As Baht Rises, Thai Tycoons Spend

Updated May 15, 2013, 8:00 p.m. ET

As Baht Rises, Thai Tycoons Spend

By JAMES HOOKWAY

Dhanin Chearavanont, billionaire chairman of CharoenPokphandGroup, says the stronger baht isn’t good for exports, but it is “a good opportunity for change.”

BANGKOK—Fifteen years ago, Thailand and other Asian countries let their currencies slide, using cheap exports to help lift them out of a devastating economic slump. Today, Thailand’s currency is soaring, and some of its tycoons are going on a buying spree. As Japan has moved to drive down the yen to power up its own exports, billions of dollars in funds have flowed into Thailand and other emerging markets in search of higher yields. That is pushing up the value of local currencies against major global counterparts such as the U.S. dollar and Japanese yen. It also is giving businesses a new, and sometimes perplexing, opportunity: purchasing power. The Thai baht has risen as much as 6% against the dollar since the beginning of the year and many economists predict further gains, leading some businessmen to reckon the best response is to borrow heavily in dollars to expand their businesses. Chief among them is Dhanin Chearavanont, who turned a seed business into Thailand’s largest conglomerate, making himself the country’s richest man in the process.Earlier this year, the 74-year-old Mr. Dhanin completed the purchase of Chinese insurance firm Ping An for $9.4 billion. His Charoen Pokphand Group is now bidding $6.6 billion for Thai discount wholesaler Siam Makro MAKRO.TH 0.00% in what is shaping up as another Asian megadeal.

“If we borrow in U.S. dollars, we can benefit from the strong baht,” Mr. Dhanin explained to reporters as he toured a sprawling training campus for his companies’ staff just north of Bangkok a few weeks ago.

“It’s not good for exports, but the strong baht is a good opportunity for change,” he said. “We should buy new machinery, for instance, to make our businesses more productive. The cost will be cheap, and we’ll be more efficient and produce better-quality goods.”

Other players are adopting a similar tactic. Charoen Sirivadhanabhakdi, the man behind Thailand’s Chang beer, earlier this year acquired Singapore-based soft drinks and property firm Fraser & Neave Ltd. F99.SG -0.11% for $11 billion to help extend his reach in other parts of Southeast Asia.

Governments also are developing a taste for dollar-denominated debt. Thailand is considering whether to launch its first dollar bond since 2003, while Malaysia is assessing the options for financing a huge multibillion-dollar investment-spending program. Both Indonesia and the Philippines are ramping issues sales of dollar-based debt.

Some Thais aren’t quite so sure that a rising baht is a good thing. Thailand’s Finance Minister Kittiratt Na Ranong is calling for the country’s central bank to cut interest rates from the current policy rate of 2.75% before Thai exports are undercut by cheaper alternatives from competitors in places such as Vietnam or China.

Thailand central bank governor Prasarn Trairatvorakul so far has resisted the clamor to cut rates, saying there is no real need for it. Worries that the U.S. will unwind its quantitative-easing program also complicate the future direction of currencies such as the baht.

The apparent resilience of Thailand in adapting to a stronger baht is encouraging to billionaire Mr. Dhanin, who argues that the price he is paying for Siam Makro is worth every baht because of the way a rising currency is supporting local consumer spending.

Populist policies such as higher minimum wages and tax rebates for first-time house and car buyers fatten wallets and offset slower export growth, says Jun Trinidad, an economist at Citigroup C +2.50% . He notes that where exports are growing, it is to other similarly fast-growing consumer markets. Thailand’s exports to other emerging Asian economies rose 6.1% year-over-year in March, compared with a 0.4% decline in shipments to the “big three” markets, the U.S., Europe and Japan.

For some investors, vindication also might be a powerful motivator.

In December, Indonesia’s Salim Group bought back direct control of auto makerIndomobil Sukses Internasional IMAS.JK +0.95% in an $809 million deal after earlier selling it off to repay debts racked up during Asia’s late-1990s financial crisis.

With plans to turn Siam Makro into a Costco COST +1.57% -like pan-Asian wholesaler, Mr. Dhanin has some advice for Thailand’s central bank: Don’t interfere with the baht, he told reporters. It is better just to let it rise.