Thailand is more often thought of as a holiday destination than a place to invest. However, if you can look beyond its beaches, it is the hub of a thriving regional economy, presenting real opportunities for investors in areas such as tourism, healthcare and consumer goods.
Thailand sits at the heart of an increasingly inter-connected regional economy that includes the fast-growing economies of Laos, Cambodia and Burma. The South-East Asian region as a whole is forecast to grow 5.1% in 2018 (1.), with many of these countries opening up to external influences for the first time. Countries such as Cambodia are projected to grow almost 7% in the year ahead.
This is good news for Thai companies, who have a fertile regional market for their goods and services. We find many of the companies in our portfolio have regional rather than global expansion plans. They strive to understand the nuances of local markets and serve those markets successfully, rather than looking to compete globally.
This means that their growth is largely independent of the ebb and flow of the global economy. There is little dependence on the fortunes of the US or Chinese economies, for example, a real advantage when these two are engaged in a potentially damaging trade war.
Thailand also has a number of unique growth areas. Tourism is one of them, as it increasingly becomes a mainstream holiday destination and intra-Asian travel increases. Bangkok was the most visited city in the world in 2017. The Thai capital became the first Asian city to top the MasterCard Global Destination Cities Index, drawing over 20m international visitors over the course of the year who generated an estimated US$14.4 billion for the City (2.).
From our point of view on the Aberdeen New Thai trust, that creates opportunities in areas such as hotels and food businesses. In our portfolio, we hold Minor International, a hotel owner with a portfolio of over 20,000 rooms across more than 160 hotels and resorts, and Haad Thip, the local distributor for Coca-Cola.
We are also seeing healthcare companies benefit from a rise in medical tourism as Thailand becomes a regional hub for people travelling to receive medical treatment, including dental work and dermatology. Standards are high, but prices are far cheaper than in neighbouring Singapore. Within our portfolio we hold Bumrungrad Hospital, for example, a private multiple-specialty medical centre in Bangkok founded in 1980.
At the same time, the consumer sector is expanding across Asia; and Thailand is no exception. A growing middle class is creating demand for items previously considered luxuries, such as cars. They also have an eye to the future, and electric car company Thai Stanley Electric remains an important holding for us.
As regional growth continues, we find new companies coming to market, growing and diversifying the market all the time. We have recently taken the decision to expand the smaller and unlisted companies’ weighting in the fund to take advantage of these opportunities. It is an exciting time to be investors in the region.
Risk factors you should consider prior to investing:
The value of investments and the income from them can fall and investors may get back less than the amount invested. Past performance is not a guide to future results.
Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
Movements in exchange rates will impact on both the level of income received and the capital value of your investment. There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
The Company invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down.
Specialist funds which invest in small markets or sectors of industry are likely to be more volatile than more diversified trusts.
Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.
Other important information:
Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.
Issued by Aberdeen Asset Managers Limited which is authorised and regulated by the Financial Conduct Authority in the United Kingdom.
Registered Office: 10 Queen’s Terrace, Aberdeen AB10 1YG. Registered in Scotland No. 108419. An investment trust should be considered only as part of a balanced portfolio. Under no circumstances should this information be considered as an offer or solicitation to deal in investments.
Find out more at: www.newthai-trust.co.uk