Thailand may not have found a place in investment acronyms such as BRICS – (Brazil, Russia, India, China and South Africa) or TIMPs – (Turkey, Indonesia Mexico and the Philippines), but there's no denying that it has been one of the best-performing stock markets over the past decade. Many know Thailand for its beaches, fantastic food and recent political instability, but beyond that it's an export hub with dynamic growth and solid stock market performance. Thailand is an interesting case where the economy has progressed amidst short periods of political stability, almost irrepressibly so. (For related reading, see: This Asian Nation Is Poised For Steady Growth.)
With a cornucopia of natural resources like gas, oil, sugar, coconuts and other agricultural products and minerals, the country has focused on exports. It's the world's largest exporter of rice and also a major shrimp producer. In addition, several foreign automakers have operations in the country. Exports account for approximately 60% of Thailand's GDP. Domestically, huge infrastructure project investments have been stimulating the economy. Thailand's service economy, which includes banking, finance and tourism, accounts for almost half of its GDP and employs about 40% of its citizens.
Political Turmoil – Thai Style
The country has recently witnessed its 19th military coup since 1930 after years of unrest. Political upheaval has taken a toll on the economy, as seen in the contraction of Q1 GDP. Business confidence has been hurt and investment has slowed. On May 20, General Prayuth Chan-ocha launched a coup against a caretaker government. His junta, the The National Council for Peace and Order (NCPO), censored broadcasters, repealed the constitution and arrested Thai cabinet members. He is focused on restoring confidence and keeping the economy on track by cracking down on protestors. (For related reading, see: Should India Be On Investors' Radar?.)
Stocks Shrugging Off the Trouble
Thai stocks seem to have welcomed the prospect of stability. So far in 2014, the SET (Stock Exchange of Thailand) Index has returned about 20%. Thai stocks had hit a low of 855.45 in October 2011 and a high of 1,643.43 in May 2013. The SET started 2014 at about 1,230 after unrest began to boil over in October. It's now trading at about 1,500. The path going forward may be shaky, though, and any dip could be construed as a good time to enter the market at a reasonable valuation.
Some of the good stock picks on the SET come from industrial, healthcare and infrastructure sectors, and high-dividend stocks such as utility companies. Some prominent names are hospitality concern Minor International (MINT), Bumrungrad International Hospital (BH), International Engineering Co. (IEC), Eternal Energy PCL (EE), Eastern Star Real Estate PCL (ESTAR), Bangkok Land (BLAND), Jasmine International PCL (JAS) and Airports of Thailand PCL (AOT).
Buying Thai Stocks
There are a few different ways for investors to invest in Thai stocks.
ETFs & Mutual Funds
The simplest way to invest in a diversified basket of Thai stocks without undergoing currency risk is via exchange-traded funds (ETFs). There is one ETF which concentrates exclusively on Thailand, the iShares MSCI Thailand Capped ETF (THD). It's the most convenient and popular option for a U.S. investor to participate in the Thai economy. The fund has net assets of around $540 million and about 120 holdings. It has more than doubled in value over the past five years (see returns below). Its five-largest holdings currently are from the financial, energy and telecommunication services sector. (For related reading, see: Get Emerging Markets Exposure With This ETF.)
|Total Return (%)||83.95||56.19||-4.23||37.66||-14.99||21.58|
YTD to Aug. 4, 2014 Source: iShares by BlackRock
In addition, investments can be made through a close-ended fund, such as the Thai Fund Inc. Common (TTF). The fund has returned around 29.10% YTD as of Aug. 4 and has an expense ratio of just under 1%.
Investors looking to purchase individual stocks can look at the ADRs traded on the U.S. exchanges. Currently, there are no Thai shares listed on U.S. exchanges. However, many are available in the lightly regulated over-the-counter (OTC) market. Some popular names are Siam Commercial Bank (SMUUY), Advanced Info Service PCL (AVIFY), Bangkok Bank PCL (BKKLY), Airports of Thailand PCL (AIPUY), Asia Fiber Plc. (ASFBY) and Bangkok Life Assurance Ltd. (BKOKY).
Non-Voting Depository Receipts (NVDR)
Thailand restricts foreign ownership of companies to a maximum of 49%, except for banking and finance sector, where the limit is 25%. A better option to trade directly in Thai stocks is through Non-Voting Depository Receipts (NVDRs), as they have no such restrictions. NVDRs entitle foreign shareholders to dividend payments but not voting rights. Some international brokers that can help investors trade Thai stocks include Euro Pacific Capital, EverTrade (EverBank) and NobleTrading.
If investors can stomach the tumult, Thai stocks offer the chance at very healthy performance. The new military government is pressing on reforms and restructuring, which shares of Thai companies have already reacted positively to. The Thai central bank has forecasted a growth rate of 5.5% in 2015 despite differing opinions about the future course of the Thai economy. One thing is sure, though: with its sound financial situation and attractive stock valuations, Thailand still presents a solid case for investment. The best time to buy could be while everyone else remains a bit wary. (For related reading, see: Investing In The ASEAN Region.)