 2010 compared to $25.0 billion at Dec 31, 2009.

Net unrealized gains on securities increased to $7.4 billion from $5.6 billion at Dec 31, 2009. Wells Fargo's total assets as of Mar 31, 2010, were $1.22 trillion and total loans were $781.4 billion.

At Mar 31, 2010, Wells Fargo shareholders equity was $116.1 billion, compared to $111.8 billion at Dec 31, 2009. Capital ratios remained strong with tier I capital and total capital ratios at 10.0% and 13.9%, respectively, compared to 8.3% and 12.3%, respectively, year-over-year. Book value per share improved to $20.79, up from $20.03 in the prior quarter and $16.28 year-over-year.

Business Update

During the reported quarter, the company converted 20 Wachovia banking stores in Arizona, Nevada and Illinois to Wells Fargo. The Wachovia merger integration remained on track and is expected to realize $5 billion of annual merger-related savings upon completion of the integration process in 2011. The company has achieved 70% of this targeted consolidated run-rate savings. Additionally, cumulative integration costs are now expected to be about $5 billion, of which $2 billion is expected to be incurred in 2010.

The company is on track with its loan modification programs and the Wachovia merger. However, the combined entity's large exposure to mortgage/real estate loans and the integration costs associated with the merger will continue to impact its earnings throughout 2010, even though Wells Fargo has not suffered as much from the current mortgage crisis as some of its peers due to its disciplined lending approach.

Although there is lot of uncertainty regarding the commercial sector, especially due to the credit crunch and regulatory and fiscal policy issues in the near term, we believe that Wells Fargo's cross-selling ability, strategic Wachovia cost-integration and a diverse business portfolio along with better-than-expected growth in investment banking will drive long-term growth and add to investors' confidence.

New Zealand Inflation Snapshot

New Zealand released its inflation figures for the March quarter showing an apparent bottoming out of inflation as the economy recovers from a recession of 5 negative GDP growth quarters. As GDP growth has now turned positive, monetary conditions remain loose, and spending is tentatively recovering inflation is likely to at least be under-pinned if not increases slightly.

Into the detail; the main inflation figure was 2% year over year, on a quarterly basis it was up 0.4% since December, below consensus estimates for 0.6% (compares to 0.3% in March 09, and -0.2% in December). Looking through to the "tradeables" and "non-tradeables", annual tradeables inflation increased to 2% from 1.5% in December, while non-tradebles slowed to 2.1% from 2.3%. So basically non-tradeables are slowing their decline and tradeables are continuing to increase.

In terms of the inflation outlook however, it is going to be very much effected by artificial factors such as government policy e.g. ACC levy increases, the emissions trading scheme, and possibly the GST increase when it comes. That said there continues to exist spare capacity in the economy, and the unemployment rate is still 7.3% (compared to a low of 3.5% in December 2007). In addition housing market inflation isn't likely to make a significant contribution in the near term.

Thus the figures are unlikely to cause huge concern to the RBNZ in terms of monetary policy. However there is the risk that the artificial inflation gets passed on into inflationary expectations and expressed as real inflation. The next key data point out of New Zealand will be the (albeit lagging indicator) HLFS [Household Labour Force Survey] on the 29th of April which will provide an update on the employment situation.

Viacom Upgraded To Outperform

We upgrade our recommendation for Viacom Inc. (VIA: 40.09 +0.19 +0.48%) to "Outperform" ahead of its first quarter 2010 financial results. The company will declare results on April 29, before the opening bell. An improving economic outlook, together with Viacom's disciplined management team, highly complementary mix of assets and a healthy financial position continue to make us optimistic about the company's future growth prospects.

 

Viacom is likely to benefit from rising sales of its Paramount movies and an improving advertising market. The stock is currently trading at significantly low multiples with respect to several valuation metrics compared with its peers, which we believe does not adequately reflect the true growth potential of the company. Viacom enjoys strong brand value with respect to several pay-TV channels.

