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. 

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 Overseas money managers have withdrawn a net $9.12bn from Thailand’s market so far this year, leaving outflows on course to surpass a record set in 2018.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”. 

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