News / Economy

Tensions Put Thailand on Sidelines of ASEAN Investment Plans

Anti-government protesters hold Thai baht banknotes to donate to protest leader Suthep Thaugsuban (unseen) as he leads a march through central Bangkok, March 28, 2014.
Anti-government protesters hold Thai baht banknotes to donate to protest leader Suthep Thaugsuban (unseen) as he leads a march through central Bangkok, March 28, 2014.
Reuters
Continuing political uncertainty, derailed infrastructure plans and sliding domestic demand are making big Thai companies look more keenly at investing elsewhere in the neighborhood rather than in Southeast Asia's second-largest economy.
 
At the Reuters ASEAN Summit, two of the country's largest companies, Siam Cement PCL and Charoen Pokphand (CP) Foods PCL, outlined growth strategies that are now firmly focused outside their home country.
 
“We are investing more in ASEAN and less in Thailand, where we focus on high value-added products,” Siam Cement chief executive Kan Trakulhoon said during an interview in Reuters Bangkok office on Thursday.
 
CP Foods told the summit how it is targeting 75 percent of company revenue to come their foreign operations within the next five years, up from 65 percent currently.
 
“Growth in emerging countries will surpass the domestic market,” said chief executive Adirek Sripratak, noting his company plans to expand in nearby Philippines and Vietnam.
 
On Friday, there was another piece of gloomy data on the Thai economy, as factory output fell for the 11th straight month in February, by 4.4 percent compared with a Reuters poll forecast for a 3.5 percent drop.
 
For months, the outlook for growth has worsened even though officials hope exports - which account for about 60 percent of the economy - will rise and lift the economy this year.
 
The central bank recently cut its 2014 economic growth forecast to 2.7 percent, compared with 4.8 pct last October, just before anti-government protesters took to the streets to seek the removal of Prime Minister Yingluck Shinawatra.
 
A decision earlier this month by the Constitutional Court to annul the result of the Feb. 2 general election has plunged the country into political limbo, raising fears that the economy will struggle to pick up speed anytime soon.
 
“If political crisis is prolonged, Thai cement demand is likely to be negative,” said Siam Cement's Kan, who runs the country's largest industrial conglomerate.
 
Pricey political "overhang"
 
That political uncertainty has been weighing on foreigners who invest in Thai securities. A March 14 research note from Nomura showed foreigners have been net sellers of Thai equities this year, with net sales of $837 million. Indonesia and Philippines by contrast have seen net purchases by foreigners of $1.01 billion and $171 million, respectively, so far in 2014.
 
“If I look across the region, I would say there are better prospects than Thailand right now until we get some sort of resolution to the political overhang that remains there,” said Andrew Swan, head of Asian equities at the world's biggest money manager BlackRock Inc, said in a summit interview in Hong Kong on Wednesday.
 
Political unrest could also threaten the country's credit rating, which all three major rating agencies currently have on a stable rating of BBB+/Baa1, in the investment grade category.
 
“If ongoing political uncertainty continues to drag, the country might be on a watch list,” Ng Kheng Siang, head of Asia Pacific fixed income at State Street Global Advisors, which has just over $2 trillion in assets under management, told the summit on Tuesday.
 
Some corporates in Southeast Asia are generally overlooking Thailand in favor of the faster-growing markets of Myanmar and Cambodia, as well as further afield in Asia.
 
Singapore's Oversea-Chinese Banking Corp., Southeast Asia's second largest lender, said that despite a fall in valuations in Thailand, it has little appetite to make any acquisitions there at present.
 
“Culturally the Greater China market appeals to us a bit more than the Thai market,” said the lender's chief executive Samuel Tsien, who is currently trying to buy Hong Kong's Wing Hang Bank Ltd.
 
The chief executive of PT Astra International, Indonesia's largest listed company by market capitalization, said it anticipates that Southeast Asia's largest economy could overtake Thailand as the region's biggest auto market within two years. Thailand is also a major production base for international auto manufacturers, but Indonesia is hoping to supplant it in coming years.
 
Reduced investment pledges
 
Thailand's troubles are hurting its investment numbers. In the first two months of 2014, pledges from foreign investors were 43 percent lower than a year earlier - and those from Japanese investors were down 63 percent.
 
“FDI this year may be less than $8 billion, the average long-term rate, because manufacturing FDI will disappear quite a bit as investors are waiting to assess the situation,” said Pimonwan Mahujchariyawong, an economist at the Kasikorn Research Center.
 
However, some portfolio investors still see opportunities. The $12 billion Templeton Asian Growth Fund, run by emerging-markets investor Mark Mobius, increased its allocation for Thailand to 27.12 percent in February, up from 24.7 percent at the start of the year, according to data from Lipper.
 
That's a bet economists believe could still pay off in the long-term, with Thailand's proximity to Myanmar, Vietnam, Laos and Cambodia.
 
“Its integration into manufacturing supply chains around the region, suggest that FDI flows will remain positive in the medium term,” said Benjamin Shatil, an economist at JPMorgan in Singapore.

You May Like

South Korea Divided on Response to North’s Cyber Attack

In past five years, officials in Seoul have accused Pyongyang of hacking into banks, government websites, causing chaos and inflicting millions of dollars in damages More

Video Calm Amid Fear in Daily Life in S. Sudan’s Bentiu

Residents have been trying to regain some sense of normalcy, but planning for the future remains uncertain as fear of attacks looms More

2015 Could Be Watershed for Syria Conflict

Republican control of US Senate in January could lead to more aggressive policy against IS militants in Syria - and against regime of Bashar al-Assad More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Ugandan Doctors Aid Victims of Sudan's Civil Wari
X
Adam Bailes
December 22, 2014 3:45 PM
In Sudan's state of South Kordofan, the number of amputees as result of civil war is in the thousands, but few have access to sufficient medical help. Adam Bailes recently visited the area and says a small team of Ugandan doctors has been providing remote help, producing new prosthetic limbs for those in need.
Video

Video Ugandan Doctors Aid Victims of Sudan's Civil War

In Sudan's state of South Kordofan, the number of amputees as result of civil war is in the thousands, but few have access to sufficient medical help. Adam Bailes recently visited the area and says a small team of Ugandan doctors has been providing remote help, producing new prosthetic limbs for those in need.
Video

Video Jane Monheit Christmas Special

Chanteuse Jane Monheit sings the holiday classic “Have Yourself a Merry Little Christmas,” and explains why it’s her favorite song of the season.
Video

Video Calm Amid Fear in Daily Life in S. Sudan’s Town of Bentiu

Six months ago, Bentiu was a ghost town. The capital of northern Unity State, near South Sudan’s important oil fields, had changed hands several times in fighting between government forces and rebels. Calm returned in November and since then, residents of Bentiu have been trying to regain some sense of normalcy. Bentiu’s market has reopened there are plans to start school again. But fears of new attacks hang heavy, as Benno Muchler reports from Bentiu.
Video

Video US Business Groups Press for Greater Access to Cuba

President Barack Obama's decision to do all he can to ease restrictions on U.S. trade, travel and financial activities with Cuba has drawn criticism from some conservatives and Republicans. People who bring tourists to the island and farmers who want to sell more food to Cuba, however, think they can do a lot more business with Cuba. VOA's Jim Randle reports.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.

All About America

AppleAndroid

World Currencies

EUR
USD
0.8157
JPY
USD
119.96
GBP
USD
0.6402
CAD
USD
1.1629
INR
USD
63.200

Rates may not be current.