 

Estimate Revisions Trend

 

The overall trend in estimate revisions is favorable. Over the last 30 days, 2 out of 12 analysts covering the stock raised their earnings estimates for the first quarter of 2010 while 1 moved in the opposite direction. For full fiscal 2010, 5 of the 17 analysts covering the stock raised earnings estimates during the last 30 days and no analyst has made any downward revision.

 

Currently the Zacks Consensus Estimate for the first quarter 2010 earnings is 54 cents per share, flat year-over-year. Nevertheless, the current Zacks Consensus Estimate of $2.71 per share for full fiscal 2010 earnings indicates an improvement of 6% year-over-year.

 

Given the upward estimate revisions recently, the Zacks Consensus Estimate has moved up by 8 cents in the last 30 days for the first quarter 2010 and by 5 cents for full fiscal 2010 during the same time frame.

 

With respect to earnings surprises, Viacom's track record is a fairly encouraging one due to the average earnings surprise of 16% in the last four quarters, which means that it has outperformed the Zacks Consensus Estimate by that measure over the last year.

 

The current Zacks Consensus Estimate of 54 cents for the first quarter of 2010 contains a significant upside potential (essentially a proxy for future earning surprises) of 13%. However, with respect to full fiscal 2010, the positive upside potential is a modest 1.5%.

Marathon To Drill Off Indonesia

Houston-based integrated oil major Marathon Oil Corporation  said that it will start drilling operations on the Pasang Kayu oil and gas block in Indonesia in the second quarter of 2010.
 
Pasang Kayu is a potential oil and gas block holding approximately 1 billion barrels of oil equivalent (BOE). Though basically an offshore block, it includes some onshore areas as well. This block ranges from onshore Sulawesi to water depths of up to 7,200 feet and covers 1.2 million acres.
 
Marathon has been fairly active on the upstream front. Its strong inventory of development projects provides for a visible production growth over the coming years. We believe that management's guidance for annual production growth of 7% through 2012 is on the conservative side.
 
For a better management of its upstream portfolio, the company recently sold its stake in the offshore Angola block. Through the divestment, Marathon aims to redeploy capital to explore other growth regions.
 
Apart from Indonesia, the company's upstream activities are located in 11 countries, including the U.S., Canada, the U.K., Norway, Equatorial Guinea, Angola and Russia.
 
Marathon enjoys the diversification benefits afforded by an integrated business model. In terms of company-specific fundamentals, Marathon's upstream asset base, particularly on the international front, is one of the most robust in the group.

United Technologies Tops

United Technologies Corp.  reported first quarter 2010 earnings per share from continuing operations of 98 cents, exceeding the Zacks Consensus Estimate of 90 cents. Revenues of $12.1 billion dipped 1% year over year, reflecting organic decline (4%), mostly offset by favorable foreign currency translation (3%). 
 
New equipment order intake at Otis was up 9% over the year-ago quarter, including a 6% impact from the weaker dollar. Carrier's orders were up 37% (excluding favorable foreign exchange 4%) while Commercial HVAC new equipment orders were down 4% (excluding favorable foreign exchange 6%). Commercial spares book to bill ratios at both Pratt & Whitney's large aero-engine business and Hamilton Sundstrand were above 1.
 
Segment operating margin at 13.6% was 250 basis points higher than prior year. Adjusted for restructuring costs, segment operating margin was 180 basis points higher than that in the previous year. Net income attributable to common shareowners for the quarter increased 20% to $866 million.
 
Cash generation remains strong, driven by continued efficient deployment of working capital and control over capital expenditures. Cash and equivalents stood at $4.8 billion with long-term debt at $10 billion and shareowners' equity at $19.9 billion. Share repurchases in the quarter were $500 million and acquisition spending was $2.1 billion, including GE Security and Clipper Windpower.
 
UTX raised 2010 outlook based on solid execution. It expects 2010 EPS in the range of $4.50 to $4.65, up 9% to 13% on revenues of $54 billion to $55 billion.
 
The company has strong market positions in both aerospace and defense and global infrastructure with a portfolio that includes: Carrier, Otis, Hamilton Sundstrand, Pratt & Whitney, Sikorsky and Fire & Security.
 
