Thais bet unrest over and scoop up Bangkok stocks

By Viparat Jantraprap

BANGKOK (BestGrowthStock) – Demand from domestic investors — including individuals with political ties and government-linked funds — has helped Bangkok stocks fare better than most in Asia since Thai troops crushed a protest movement on May 19.

The army assault on a vast anti-government protest camp in central Bangkok ended weeks of political violence in which 89 people were killed and nearly 1,900 wounded.

Many foreign investors see further unrest ahead and have pulled back, but local buying has more than offset that, insulating Thailand from euro zone debt problems to some extent.

Since May 19, MSCI Inc’s index of Thai stocks has fallen just 1.3 percent, beating the 5.7 percent drop in MSCI’s index for Asian markets excluding Japan.

For the three months from March, MSCI’s Thai index is up 3.7 percent, outperforming an 11 percent fall in Asia outside Japan. In May alone, MSCI Thailand dropped 2.4 percent, less than the 11.1 percent drop in the MSCI Asia Ex-Japan index.

Several dealers reported brisk buying by individuals with links to Thai politics and by local fund managers who think the worst of the political problems are over.

Yernyong Thepjumnong, chief investment officer at Krung Thai Asset Management, said he believed political conditions would improve after the government survived a no-confidence motion last week, and he saw good value in Thai stocks, which trade at just 10.3 times estimated 2010 earnings, Southeast Asia’s cheapest.

That compares with the Philippines’ 11.9 times and Indonesia’s 13.1, according to Thomson Reuters StarMine data. The low valuations, Thai fund managers say, suggest much of the political risk in Thailand is already priced in.

“We have increased our equities weighting over the past month. We will take more equities if the index falls strongly,” said Yernyong, who manages $4.5 billion in assets.

CRISIS NOT OVER?

Bangkok’s outperformance has been all the more remarkable because of the absence of foreign investors, who represent about 15 percent of daily turnover and sold a net $2.06 billion of stocks from the first serious violence on April 10 until June 8.

Many foreign investors share the view of CLSA equity strategist Christopher Wood that the break-up of the protests on May 19 in no way resolved the underlying social and political divisions that brought protesters into the streets and fueled the worst political unrest in modern Thai history.

In the absence of political reform, many expect another crisis to flare again in the months ahead. That gives Wood, the second-ranked Asia strategist in Institutional Investor magazine’s annual poll, and other analysts reason to pause.

Joerg Zeuner, chief strategist at VP Bank Group, a Liechtenstein-based private banking firm, said: “The Thai stock market will perform quite well but there will be no long-term outperformance compared to other Asian markets as long as there is a lack of confidence in the Thai government and the political system.”

Reinforcing the view Thailand remains volatile, Prime Minister Abhisit Vejjajiva said on Sunday a state of emergency would remain across a third of the country including Bangkok.

The decree, which bans gatherings of more than five people, was needed to curb “remaining activities” of protesters, he said.

Undeterred, retail investors, who account for about 60 percent of daily turnover, have snapped up $670 million in stocks between May 19 and June 8, outpacing buying by Thai brokers and institutional investors.

Average daily turnover this year is about 21 billion baht ($644 million), according to a Reuters calculation.

There are signs some foreigners are edging back into the Thai market, which rose 15 percent on a $1.8 billion wave of foreign buying from mid-February to April 9, a day before the protests turned deadly with a gunbattle in Bangkok that killed 25 people.

The scale of foreign selling has dwindled. There were two straight days of foreign buying on June 3-4, the first since April 7. Since May 27, net foreign selling has totaled just $101 million. Last week Citibank urged investors to buy Thai stocks.

“There are plenty of firms with promising growth prospects despite all the political problems and they will end up paying good dividends,” said Adithep Vanabriksha, deputy chief investment officer in Bangkok for UK-based Aberdeen Asset Management.

($1=32.64 Baht)

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(Editing by Jason Szep and Alan Raybould)

Thais bet unrest over and scoop up Bangkok stocks