Thailand is an interesting microcosm of the economies of Southeast Asia, showing both promise and varied opportunities for potentially successful investment. The World Bank has characterised the country as “one of the great development success stories” with respect to both social and development indicators. Despite this glowing description, Thailand has had numerous ups and downs over the past several decades, which have resulted in political turmoil and a series of military coups to establish stability. Fortunately, from 1988 to the present, poverty has declined significantly from 65% to below 10% in 2018.
With respect to its neighbours and the world, Thailand is still classified as an “emerging industrialised economy”. To rise above its present level, more investment is necessary, as well as an influx of professional specialists and experts to modernise its existing technological base. The current military leadership coined a phrase in 2016, “Thailand 4.0”, as a “master plan to free Thailand from the middle-income trap, making it a high-income nation in five years”. This plan, however, never anticipated the impact of the Covid 19 pandemic. The World Bank foresaw an economic contraction of nearly 9% for 2020 alone, and the local economy has struggled to regain steam, as have other countries across the globe.
Investors have looked beyond this overarching issue and have taken note that the Thailand investment landscape has several companies worthy of providing above average returns. The local economy does revolve around exports, nearly 60% of GDP, with China being a major trading partner. Positive news from China will have a positive ripple effect upon Thailand. The local government encourages foreign investment with favorable tax benefits as incentives, and the Thai Baht has been stable and appreciating gradually after the Asian Financial Crisis of 1997. It is currently about 0.030 to the US Dollar, having improved from 0.040 over the past two decades, but recently weakened due to Covid issues, as depicted below:
Stocks are traded on the Stock Exchange of Thailand (SET), which was founded in 1975 and has its headquarters in Bangkok, the largest city in the country and a financial hub for Southeast Asia. With nearly 600 listed companies and a market capitalisation of about $569 billion, it has achieved a ranking of 23rd on a global basis. Tradable instruments include stocks, bonds, derivatives, and ETFs. The exchange also publishes indices that provide information on various sectors of the economy, as well as for Large Cap, Mid Cap, and Small Cap companies. Global brokers will typically offer ETFs that mimic the performance of the top 50 or 100 listings.
How does one invest in Thailand and its economy? The Thai economy is the eighth largest in Asia and the second largest in Southeast Asia behind Indonesia. When per capita effects are taken into account, it ranks fourth in Southeast Asia, behind Singapore, Bruni, and Malaysia. The impact of Covid may have been to retard the growth of Thailand and its neighbours, but signs are that a recovery is underway. Global brokers typically offer participation in an Exchange-Traded Fund (ETF) that tracks popular companies in Thailand, but the more adventurous investor may want to try his hand at individual entities. This approach may require a specialised broker.
One example of a Thailand based ETF is presented in the IG weekly chart shown below:
As indicated in the chart, Thailand companies in the ETF group have already begun their recovery from the dramatic downturn caused by the Covid pandemic. The current value of these shares is roughly $73, far better than the Covid floor of $50, but still below its pre-Covid plateau of $90. Charts for individual entities also tend to follow this general dynamic. In summary, the future prospects for the Thailand economy and for major companies within its domain are favorable.
Based on various analyst suggestions, the following seven individual companies come highly recommended as being prepared to benefit from an economic recovery going forward. All share prices are expressed in Thai Bahts (THB).
Whether you wish to invest in an ETF or an individual company, take advantage of the free demo system provided by your broker to test your investment strategy, availing yourself of both technical and fundamental information for your target investments. Then decide if the broker’s trading platform is user friendly and straightforward.
The Thailand economy is poised to make a recovery from these post-Covid times. When tourism once again becomes possible at increased levels, various entities in Thailand will benefit handsomely. Even though Thailand is an economy to watch, many global brokers do not offer direct access to its national exchange, the SET. If you wish to bypass trading in a Thailand ETF and select specific companies for investment, take the time to locate a reliable and safe local broker that can provide the direct SET access that you need.
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