UTX will be one of the few companies that can take advantage of strategic M&A once liquidity is restored and a functioning M&A markets re-emerge, which is likely in FY2010.
 
The company is likely to deliver double-digit earnings growth in FY10, given restructuring savings, growth in the highly-profitable aftermarket business and potential improvement in emerging markets construction activity; balancing other late-cycle exposures.
 
The financial performance of the company is dependent on the conditions of the construction and aerospace industries. The company is highly dependent on the U.S. Government's budgetary allocation for defense. Its business may also be impacted by government contracting risks.
 
The company designs, manufactures and services products that incorporate advanced technologies. The introduction of new products and technologies involves risks and the degree or timing of benefits may not be correctly anticipated.
 
United Technologies was incorporated in Delaware in 1934. It provides high technology products and services to the building systems and aerospace industries worldwide. Operating units include businesses with operations throughout the world. Otis, Carrier and UTC Fire & Security (collectively referred to as the commercial businesses) serve customers in the commercial and residential property industries worldwide.
 
We currently have a Neutral recommendation on UTX.

Sales Momentum Ramps Up At Apple As iPhone Powers Earnings

Apple  sells a couple products that it labels with the term 'magic', its multi-touch mouse and new iPad Tablet, but after the company's March quarterly earnings, reported Tuesday after the market close, sales of Apples seem out of a fairy tale.

Analysts Wednesday morning have been pushing over themselves digesting the news and raising price targets further. RBC now joins the highest estimate on the Wall Street with its brand new price target of $350 for the Cupertino electronics company. Several other firms including Piper Jaffray, Oppenheimer and J.P. Morgan pushed through or moved higher than $300 as well. And after dissecting Apple's report there are many compelling reasons why.

First though, what about the quarter? Well let's recap expectations coming in and see just how handily Apple beat them.

Financial Metrics
exp. $12.06 Billion in Revenue <-> $13.5 Billion in Revenue
exp. $2.45/share in Earnings <-> $3.33/share in Earnings ($3.07 Billion in Profits)

Unit Metrics
exp. 2.7 Million Macs <-> 2.94 Million Macs
exp. 6.8 Million iPhones <-> 8.75 Million iPhones
exp. 9.0 Million iPods <-> 10.89 Million iPods

An astounding financial performance by any measure expected by Wall Street professionals. Apple's sales momentum is at an all time high and the product mix the company has to offer is striking the right chord with consumers even during a time when retail spending hasn't fully begun its recovery due to continued high unemployment and the global economy's sputtering into growth.

The real story here is the strength of the iPhone. With the AppStore under its wing the massively popular platform continues to grow in International and Domestic markets. Growth numbers are almost double overseas for Apple as it continues to add more carrier partners and branches into business models that include multiple-carriers in the same country, something it has yet to do in its home market, the United States. The upside surprise on iPhone sales, given its $600 Average Selling Price accounted for the vast majority of the $1.5 Billion in Revenue that Apple over-achieved this quarter.

But just to get back to the numbers, beating the street is one thing, but crushing expectations to this magnitude is quite another. Apple's own guidance is always conservative to the point where one wonders when they will stop giving any at all. For the concluded quarter Apple brass presented the street with ranges of $11 to $11.4 Billion in Revenue and $2.06 to $2.18 in EPS. The street's expectations where
5-9% higher on Revenue and 12-19% higher on EPS, so it's not as if Wall Street is just marching to Apple's expectations drum. The company however, does very well in controlling and managing expectations, it does well in controlling just about everything it can, well expect for the massive leak of the next generation iPhone that was widely reported on the gadget blogs and Apple faithful websites.

The fact that Apple beat the street's already higher estimates by 12% on Revenue and 36% on EPS is the kind of operational performance that makes the company among the most admired in the world, and leads to the collective fawning markets are seeing this morning with Upgrades and Price Target hikes. Of course Long Investors are just as thrilled about the 6% move in the stock to an all time high near $260.

