In spite of its troubled past - or perhaps because of it - Thailand has always been considered the quintessential emerging market. In the early 1990s, its obvious growth potential - and apparent openness to foreign investors and tourists alike - made it an attractive destination for inward fund flows
"Thailand has been shooting up the rankings and now shares fourth spot with Taiwan"
Indeed, it was the sudden exodus of the huge amounts of money that had poured in which caused the collapse of the Thai baht - the start of the 1997 Asian financial crisis. Dodgy property investment financed with short term foreign capital was a recipe for disaster and when the balloon popped the collapse was devastating.
However, for the past nine years Thailand's wealth creation has been notable. Since the end of 2002, the total shareholder return for the MCI Thailand index has been 61% higher than for the region as a whole. This is a tribute to corporate leaders who realised that mistakes had been made - the easy bit - learned from them - harder - and went on to prosper – hardest. Nowhere is this more apparent than with corporate governance. Thailand has been shooting up the rankings and now shares fourth spot with Taiwan in the CLSA/ ACGC's latest corporate governance survey, behind only Singapore Hong Kong and Japan.
Furthermore, what is holding back its ranking is not the corporate sector itself but the country’s uncertain political situation.
However, with elections just around the corner it is just possible that this barrier will be significantly lowered. Indeed, the country has been the region’s star performer in the equity markets over the past year or so.
Thailand has invested heavily in director training, adopted best practises with respect to accounting standards, and can now boast a strong and vibrant corporate sector.
Companies themselves tend to be in better shape than many of their counterparts elsewhere in Asia: the MSCI Thailand index’s return on equity is a very healthy 17.2% compared with 13.4% for the region as a whole. As an investor, such fundamentals provide me with both comfort and excitement.
Published in Investment Adviser
The views expressed in this communication are those of Peter Elston at the time of writing and are subject to change without notice. They do not constitute investment advice and whilst all reasonable efforts have been used to ensure the accuracy of the information contained in this communication, the reliability, completeness or accuracy of the content cannot be guaranteed. This communication provides information for professional use only and should not be relied upon by retail investors as the sole basis for investment.