Apr 20, 2014

Thai stock market and economy

According to Kasikorn Research, the Thai economy is close to entering a recession and first quarter GDP estimated to have declined by 1.8% from the previous quarter (but expanded 0.7% y-o-y), in line with the National Economic and Social Development Board (NESDB) who forecasted that first quarter GDP may fall by 1.7% from the previous quarter.

The prolonged political unrest had affected the economy as well as domestic spending ever since the first political protests started in Oct 2013. Public investment has largely stalled and the tourism sector has not been spared and international tourist arrivals in March were poor at -9% y-o-y.

Quoting from the Bank of Thailand on 31 March 2014, y-o-y, the Private Consumption Index (PCI) is down -2.5%, Private Investment Index (PII) is down -7.7% as businesses defer investments and the Manufacturing Production Index is down -4.4%. Merchandise exports are up +2.2% from the same period last year. Automobiles, electronics, electrical appliances, agricultural products, machine and equipment also picked up. In contrast, steel and metal exports growth are still negative y-o-y and petroleum exports fell due to the maintenance shutdown of refineries.

Unemployment rate remained low while inflation rose on the back of rising fresh food, prepared food and liquefied petroleum gas prices. Current account is positive, due to a surplus in trade balance while capital account recorded a deficit as financial institutions repaid short-term foreign loans, foreign investors reduced portfolio investment in Thailand and Thai investors increased overseas debt securities holdings.

Therefore I believe exports will bear most of the burden of driving the economy this year. I am not very confident, however economic recovery of Thailand's trading partners may boost their exports this year.

The political deadlock is approaching a turning point soon as the Constitutional Court is set to rule on a case against Prime Minister Yingluck.

While many institutions and people perceive that the political unrest will end sometime in the middle to late this year, lets take a look at the Thai stock market (SET) based on last friday's closing.

Quoting from Bualuang Securities, the SET recently traded on forward PER of 13.5x compared with 11.1x for Asia and 10.2x for emerging-market countries. Ever since the market plunge on political tensions, foreign and local institutional investors have been on buying sprees causing the index to rebound quickly.

Comparing from last October 31st (1442.88) to last friday's close at 1409.18, the SET is down only about -2% (Line drawn in chart for emphasis). Thus, the SET is not offering a political-risk discount anymore for the slow-movers. In the best case scenario, the political situation is resolved peacefully with both parties satisfied (somehow), domestic fiscal stimulus resumes and foreign investment is back on track. Note that elections may occur this June-July.

As for now, it is time to review my SET holdings. 

1. Krung Thai Bank - I have been averaging up since last September. KTB offers an upcoming (end-April) dividend of about 4.5% at the current price. P/E ttm is about 8.06, still very attractive among the big banks of about 10-11. KTB is trying to shed its state-owned image by positioning itself more to the market. It bears the most political risk as compared to the other big banks. One of the main reasons that I invested in KTB initially was in anticipation of the government's planned infrastructure projects. I did not foresee this whole political fiasco and recession at the time. Expectations are still on the share price to catch up to its peers as most of the other banks have already released first quarter results (mixed, big banks are generally still hanging in there). I expect KTB to at least meet estimates for earnings.

As political risks have now added another dimension (and risk) into KTB, I will lock in some profits soon based on P/E. 

I have attached a chart of the bank sector comparison against the SET below. Banks are strongly correlated with the index and both are approaching several resistance levels.

2. MK - I missed several chances since the IPO listing date because I did not want to chase the price, and my average price is very near the IPO price. Business has been affected by the political situation and outlet expansion has been delayed. MK is still the most profitable restaurant operator in Thailand however, and there are several projects in the pipeline such as growing its other restaurant brands and also hunting for an acquisition. My holdings in MK is relatively small, as compared to my KTB investment, therefore I have no qualms to take profit soon. I will probably do a detailed write up in future, of MK to better explain what I see in it.

I have attached a chart of the food sector against the SET below, I admit that there are not that many quality food companies and their performance varies widely from one to another, so the correlation with the SET is not that helpful. 

Despite the index being relatively strong (and not cheap) in this climate, there is still value to be found in individual stocks. However they are not immune to the swings of the main index and I am looking at a few more stocks and will invest when the price offers more margin of safety. In the long run, I aim to have my THB account at least 50 to 70% of my invested capital.


  1. Can I seek your advise how do you buy Thailand stocks, does local bank Brokerage offer purchase of individual stock from thailand? Any tax on the dividend? Thank you.

  2. Hi Desmond,

    You can refer to this post that I wrote. It is quite sometime ago so I am not sure if anything has changed since then (or if it applies to all brokers), but you can use it as a reference. It is still best to ask your current broker if they offer access to the Thai market.


    I'll share some more information here since this question is pretty common.

    You can purchase Thai shares using your brokerage if they have access. After you buy, the brokerage converts your share to ''foreign'', so for example ABC becomes ABC-F. When you want to sell, you need to queue under ABC-F instead. No contra is allowed although T+3 or more still applies.

    The Thai exchange also has Non Voting Depository Receipts (NVDR) which is similar to the actual share except that you have no voting rights (but still entitled to dividends etc.) So you may see ABC company listed counters with ABC, ABC-F and ABC-R.

    There is a custody fee as well as some handling fee on dividends. I think the actual fee varies among the brokers here.

    Personally, I am dissatisfied with my current brokerage for Thai market access. I have a good broker, but the platform and IT support is disappointing. I have had problems queueing orders recently because the platform does not recognise that I have the shares in custody when I tried to key a Sell order.

    I have decided to switch to a brokerage in Thailand to trade directly instead and I think it makes more sense to do it this way.


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