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Charlemagne’s Gems: there's no bubble trouble in Thailand

by Julian Mayo on Apr 12, 2013 at 10:35

Charlemagne’s Gems: there's no bubble trouble in Thailand

Thai equities have been among the best performing in the world in recent times, with the SET index up 31% over 12 months to the end of March.

With property stocks leading the way – Quality Houses is up 169% over the same period – talk of a bubble has emerged but a recent visit to the country has put our mind at rest.

Although the sector is booming, it does not look overstretched and the Bank of Thailand has scope to step on any signs of overheating. According to reports, the Bank is already considering cooling measures and meeting property developers to gauge the health of the market.

In broad terms, we remain positive on Thailand and are overweight across our portfolios with double the benchmark position.

Looking at the macro, growth has averaged 5% per annum over five years and the economy has made huge strides in the last three decades, moving away from a traditional reliance on agriculture.

In line with many emerging countries, consumerism is a major theme as Thailand also looks to reduce its dependence on exports.

We would highlight other supportive fundamentals, including the usual emerging market infrastructure story.

Thailand is a large country, with its 60 million inhabitants spread around and a new 2,500km high- speed rail network is expected between 2016 and 2018 costing in the region of $30 million.

Looking at investments in the region, banks have been key to overall market performance alongside property.

This has led bubble fears to their door but we highlight names such as Kasikornbank, where loan growth in the 9-11% range is far away from the 20% expected in bubble territory.

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