The first 6 months of a new year are typically seen as 'seasonal' by the industry but the only thing seasonal now is the collective scrambling of Wall Street's major analysts in their re-writing of the rules of the road for Apple future estimates and valuations. In the press release, CEO Steve Jobs touted having several more extraordinary products in the pipeline for this year and so far the smart money's on the cats-out-of-the-bag 4th Generation iPhone. The company also has previewed its next iPhone Operating System, improved its high selling MacBook Pro line of laptops and is likely nearing the 1 Million in sales mark for its iPad device after just going on sale mere weeks ago. The upcoming quarter includes the launch of the iPad with 3G networking, the International launch of the iPad and likely invitations for the next iPhone announcement, expected in June.

Apple continues to be a must own Technology stock and one that is running with a Sales and Product tailwind unlike any in its history. But with all the love, who's left to buy it? With quarterly performances like this one, somehow, somewhere, investors will continue to be found.

Disclosure: Author is long AAPL

Stock Market Movers: Fifth Third Bancorp, Citrix Systems, Williams-Sonoma

Williams-Sonoma, Inc. - Unconfirmed takeover rumors swirling about the specialty retailer of home goods fanned the fire under Williams-Sonoma's shares this morning, sending the stock up as much as 8.2% in early morning trading to a new 52-week high of $31.20. Options players looking to benefit from near-term share price appreciation piled into call options in the May contract. Investors picked up 3,600 now in-the-money calls at the May $30 strike for an average premium of $1.25 apiece. Early-morning movers make money if shares of the underlying stock rally above the average breakeven point on the calls at $31.25 ahead of May expiration day. Call-buyers could decide to bank intraday gains by selling the contracts because of the more than 160% increase in premium on the May $30 strike calls, which now tote an asking price of $1.85 each. Buying interest spread to the higher May $35 strike where bullish players purchased more than 4,200 call options for an average premium of $0.19 apiece. Premium on the higher strike call contracts has risen 500% during the session, and late-comers to the feeding frenzy must now shell out $0.34 in premium to purchase the May $35 strike calls. Takeover chatter and increased demand for options on Williams-Sonoma boosted the stock's overall reading of options implied volatility 12.6% to 39.40% as of 11:00 am (ET).

Citrix Systems, Inc.  - Near-term put options are in demand this morning as investors await Citrix Systems' first-quarter earnings report scheduled for release after the closing bell this afternoon. Shares of the provider of virtualization, networking and cloud computing solutions are currently trading 0.15% higher on the day at $49.52, which is a scant $0.06 below the current 52-week high on the stock of $49.58, attained during Tuesday's trading session. Investors hedging against an earnings disappointment picked up 3,800 put options at the May $45 strike for an average premium of $0.60 apiece. Put buyers are perhaps building up relatively cheap downside protection on long underlying stock positions in case Citrix Systems' first-quarter report fails to impress. Alternatively, buying interest in the put options may be outright bearish bets that Citrix shares will decline following earnings. In this scenario, investors long the put options make money if shares plummet more than 10.33% to breach the average breakeven price of $44.40 by May expiration.

Fifth Third Bancorp.  - Shares of the bank holding company rallied 2.5% to a new 52-week high of $15.17 this morning after the firm's CEO and chairman, Kevin Kabat, told shareholders at FITB's annual meeting that the company is "positioned to emerge as one of the best-performing regional banks." Options investors reacted to the positive statement by picking up call options on the stock. More than 3,100 calls were scooped up at the May $16 strike for an average premium of $0.57 per contract. Investors long the calls make money if Fifth Third's shares increase 9.2% over the current price to surpass the effective breakeven point to the upside at $16.57 by May expiration. Options implied volatility on Fifth Third Bancorp is up 11.7% to 46.16% as of 11:25 am (ET).

Prudential Expects Hong Kong, Singapore Listings On May 11 - Update

 Prudential Plc (PRU.L, PUK) Friday said listing of its shares on the main board of the Stock Exchange of Hong Kong Ltd. and on the main board of the Singapore Exchange Securities Trading Ltd. or SGX-ST to commence on May 11, 2010.

According to the company, the listing in Hong Kong Stock Exchange, a dual primary listing alongside its primary listing in the London Stock Exchange, will be effected by way of an introduction. The listing committee of the Hong Kong Stock Exchange considered its application for the Hong Kong Introduction on April 21.

