Carolyn Chan

Staying overweight Thailand despite electoral chaos

Carolyn Chan

Carolyn Chan: Staying overweight Thailand despite electoral chaos

Thailand’s national elections at the weekend – the first since a military coup in 2014 – have ended in disarray with two parties claiming victory and the country’s Election Commission compounding the uncertainty by stating that official results will not be announced until 9 May.

Monday saw the release of unofficial results covering 350 out of the 500 constituencies in the lower house of Thailand’s parliament. These indicated that the pro-military Phalang Pracharat party surpassed expectations with 7.9m votes against the pro-democracy Thaksin linked Pheu Thai party with 7.4m votes.  However, the Pheu Thai party looks to have won more seats: 138/350 seats against Phalang Pracharat’s 96/350 seats. Results for the remaining 150 seats will not be announced until 9 May.

Further clouding an already complicated picture is the fact that Thailand’s 250-seat upper house is fully elected by the ruling military junta. This means that the pro-democracy Pheu Thai party and its collation allies would therefore need to claim 376 lower-house seats in order to secure a simple majority across the both houses. Our view is that there will be negotiations aplenty over the next six weeks and we ultimately expect the political landscape to show some form of continuity via a military-led coalition government.

We are encouraged that the situation on the ground remains stable, peaceful and orderly and we are comfortable remaining overweight Thailand in the Fund, with an 8.8% weighting (vs 2.7% and 2.2% respectively in the MSCI Asia ex-Japan and MSCI Asia Pacific ex-Japan indices).

Looking ahead, fiscal stimulus involving cuts to personal income tax brackets and increases to minimum wages should boost domestic consumption. In addition, we expect public infrastructure spending to continue to support growth and we note that there has been an acceleration in approvals and momentum. As of February 2019, 20 largescale projects with a total value of Bt729bn (equivalent to 4.5% of GDP) have been prioritized and are now moving ahead to the implementation stage.

Four out of the five stocks we own in Thailand (Digital Telecommunications, Intouch, Jasmine Broadband Infrastructure Fund, and Land & Houses) are held for their exposure to domestic economic growth, which is itself aided by structural drivers such as government policies supporting increasing data consumption. Our fifth holding in the country is Thai Oil, one of the leading refineries in South-East Asia, which is more exposed to international drivers.

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Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in Funds managed by the Asia team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Fund’s expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. 


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Wednesday, March 27, 2019, 1:10 PM