By Shanthy Nambiar and Lilian Karunungan
Feb. 19 (Bloomberg) -- Henderson Global Investors Ltd. is loading up on Thailand stocks and Western Asset Management Co. is buying the nation’s bonds on optimism Prime Minister Abhisit Vejjajiva’s two-month-old government will bring stability and avert a recession.
“Thailand has a very good chance to make solid progress over the next few years after a period of conflict and stagnation,” said Andrew Beal, a London-based fund manager at Henderson, which manages about 51.2 billion euros ($64 billion). “I’ve been increasing my exposure in recent months as the political situation has started to become a little clearer.”
Investors are growing more confident after Parliament’s December election of Oxford University-educated Abhisit ended three months of anti-government protests. The 44-year-old premier said yesterday the government aims to invest 2 trillion baht ($56.6 billion) over three to four years, mainly on infrastructure projects.
The benchmark SET index, Asia’s worst performer during the past five years, fell 2.3 percent since Jan. 1 compared with a 9 percent decline in the MSCI Emerging Markets Asia Index. The Thai baht lost 1.8 percent against the dollar, compared with the 14 percent slump for South Korea’s won. Thailand’s government bonds dropped 3.2 percent this year, indexes compiled by HSBC Holdings Plc. show.
Stimulus Plan
Abhisit predicted this week the economy will grow in the second half after contracting 3 percent in the final three months of 2008, the first decline in 38 straight quarters. Finance Minister Korn Chatikavanij, 45, the former president of JPMorgan Chase & Co.’s Thai unit, already obtained lawmakers’ approval for a 117 billion baht ($3.3 billion) stimulus plan.
Thai stocks are the cheapest among emerging markets in Asia. The SET, down about 41 percent since February 2004, trades at 6.8 times its companies’ reported earnings. Shares in China’s benchmark index trade at 17.4 times earnings and 9.1 times in South Korea.
Mark Mobius, who helps oversee about $20 billion of emerging-market assets at San Mateo, California-based Templeton Asset Management Ltd., said he owns stocks that would benefit from the country’s cash handouts to consumers and tax breaks for businesses. The $77 million Templeton Thailand Fund holds PTT Pcl, the largest energy company, Bangkok Bank Pcl, the biggest lender, and Advanced Info Service Pcl, the Bangkok-based mobile- phone operator, according to fund data as of Dec. 31.
‘Looks Attractive’
“We continue to believe the market looks attractive,” Mobius said in an e-mail response to questions. “The economic recovery is sound.”
Bangkok Bank climbed 8.7 percent this year, while Bangkok- based PTT dropped 9.1 percent and Advanced Info fell 3.1 percent.
The country’s contraction at the end of last year was the first since the start of 1999, when Thailand was struggling with the baht devaluation of July 1997 that sent the currency down 45 percent.
Abhisit is calming last year’s political turmoil. He replaced Somchai Wongsawat, the brother-in-law of former Prime Minister Thaksin Shinawatra, who was ousted in a 2006 military coup. Abhisit’s appointment ended a three-month occupation of the prime minister’s offices and the eight-day seizure of Bangkok’s two airports by anti-government protesters.
The spending plans designed by Abhisit, leader of the Democrat Party, were tailored to lure rural voters from the Puea Thai party, supported by Thaksin, who fled to Britain last year to escape corruption charges.
‘Wary Eye’
“We could well add exposure this year but are keeping a wary eye on politics,” said London-based Ian Beattie, head of Asian equities at New Star Institutional Managers Ltd., which had $17.8 billion of assets at the end of December. Beattie said he is “overweight” Thailand, mostly in bank and property stocks.
Abhisit and Korn may face challenges ensuring that the stimulus package isn’t wasted, said Edwin Gutierrez, who runs $4 billion of emerging-market debt at Aberdeen Asset Management in London. The yield on 10-year Thai government notes rose 1.18 percentage points to 3.68 percent since the start of the year.
“We have our doubts about the efficacy of the fiscal stimulus,” Gutierrez said. “A lot of it is somewhat pork-and- barrel oriented to help prop-up the democrats and their fragile coalition.”
Aberdeen has been buying Thailand’s government bonds. Moody’s Investors Service rates Thailand’s foreign-currency debt Baa1, six levels above the Philippines and five higher than Indonesia.
Falling Rates
Western Asset Management’s Rajeev de Mello said he’s buying Thai debt as interest rates fall and the change in government “leads to greater stability.”
The central bank lowered the one-day bond repurchase rate 1.75 percentage points since December to 2 percent. Consumer prices fell for the first time in nine years in January, dropping 0.4 percent from the same month in 2008.
“We have become more positive on Thailand over the past couple of months and are increasing exposure,” said de Mello, head of Asia bonds in Singapore for Western Asset, which oversees $513.3 billion. “Inflation has disappeared as a worry, which is allowing the central bank to cut rates and that’s why we like the bonds.”
To contact the reporter on this story: Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net
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