China and India may be Asia’s largest economies, but they aren’t the only countries with growth potential on the continent. Southeast Asian countries can also offer compelling investment opportunities. Thailand, known as the “land of the smiles” because of the expression its natural beauty and friendly people inspire, is a country where we believe the economic prospects could give investors reasons to smile too.
-Mark Mobius, executive chairman, Templeton Emerging Markets Group
Kicking and Smiling
Unlike other Southeast Asian nations, Thailand (known as Siam until 1939) managed to escape European colonial rule. That doesn’t mean Thailand has escaped Western influence, or internal conflict. Coups, protests and periods of military rule have triggered social and economic turbulence throughout its history, and political leaders today have struggled to reconcile with opposing forces and reform the constitution (drafted in 2007 under military rule).
Thailand has endured other challenges, too, such as the financial crisis in the late 1990s, a tsunami which struck in 2004 and devastating floods in 2011. All of these events caused serious economic setbacks, but Thailand has been adept at battling back from adversity, which is fitting for a country whose national sport is kickboxing, or “Muay Thai.”
An example of this fighting spirit was on full display when Thailand’s GDP growth sank in 2011 to a mere 0.1% in the wake of flooding there, but then quickly rebounded. While forecasts differ slightly, recently, Thailand’s central bank raised its expectations for 2012 GDP growth to 5.9%, with growth forecast at 4.9% for 2013. Policymakers said stronger-than-expected expansion of private investment helped drive improved growth prospects.
Domestic economic strength helped Thailand’s equity market post one of the best performances in Asia (and even the world) in 2012, with the benchmark Stock Exchange of Thailand (SET) Index returning more than 35%.1 Industry data showed loan growth supported banking stocks in particular. Interestingly, over the past two years, some European banks—dealing with a debt crisis at home—withdrew from some emerging markets; this seems to have benefited local lenders in Thailand. The Thai construction industry was another well-performing sector story, as suggestions that a ramp up in Thai infrastructure projects could further increase demand for building materials.