Thai Stocks Have ‘Upside’ Amid Crisis, Aberdeen’s Young Says

The Stock Exchange of Thailand
Pedestrians walk past the Stock Exchange of Thailand (SET) in Bangkok, on Dec. 23, 2009. Photographer: Jeremy Horner/Bloomberg

Thailand’s stocks are relatively cheap with potential to climb as the political crisis that prompted the biggest selloff in five months will probably be resolved peacefully, the top Thai fund manager said.

“Typically, the Thais compromise,” Hugh Young, Singapore- based managing director of Aberdeen Asset Management Asia, which oversees $25 billion in the region and has been running a dedicated Thai fund for more than two decades, said in an interview. “The stocks look cheap, there’s upside there.”

The Aberdeen New Thai Investment Trust Plc has advanced 118 percent in a year, the most among 235 equity funds focused on Thailand, according to Bloomberg data. Siam Cement Pcl, the third-largest publicly traded company, accounts for 6.6 percent of the fund and has more than doubled in 12 months. The stock has been upgraded this month by brokerages including BofA-Merrill Lynch, JPMorgan Chase & Co. and Credit Suisse Group AG.

The benchmark SET Index dropped the most in six months on April 12, before the three-day holiday, after 23 people died in the deadliest political violence in 18 years. Protesters who fought security forces demanded that Prime Minister Abhisit Vejjajiva quit and call immediate elections.

Thai equities are trading at 11.3 times estimated earnings, the lowest in Asia after Pakistan and South Korea, data compiled by Bloomberg show.

‘Buy’ Opportunity

“We see a correction presenting a ‘buy’ opportunity,” Citigroup Inc. analyst Suchart Techaposai said in a note dated April 14, maintaining a SET target of 915. That’s 20 percent higher than the close on April 12, and the brokerage recommended investors “overweight” banks, energy, property and building material stocks. Top selections include Siam Cement, PTT Exploration & Production Pcl and Bangkok Bank Pcl.

“This is not excessive in our view, given that it is still a discount” from Citigroup’s target for the MSCI Asia ex-Japan index, Suchart said. “Strong growth this year is based on export and private consumption, and not investment, which is sensitive to political events.”

Overseas investors sold a net 2.1 billion baht ($65 million) of Thai shares on April 12, the most since Nov. 23, according to the Stock Exchange of Thailand’s data. They withdrew a net 5.2 billion baht over the last three trading sessions, halting 31 straight days of net purchases, the longest stretch since February 2005.

‘Sit on Our Hands’

Aberdeen, which has about 4 percent of its regional funds invested in Thailand, is maintaining its holdings, Young said.

“Corporate earnings have rebounded in line with everything that’s happened in the region,” he said yesterday in the Singapore bureau. “We just sit on our hands. We’ve been through this before in Sri Lanka and places like that. You have these wobbles.”

Supporters of former premier Thaksin Shinawatra have held street protests since the middle of March. The standoff escalated on April 3 when demonstrators blocked roads in the capital’s main commercial district.

Abhisit declared a state of emergency in the capital last week after a month of mostly peaceful protests seeking his ouster. The clashes were the deadliest since 1992, when more than 40 demonstrators were killed during a four-day crackdown by security forces.


“Following the weekend’s clashes, public sentiment has not yet turned totally against the Abhisit government and the army,” Citigroup’s Suchart said. “A truce is in place, all sides are back at the negotiation table, and a political solution should be reached soon.”

Soldiers used rubber bullets and tear gas to disperse crowds, and protesters fought back with guns and bombs, government spokesman Panitan Wattanayagorn said. Troops were later ordered back to their bases. South Korea, Italy and Russia were among nations that cautioned their citizens about traveling to Bangkok.

The clashes are undermining confidence and growth in Thailand, Finance Minister Korn Chatikavanij said in an interview with Bloomberg Television yesterday from Bangkok. Tourism may be “decimated,” and economic growth may be shaved by one or two percentage points, even without taking into account the impact on consumer confidence, Korn said.

Thai Airways International Pcl, the country’s largest carrier, slid 14 percent to 24.2 baht on April 12, the steepest decline since September 2001. Airports of Thailand Pcl, the nation’s biggest airfield operator, dropped 4.1 percent to 35.5 baht, while Minor International Pcl, which owns the Marriott and Four Seasons hotels in Bangkok, lost 8.7 percent to 9.5 baht.

Investors had earlier shrugged off concerns of the protest, driving the SET stocks index 10 percent higher in the month prior to the slump on April 12, the best-performing Asian stock market after Mongolia.

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