Aberdeen Buys Thai Stocks in Biggest First-Day Rout on Valuation

Aberdeen Buys Thailand’s Stocks Amid Worst First-Day Drop

The worst start to a year for Thai stocks since at least 1988 spurred Aberdeen Asset Management Plc to buy after valuations fell to the lowest levels in 18 months. The benchmark SET Index tumbled 5.2 percent yesterday amid concern that prolonged political unrest will curb economic growth. That left the measure valued at 10.8 times earnings estimates for the next 12 months, the cheapest since June 2012, data compiled by Bloomberg show. The gauge’s 14-day relative strength index sank to 19.91, below the 30 threshold that some traders use as a signal to buy. The last time it fell this low, in October 2008, the SET rallied 20 percent in two weeks.“I was very busy buying stocks yesterday,” Adithep Vanabriksha, the Bangkok-based chief investment officer for Thailand at Aberdeen Asset Management, which oversees about $324.6 billion worldwide, said by phone today. “I still strongly believe that the current political crisis will be resolved in a peaceful way and the stock market will rebound.”

While exchange data showed local institutions unloaded stocks yesterday after political groups opposed to caretaker Prime Minister Yingluck Shinawatra threatened to surround government ministries and occupy major intersections in Bangkok on Jan. 13, foreign investors were net buyers. Charamporn Jotikasthira, president of the Stock Exchange of Thailand, said in a phone interview today that the slump in equities is temporary and valuations are attractive.

Political Unrest

The SET’s drop yesterday followed a 6.7 percent retreat in 2013. The gauge slipped 0.5 percent to 1,224.62 at the close today, after earlier rallying as much as 0.3 percent. The MSCI Asia Pacific Excluding Japan Index sank 1 percent.

The baht weakened for a record 12th day today, falling 0.2 percent to 33.01 per dollar. The yield on 3.625 percent government debt due June 2023 was steady at 3.87 percent today, and has declined 5 basis points since Dec. 27, according to the Thai Bond Market Association’s data compiled by Bloomberg.

Yingluck’s administration has endured more than two months of street demonstrations that protest leaders say are aimed at erasing her family’s political influence. Allies of Yingluck’s brother, Thaksin Shinawatra, have won the past five elections, including two since his ouster in a 2006 coup. Eight people have been killed in clashes between rival political groups in the past month.

Weak Sentiment

The prospect of prolonged tension will make most investors reluctant to buy Thai shares despite cheaper prices, said Prasert Khanobthamchai, the chief investment officer at Kasikorn Asset Management Co., Thailand’s biggest private money manager with about $28 billion of assets.

Political uncertainty may delay the government’s 2 trillion baht ($60.6 billion) infrastructure spending plan and curtail private investment, while the weak baht will raise import costs, Kittiratt Na-Ranong, Thailand’s caretaker finance minister, told reporters in Bangkok today.

“Market sentiment is very weak with no foreseeable solution on the current political deadlock in the near future,” Kasikorn’s Prasert said by phone yesterday.

Global investors sold a net $6.2 billion of Thai equities in 2013, the most since Bloomberg began compiling the data in 1999. Foreigners bought a net $3.8 million yesterday, the first inflow in three days.

Stock Rallies

Thai stocks have rebounded after past periods of political tension. While the SET Index (SET) 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 on Sept. 19, 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 during the following 12 months.

Aberdeen favors energy stocks, including PTT Exploration & Production Pcl (PTTEP), along with power producers, health-care service providers, phone companies and insurers, Adithep said.

“Thailand has come out strongly from a number of big crises in the past few years,” he said. “I don’t expect the political tension will turn much more violent.”

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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