Prudential has also applied to the Singapore Exchange for a secondary listing by way of introduction. The company expects to publish the listing documents for each of the Hong Kong Introduction and the Singapore Introduction on or around May 5.

The company noted that only Prudential shares which are registered on the Hong Kong branch register will be capable of being traded on the Hong Kong Stock Exchange once the Hong Kong Introduction becomes effective.

Further, Prudential said that following the Hong Kong Introduction, shares on Prudential's principal register of members will continue to be capable of being traded on the main market of the London Stock Exchange and American Depositary Receipts representing Prudential's shares will continue to trade on the New York Stock Exchange.

PRU.L is currently trading at 538.5 pence, down 7 pence or 1.28%, on a volume of 3.21 million shares.

PUK closed Thursday's regular trading at $16.97 on the NYSE.

ProShares Launches Inverse, Leveraged Regional Bank ETFs

ProShares continues to be one of the most active ETF issuers of 2010, announcing the launch on Thursday of the first inverse and leveraged ETFs offering exposure to regional banks. The Ultra KBW Regional Banking  will seek daily returns equal to 200% of the return on the KBW Regional Banking Index, while the Short KBW Regional Banking  will seek to provide -100% of the return on the same benchmark. The index to which the new ETFs is linked is currently tracked by the SPDR KBW Regional Banking ETF, the largest and most heavily-traded regional bank ETF. This benchmark is an equal-weighted index that consists of about 50 regional banks.

KRU and KRS join a number of existing leveraged and inverse financial ETFs in the ProShares lineup. The Short Financials , Ultra Financials , and UltraShort Financials are all linked to the more broad-based Dow Jones U.S. Financials Index, a benchmark with a tilt towards big Wall Street banks. "We're pleased to provide investors with ProShares ETFs on the regional banking sector," said Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC, ProShares' investment advisor. "Many investors follow regional banking stocks, and these ETFs provide them with additional tools to act on their views."

Regional Banks In Focus

Although much of the media coverage of the recent financial crisis focused on multinational institutions such as JP Morgan and Citi, regional banks have had their worlds turned upside-down over the last two years as well. The number of bank closures has surged over the last 15 months amidst the credit crunch and general uncertainty in the financial sector. In 2009, 140 banks shut their doors, nearly six times the number that closed the previous year and the highest annual total since 1992 when 181 banks failed. Already this year 50 names have been added to the FDIC's failed bank list, and analysts expect that number to grow throughout the remainder of 2010.

While most sectors got a lift from the strong recovery effort in 2009, regional banks were among the laggards that lost ground on the year; KRE slid more than 20% in 2009. But despite lingering concerns about the health of lending activity, regional bank ETFs are among the best performers of 2010; KRE has gained about 30% on the year, far outpacing the broad Financial SPDR . Moreover, regional banks ETFs have a tendency to be relatively volatile, an appealing characteristic for short-term investors and a good fit for leveraged and inverse products. Since the beginning of 2009 KRE has gained or lost at least 1% in just over six out of ten trading sessions. It has swung by at least 3% once in every four sessions and by at least 5% once in every ten trading days.

Leveraged Growth

Despite potential hurdles resulting from the SEC's recent decision to investigate the use of derivatives by ETFs and mutual funds, the leveraged ETF space has seen tremendous growth in 2010. According to the latest data from the National Stock Exchange, almost $500 million flowed into leveraged ETFs in the first quarter (including inverse leveraged ETFs), while inverse ETFs took in about $230 million.

ProShares and Direxion have been very active in the product development area, already launching more than two dozen new products in 2010 (see news on Direxion's recent filing for more than 30 additional ETFs).

For a look at all the ETFs that have launched this year, see our collection of monthly roundups.

Disclosure: No positions at time of writing.

