Thai Stocks Most Volatile Since 2006 Lure Invesco on Profits

The biggest price swings in Thai

stocks since the nation imposed capital controls in 2006 are

turning Invesco Asset Management and Aberdeen Asset Management

Plc into buyers on speculation that corporate profits will

weather political turmoil.

The benchmark SET Index’s 90-day volatility has more than

doubled during the past year and was twice that of the MSCI
Emerging Markets Index last week, according to data compiled by

Bloomberg. The last time the gap widened this much, after
Thailand imposed investment restrictions to stem the baht’s

rally in December 2006, the SET advanced 17 percent in six

months and outperformed the emerging-market gauge.

Invesco, Aberdeen and BBL Asset Management, which oversee a

combined $1.1 trillion, say market swings caused by anti-government protests and $344 million of foreign outflows this

month have created buying opportunities among oil producers and

phone stocks. While snap elections called by Prime Minister

Yingluck Shinawatra for Feb. 2 may lead to even more volatility,

analyst estimates compiled by Bloomberg show SET (SET) Index profits

will probably climb 21 percent during the next 12 months.

“We have been buying more in Thailand,” Abdul Jalil Abdul Rasheed, a Singapore-based investment director at Invesco, which

oversees about $779 billion worldwide, said in an e-mailed

interview on Jan. 29. “We are invested in companies, not

countries.”

Region’s Cheapest

That optimism makes the three money managers stand out

among global investors. The SET Index has dropped 2.1 percent in

January, poised for its third-straight monthly decline, amid a

retreat from developing-nation assets that sent the MSCI

Emerging Markets Index to its worst start to a year since 2008.

“If you look at the ability to generate profit by listed

firms, I think our listed firms are quite resilient,”

Charamporn Jotikasthira, president of the Stock Exchange of

Thailand, said in an interview with Bloomberg Television.

“We’ve already seen foreigners coming back in some sectors, for

example the agricultural and export sectors.”

The benchmark SET Index may recover to the level before the

political turmoil when it subsides, he said. The measure rose

0.6 percent to 1,271.66 at 10:13 a.m. in Bangkok today.

The Thai gauge lost 6.7 percent in 2013 as foreigners sold

a net $6.2 billion of the nation’s stocks, the most since

Bloomberg began compiling the data in 1999, and the U.S. Federal

Reserve signaled its plans to reduce economic stimulus.

The benchmark measure of Thailand’s $335 billion market is

valued at 11.4 times estimated earnings for the next 12 months,

the cheapest among Southeast Asian peers. The multiple dropped

to 10.9 on Jan. 3, the lowest since June 2012.

Mass Rally

A measure of the SET index’s 90-day swings reached 21.5 on

Jan. 22, versus 10.7 for the MSCI Emerging Markets index. The

Thai measure was at 20.3 yesterday.

Yingluck’s administration has faced street demonstrations

that protest leaders say are aimed at removing her family’s

political influence. Ten people have been killed in clashes

between rival political groups and the police since the anti-government protests intensified on Oct. 31, according to the

Bangkok Emergency Medical Service.

Allies of Yingluck’s exiled brother, Thaksin Shinawatra,

have won the past five elections, including two since his ouster

in a 2006 coup. The caretaker government imposed a state of

emergency in Bangkok on Jan. 22 as attacks on protesters

escalated and demonstrators blockaded the city’s busiest

intersections.

Unelected Council

Suthep Thaugsuban, a former opposition party politician

leading the protests, called for a mass rally on Feb. 2 in

Bangkok and nationwide to disrupt the election. He’s vowed to

continue blockades in the capital that began Jan. 13 until

Yingluck resigns, and wants the government replaced with an

unelected council that would change laws to prevent parties

linked to former premier Thaksin returning to power.

The prospect of prolonged political deadlock may deter

investors despite cheaper valuations, according to Saharat Chudsuwan, a Bangkok-based first senior vice president at Tisco

Asset Management Co., which oversees about $4.6 billion.

The Bank of Thailand lowered its growth forecast for
Southeast Asia’s second-biggest economy on Jan. 22. The monetary

authority predicted gross domestic product will increase by less

than 3 percent in 2013. It cut the estimate for this year to

about 3 percent from a previous projection of 4 percent on

expectations political turmoil will delay government investments

and hurt consumer spending.

Overseas Visitors

Tourist arrivals will fall by half to 1 million this month,

Minister of Tourism Sports Somsak Phurisisak said Jan. 23,

with some hotels in the capital and nearby resort towns of

Pattaya and Hua Hin only 30 percent full. The revenue loss could

amount to 22.5 billion baht ($682 million), according to the

Tourism Council of Thailand.

“Our clients have been advised to reduce holdings in Thai

equities and shift investments into overseas markets such as

North Asia and Japan,” Saharat said in an interview on Jan. 22.

“Valuations have come down significantly, but they remain

unattractive. With the mass protests and state of emergency,

Thailand has a very poor outlook for foreign investors.”

Stock Picks

Thai stocks have rallied from past periods of political

tension. While the SET Index lost as much as 13 percent in four

months after military leaders sent tanks to block Bangkok’s

Government House and said they’d seized control of the capital

in September 2006, the gauge recouped its losses by May 2007.

The SET lost 11 percent amid protests in the first half of 2010,

then rallied 46 percent in the following 12 months.

Power producers, insurers and energy companies, including
PTT Exploration Production Pcl (PTTEP), have dropped to attractive

levels, according to Adithep Vanabriksha, the Bangkok-based

chief investment officer at Aberdeen Asset, which oversees about

$324.6 billion worldwide.

PTT, a Bangkok-based producer of oil and natural gas, has

lost 6.3 percent this year and trades at 9.6 times reported

earnings, according to data compiled by Bloomberg. That compares

with the median multiple of 20 times for global peers.

Invesco’s Rasheed recommended shares of telecommunication

companies and banks. Advanced Info Service Pcl (ADVANC), the mobile phone

company owned by Singapore’s Temasek Holdings Pte, has gained

2.8 percent this year after a 4.6 percent drop in 2013. The

stock is valued at 14.5 times estimated earnings, down from 17.1

before the protests.

Tourism Stocks

Voravan Tarapoom, the chief executive officer at BBL Asset,

said tourism companies will rally when the political crisis is

resolved.

The industry rebounded from protests that shut the main

airport for almost two weeks in 2008 and turned inner Bangkok

into a war zone in 2010. It also bounced back from disasters

such as the Indian Ocean tsunami that devastated beach resorts

in 2004, and floods in 2011. Overseas travelers to the country

jumped 20 percent to a record 26.7 million in 2013, according to

the Tourism Authority of Thailand.

The SET Tourism and Leisure Index, which has its largest

weighting in Bangkok-based Central Plaza Hotel Pcl (CENTEL), has dropped

21 percent since the end of October and is valued at a 24

percent discount versus its one-year average, data compiled by

Bloomberg show.

Some stocks “may already reflect all the negative

political factors,” Voravan, who helps to oversees about $10

billion, said by phone on Jan. 29. “Lower share prices offer

golden opportunity of high returns for long-term investments.”

To contact the reporter on this story:

Anuchit Nguyen in Bangkok at

anguyen@bloomberg.net

To contact the editor responsible for this story:
Michael Patterson at

mpatterson10@bloomberg.net

Thai Stocks Most Volatile Since 2006 Lure Invesco on Profits