Advertisement

Could Thailand’s coup damage Asia?

Thailand's military takeover has already rattled investors in the region.

Thailand's latest military coup hardly improves the odds of solving its protracted political crisis, says Andy Mukherjee on Breakingviews. The stand-off has already sent the economy into recession: it shrank by 2.1% in the first quarter from the previous three months.

Consumers and businesses have been severely rattled. Private investment fell by an annual 7.3%; household consumption by 3%. The last coup, in 2006, meant that Thailand fell behind the rest of the region. It's set to be a similar story this time.

Advertisement - Article continues below

The good news, however, is that the rest of Asia should barely be affected by Thai turmoil, says Capital Economics. Thailand is not an important export market for the region; it accounts for 2%-3% of emerging Asia's foreign sales. Malaysia has the largest exposure, at 5% of exports, but intermediate goods (which are shipped on) make up most of the total.

Asia's solid external finances also make contagion unlikely. Malaysia and Vietnam, meanwhile, tend to gain tourists from Thailand during periods of turmoil.

Longer term, foreign investors deterred by political instability and stalled reform efforts seem likely to opt for Indonesia and the Philippines instead, as these countries have been closing the competitiveness gap with Thailand in recent years.

Advertisement
Advertisement

Recommended

Bullish investors return to emerging markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Beware the hidden risks when investing in emerging markets
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019
Emerging markets: buy when the news is bad
Emerging markets

Emerging markets: buy when the news is bad

Emerging markets are being squeezed by local turmoil and by more general factors. But bad news can spell opportunity for investors.
5 Nov 2019
Emerging markets bounce back after a miserable few months
Features

Emerging markets bounce back after a miserable few months

Investors in emerging markets have been enjoying some long-awaited relief after a miserable few months.
13 Sep 2019

Most Popular

What gold, bonds and tech stocks have in common
Stockmarkets

What gold, bonds and tech stocks have in common

"Risk off" or "safe haven" assets such as gold and government bonds have been doing well lately. But so have riskier tech stocks. That seems to defy c…
10 Jul 2020
An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
10 Jul 2020