Daily ETF Roundup: UNG Surges, VGK Slides

Investors had no shortage of news and developments to digest on Thursday. In New York, Obama slammed the financial industry and issued his strongest call yet for a regulatory overhaul. BP revealed that it was days away from announcing a "commercially attractive" oil discovery before a Transocean drilling rig caught fire and sank, while US Airways and United suspended merger talks. Overseas, sovereign Greek debt was downgraded while UK political leaders squared off in the second major debate.

The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through exchange-traded products, added 2.11 points, or 0.2%, to reach a new high for the second straight day. Trading was once again heavy, with aggregate volume of 945 million for the index components.

The United States Natural Gas Fund (UNG:7.58 +0.25 +3.41%) added % on the day after a government report showed that supplies increased by less than expected last week. The weekly Energy Information Administration data release showed that supplies added 73 billion cubic feet for the week ended April 16, below the 78 billion expected. That bucked the trend of recent weeks that has seen a premature end to the winter drawdown season and a surge in supplies. Natural gas futures contracts have now lost more than 25% this year, due to both growing supplies and expectations of bigger additions in the future (see How UNG Lost 20% In March). UNG is always a big mover on Thursday, as the release of the gas storage report generally causes a spike in trading .

One of the big losers on Thursday was the Vanguard European ETF (VGK: 48.80 +0.62 +1.29%), which slid 1.1% after Moody's downgraded Greek debt and put the country's sovereign ratings on review for possible further action. Separately, the European Union sparked a selloff in the euro currency and equities after announcing that its statistics agency said Greece's deficit is worse than originally reported. Despite the relatively small size of the Greek economy, ongoing concerns over the country's financial stability have weighed on European equities for much of 2010.

Disclosure: No positions at time of writing.

Thailand ETF (THD) Continues Slide As Violence Intensifies

Thailand, one of Asia's most promising and fastest-growing markets, has been hit by a wave of violence in recent weeks that threatens to derail an impressive recovery and projections of solid economic growth. The recent scene in Bangkok's business district sounded not like the home to one of Asia's financial hubs but of a war-torn third world nation. "Across the street from Thailand's main financial district, anti-government protesters gathered sharpened bamboo poles while a speaker dressed in black threatened to castrate soldiers deployed nearby if they moved to disperse their protest site," writes Shawn Crispin.

The already volatile situation took a turn for the worse on Thursday, when a series of grenade attacks in Bangkok's central business district injured at least 70 people and killed at least one. The attacks marked a significant escalation in tensions between the armed forces and anti-government protesters. In recent weeks grenades have been fired at government buildings several times by protesters demanding that Prime Minister Abhisit Vejjajiva call new elections. "But this is the first time the attacks have killed or caused widespread injury, and it is the first time grenades have been fired at targets in densely populated business areas crowded with commuters," writes James Hookway.

The government blamed the violence on factions of the Red Shirt protesters, a group supporting fugitive former premier Thaksin Shinawatra, who was ousted in a military coup four years ago. Named after their red attire, the group has refused to compromise in its demand that the current government call new elections. The Red Shirts have clashed several times in recent weeks with the government supporters near Silom Road, Thailand's equivalent to Wall Street.

Thailand ETF In Freefall

The deteriorating conditions in Bangkok have begun to take a toll on the iShares Thailand Index Fund (THD 46.45 +0.33 +0.72%), which measures the performance of the Thai equity market. Since the Red Shirts moved their protests to Bangkok's main shopping district earlier this month, the country's tourism industry has collapsed. Several high-end hotels and shopping malls have closed down, and dozens of foreign governments have advised their citizens to avoid travel to Bangkok. Even the city's recession-resistant sex industry has ground to a halt. "It seems even the randiest of tourists can be dissuaded by coils of barbed wire and the sight of army Humvees parked in front of clubs with names such as Lucifer and Spanky's," writes Mark MacKinnon.

THD has lost about 4% on this month, at one point sliding more than 8% in just over a week. While the tourism industry has already taken a big hit, some analysts worry that a prolonged conflict could doom a still fragile recovery. Thailand's economy began to grow in late 2009 after plunging during the recent economic downturn. Each episode of violence increases the likelihood of a double dip into

 

For more ETF ideas, sign up for our free ETF newsletter.

Disclosure: No positions at time of writing.