Over the past four decades Thailand has made remarkable progress in social and economic development, moving from a low to upper income country in less than a generation. And this has translated into strong growth for Thai equities. Over 20 years to 29 May 2020, the Stock Exchange of Thailand made a total return of 1,270 per cent or14 per cent a year. By contrast, over same period the FTSE All-Share index made a total return of 124 per cent, or 4 per cent a year.
But Thailand’s economy has been hit by the coronavirus outbreak. In particular, travel curbs on foreign arrivals and the closure of pubs and sports stadiums will have a negative effect on the economy and corporate earnings in the near term.
Orsen Karnburisudthi, manager of Aberdeen New Thai Investment Trust (ANW), says that the country’s fundamentals prior to the Covid-19 outbreak were robust. He adds: “Thailand is home to some outstanding businesses, which provide goods and services both domestically and overseas. When the economy does recover, key beneficiaries will include exporters, consumer companies and services sectors, such as healthcare and, eventually, tourism. Many of Thailand’s companies have a wider regional exposure, trading increasingly with, and investing in, nearby fast-growing countries such as Cambodia, Laos, Myanmar and Vietnam. Thailand’s position as a regional hub gives sufficient diversity, but often less vulnerability to global dislocations.”
Among New Thai’s holdings are Osotspa, which makes beverages and personal care products, and soft drinks producer Haad Thip.
However, Mr Karnburisudthi thinks the recent disruption to economic activity caused by the Covid-19 pandemic will result in a sharp slowdown in economic growth: “This is the key short-to-mid-term risk for Thailand and its neighbours.”
Brook Tellwright, co-manager of Waverton Southeast Asian Fund, says that because the Thai stock market has risen very strongly he believes it is fairly expensive. He adds that while Southeast Asia as a whole should deliver strong growth over the long term he is not sure that Thailand is the most attractive market within it at the moment. ‘It’s a high starting point if you’re investing,” he explains.
However, the Thai government has initiated a stimulus package amounting to 1.9 trillion baht or almost 11 per cent of Thailand’s gross domestic product. This “is a major driver covering cash handouts, social rehabilitation and a stabilisation fund for the corporate bond market,” says Mr Karnburisudthi.
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