How Thailand became Asia’s toothless tiger
Thailand was once an economic tiger that rocked world markets. Not any more, with tourism decimated but the pandemic and GDP set to shrink by around 7% in 2020.
There’s “trouble in paradise”, says Ashutosh Pandey for Deutsche Welle. Thailand has managed the pandemic relatively well, but its economy is another matter. GDP is set to shrink by around 7% in 2020. The tourist sector makes up 20% of the economy, but between April and September there were zero foreign tourist arrivals. Now pro-democracy protests threaten to deliver an economic “double whammy”.
The economy was struggling before Covid-19. It has long been overshadowed by more dynamic neighbours; last year’s growth of 2.4% was the slowest in five years. The population is ageing. The local SET stockmarket has fallen by 24% this year, making it a top contender for Asia’s worst-performing market this year.
A financial afterthought
Once an “Asian tiger” that helped rock world markets in the 1990s, Thailand is today little more than a “financial afterthought”, says Craig Mellow in Barron’s. The country makes up just 2% of a typical emerging-market index. Thailand is a deeply unequal society, where a “selfish, military-backed elite” hoards wealth and opportunity, while “more than a third of the adult population has not finished primary school”. The resulting skills shortage and political unrest helps explain the dearth of exciting local companies.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
There is one corner of the local stockmarket that has shrugged off the gloom, reports Masayuki Yuda for Nikkei Asia. The number and size of initial public offerings (IPOs) this year has easily beaten that of Thailand’s southeast Asian neighbours. IPOs amounted to a cumulative $3.1bn to the end of September. Excitable trading of recently floated SCG Packaging shows the unrest has done little to curb the trend. This “bizarre IPO boom” seems to be driven by speculative activity from local investors, who have little else to get excited about.
Foreign investors have been pulling out for a while, note Anuchit Nguyen and Kam Sau Yung on Bloomberg Quint. Overseas money managers have withdrawn a net $9.12bn from Thailand’s market so far this year, leaving outflows on course to surpass a record set in 2018. Valuations are not falling as quickly as share prices. “Thai companies have a very grim earnings outlook,” says Komsorn Prakobphol of Tisco Financial Group PCL.
On a cyclically adjusted price/earnings ratio of 12.5 Thai stocks trade on a similar rating to the much-hated UK market. Unlike the UK, the country has a long track record of instability, with more than a dozen coups and coup attempts since 1933. As Gareth Leather of Capital Economics told Pandey, if a business wants to build a factory in southeast Asia the choice between Vietnam, which is “politically stable, has low wages, and is near China” and volatile Thailand is a “no-brainer”.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Alex Rankine is Moneyweek's markets editor
-
Higher rates are disappearing – should you fix your savings?
Fixed savings rates have dropped to their lowest levels in over a year. Should you fix your savings now ahead of a potential base rate cut in November?
By Katie Williams Published
-
Nine million people fall victim to financial scams, says Citizens Advice
The charity says that around one in five people across the UK have been caught out by a finance scam in the past year - here is how to protect your money
By Chris Newlands Published
-
What will a broken-up Google look like?
The US courts have ruled that Google is a monopoly, leaving it facing the prospect of a break-up. WIll that be a good thing?
By Matthew Lynn Published
-
How will the UK gambling sector be hit by the Budget?
There are concerns for the UK gambling sector in the lead-up to the Autumn Budget. What could be on the cards?
By Dr Matthew Partridge Published
-
HSBC returns to cost-cutting plan
HSBC is set to revamp its commercial banking division – but will it come at a cost?
By Dr Matthew Partridge Published
-
Pfizer shares rise as US investor takes $1 billion stake
Pfizer shares are on the up since US activist investor Starboard Value built up a stake in the drug maker. But strategic options appear limited
By Dr Matthew Partridge Published
-
Qualcomm could acquire rival Intel – but securing the deal won't be easy
A tie-up between Qualcomm and its semiconductor rival Intel would be a coup. But multiple regulatory and commercial hurdles lie ahead.
By Dr Matthew Partridge Published
-
Modi’s reforms set Indian stocks on fire
Indian stocks pass a new milestone, but global fund managers are holding back. Are there signs of overheating?
By Alex Rankine Published
-
How to invest in the quiet market months
Here's how to invest in the quiet market months, since “sell in May” hasn’t paid off this year.
By Cris Sholto Heaton Published
-
Spire Healthcare: invest in the booming demand for private healthcare
Spire Healthcare is one of the few listed companies benefiting from the growing trend in private healthcare. Should you invest?
By Rupert Hargreaves Published