In Thailand, There’s No Need To Frown As A Market Rally Sets The Mood
thailand stock exchange

It’s not every day you see the headline “Thailand: Why the Land of Smiles is Frowning,” but that’s exactly what an article from Barron’s proclaims. I have written before about the economic and political climate in Thailand. Being that it isn’t bright, people have resorted to buying dolls upon which they lavish their attention in order to escape from the day to day morass. So now it seems the country is adding to its woes by frowning. But should they?

GDP growth in the recent quarter was a healthy 3.2%, which was the highest growth in three years despite a pseudo-civilian government made up of army generals who are completely out of their depth. But digging a little deeper, it looks like the GDP growth comes from higher government spending and strong tourism which has taken the place of private investment and exports.

Foreign retail investors have largely been absent, and surprisingly tourism has remained strong with the January to April numbers ahead by 14.12% from a year ago despite physical attacks on visitors, including women. There is one particular disturbing video of an elderly tourist being beaten while bystanders did nothing to help.

This doesn’t add to investor confidence, I must say.

So maybe there is a case for frowning, but the SET 50, the benchmark index of the Thailand Stock Exchange, has a nice, healthy return of 11% YTD, while the iShares MSCI Thailand Capped ETF (THD) has a YTD return of 16.32%.

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This may put a smile on the faces of the generals, but government spending and even tourism alone cannot boost an economy long term. Even though 3.2% is a good number, the country considerably lags far behind its neighbors. But as they say in investment circles, make hay while the sun shines. With that in mind, I suggest investors take a look at Charoen Pokphand Foods PCL (CPOKY) as they are involved in feed, farm and food, and are up a dramatic 68.37% YTD.

One final note. The previous Prime Minister, Yingluck Shinawatra who, despite being banned from politics for five years by the military, has recently begun making appearances. Wherever she goes, she gets rock star treatment, much to the chagrin of the military who keep postponing elections. Maybe they fear she will be voted back into power. And if that happens, it would definitely help the confidence of foreign investors.

Peter Kohli, CEO of emerging market specialist DMS Funds.

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