Foreign Investors Dumping Thai Stocks, Amid Falling Exports and Weakening Baht
BANGKOK – Foreign investors are dumping Thai stocks as fast as they can as Thailand’s military led government struggles to deliver on pledges to revive economic growth.
Overseas funds unloaded a net $774 million of Thai shares in July as the benchmark Stock Exchange of Thailand (SET) Index fell 4.3%. The baht is trading near the weakest level in more than six years after slumping 3.4% against the United States dollar last month.
The sell off suggests international money managers are losing patience amid falling exports, weak corporate earnings and a contraction in manufacturing. Prime Minister Prayut Chan-o-cha has failed to make much headway on planned investments in transport infrastructure, disappointing investors who had bet the projects would help kick-start Southeast Asia’s second-largest economy.
“We still don’t see any bargains,” said Roshan Padamadan, a Singapore-based money manager at Luminance Global Fund. “A dark cloud is hanging over the horizon.”
The Ministry of Finance last week cut its forecasts for exports and gross domestic product growth for a third time this year. A factory output index has fallen every month but one since March 2013, while exports have declined each month this year. The government has disbursed less than half the 450 billion baht ($13 billion) earmarked for roads, mass transit and other infrastructure projects in the fiscal year ending Sept 30.
The SET Index dropped 0.4% to 1,434.79 as of 10.22am in Bangkok on Monday, heading for the first decline in three days. The baht fell 0.1%.
The SET gauge entered a correction in July after dropping 11% from its Feb 13 peak. The measure trades at 13.7 times projected 12-month earnings, or 8.7% more expensive than its five-year average.
Foreign outflows may abate as traders with short-term strategies may have already sold their holdings, said Juckchai Boonyawat, the Bangkok-based chief distribution officer at Manulife Asset Management Co. International investors have sold $1.24 billion of Thai stocks so far this year, following withdrawals of $1.09 billion in 2014 and $6.21 billion in 2013.
“Overseas investors with a long-term strategy are the ones who still hold Thai stocks,” Mr Juckchai said. “We expect the government’s spending to come into effect from the fourth quarter onward. We are overweighting some construction companies, which will directly benefit from that state spending.”
Thailand’s tourism sector is also getting a boost from the baht’s 6.4% plunge over the past six months. The SET Tourism & Leisure Index has risen 7.3% this year, compared a 3.8% decline for the benchmark gauge.
Still, lacklustre earnings in the broader market are deterring investors. Profits for SET index companies grew less than 4% in the three months ended June 30, after declining for three straight quarters through March, according to data compiled by Bloomberg.
“Listed companies’ earnings growth has been disappointing as a result of the weak economy,” said Win Phromphaet, the head of investment at Social Security Office, which overseas about $37 billion as Thailand’s largest investor.
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