A leading financial analyst says this country lags behind others in obtaining full advantage from the nascent upswing due to its governing structure
A lthough Thailand is benefiting from the dramatic improvement in the global economy along with the rest the world, it is not gaining as fully as many other emerging nations both in Asia and other regions such as South America, says Kongkiat Opaswongkarn, the CEO of Asia Plus Securities.
That this country lags behind others in obtaining full advantage from the nascent upswing is due to its governing structure, he believes.
``Thailand, I think, has become a very bureaucratic state and things are moving very slowly because of the system we created ourselves,'' he said.
``Even at the Asean summit, I think Thailand was not able to sign multilateral agreements on a number of issues because we need parliamentary approval.''
Despite such limitations, the country manages to muddle along because it is rich in many resources, especially soft commodities. For example, Thailand is one of the world's largest food exporters.
Mr Kongkiat remarked that this key strength is very important, especially now that a lot of people have started talking about food security. However the country should work harder at improving its productivity and efficiency, with rice production a noteworthy example. He pointed out that Vietnam is now able to produce more rice per rai than Thailand does. ``We have the same tropical climate, so there is no excuse.''
Turning to the stock market, Mr Kongkiat said he is not much worried about this year because the bourse is benefiting from low interest rates, very tame inflation and hopes of global economic recovery.
``As long as interest rates on the US dollar and several other major currencies stay close to zero I am not too concerned about inflation _ that is not an issue. So basically everyone is buying on hope, but next year I am afraid people may sell on fact after digesting all the good numbers and everything else that is new.''
Mr Kongkiat added, however, that the Stock Exchange of Thailand, up more than 50% this year, was unlikely to do well two years in a row.
``I am optimistic for this year, but if you look back, in 2003 we had a big rally and afterwards a big flop for five years.''
That is why he sees this year as a golden opportunity to make money, because next year a different set of skills would be needed to get returns.
``This year it's easy _ you just throw a dart and make money on whatever name you hit on the dartboard, but next year it will be more difficult to make money.''
He expects inflation to creep up by the middle of next year, meaning that interest rates would eventually also head upwards.
Inflation can rise quite quickly in Thailand because it is a net oil importer. As oil already costs US$80 (2,670 baht) a barrel, should it climb to $90 to $100 next year it would spike inflation and along with it probably interest rates too.
It is because interest rates are so low right now that investors sitting on the sidelines are channelling their funds into stocks. Aside from this, corporate earnings of some listed companies are extremely impressive and investors cannot ignore this.
``Even in Thailand this year we expect earnings-per-share growth of around 40%, and we are in the process of revising this after third-quarter results are announced.''
This means the Thai market's valuation is not overly high, standing at 13 times this year's earnings. As Asia Plus Securities expects earnings growth of 16% next year, the price/earnings (PE) ratio is also expected to slide to approximately 11.5 times.
However, Mr Kongkiat pointed out that the market is currently most concerned about rumours, given how the exchange was rocked three weeks ago when concerns, later proved unfounded, arose about the health of His Majesty the King.
``Our structure is still fragile and I think a lot of times mutual funds act as retail investors as well,'' he said.
``Sometimes when they feel uncomfortable they just dump everything into the market. They are akin to big players here _ if they don't like the market they just dump a few million baht in one shot.''
Despite this, several blue-chip companies are doing very well and even some tier-two companies have improved dramatically and could move up to the top bracket in the future.
Mr Kongkiat pointed to the property sector as having benefited from tax incentives that have directly lifted developers' bottom lines. Under this tax break that expires in March 2010, the special business tax on property transactions has gone down for 3.3% to 0.11%, transfer fee from 2% to 0.01% and mortgage registration fee from 1% to 0.01%.
However, not all property companies are thankful. The head of a very large listed firm told Mr Kongkiat that he did not need this kind of help from the government because he was able to make a profit on his own.
Mr Kongkiat added that if the government really wanted to help buyers rather than companies, then it should have increased the personal income tax deduction on mortgage loan principal payments higher than 300,000 baht.
``If there is no limit or there is a generous limit, then you encourage people who have a lot of savings in the bank to start spending some of their money _ start buying expensive houses and condominiums for their children.''
Where foreign investors are concerned, as a lot of them already hold shares in most of the big cap companies they continue to search for good investment ideas, but unfortunately the Thai bourse has very few initial public offerings (IPOs) coming on line.
``Bigger markets always have IPOs so it's much more exciting, and of course they don't have any political disturbances.''
The big question mark hanging over the market is politics and nobody seems to be able to give precise answers to the different scenarios that could possibly transpire.
``Of course foreigners do not want this sort of an uncertainty hanging around, especially if their judgment is based on too many what-ifs, too many negative factors.''
However, Mr Kongkiat said, the key point investors should bear in mind is that 40% of the companies listed on the Thai exchange are still trading below their book value and some of them are even paying 7-8% dividends.
Posts
No comments:
Post a Comment