Tensions put Thailand on sidelines of ASEAN investment plans

Monday, 31 March 2014 00:35 - - {{hitsCtrl.values.hits}}

REUTERS: Continuing political uncertainty, derailed infrastructure plans and sliding domestic demand are making big Thai companies look more keenly at investing elsewhere in the neighbourhood rather than in Southeast Asia’s second-largest economy.

At the Reuters ASEAN Summit, two of the country’s largest companies, Siam Cement PCL and Charoen Pokphand Foods PCL, outlined growth strategies that are now firmly focused outside their home country. “We are investing more in ASEAN and less in Thailand, where we focus on high value-added products,” Siam Cement Chief Executive Kan Trakulhoon said during an interview in Reuters Bangkok office on Thursday. CP Foods told the summit how it is targeting 75% of company revenue to come from foreign operations within the next five years, up from 65% currently. “Growth in emerging countries will surpass the domestic market,” said Chief Executive Adirek Sripratak, noting his company plans to expand in nearby Philippines and Vietnam. On Friday, there was another piece of gloomy data on the Thai economy, as factory output fell for the 11th straight month in February, by 4.4% compared with a Reuters poll forecast for a 3.5% drop. For months, the outlook for growth has worsened even though officials hope exports - which account for about 60% of the economy - will rise and lift the economy this year. The Central Bank recently cut its 2014 economic growth forecast to 2.7%, compared with 4.8% last October, just before anti-government protesters took to the streets to seek the removal of Prime Minister Yingluck Shinawatra. A decision earlier this month by the Constitutional Court to annul the result of the 2 February general election has plunged the country into political limbo, raising fears that the economy will struggle to pick up speed anytime soon. “If political crisis is prolonged, Thai cement demand is likely to be negative,” said Siam Cement’s Kan, who runs the country’s largest industrial conglomerate. That political uncertainty has been weighing on foreigners who invest in Thai securities. A 14 March research note from Nomura showed foreigners have been net sellers of Thai equities this year, with net sales of $ 837 million. Indonesia and Philippines by contrast have seen net purchases by foreigners of $ 1.01 billion and $ 171 million, respectively, so far in 2014. “If I look across the region, I would say there are better prospects than Thailand right now until we get some sort of resolution to the political overhang that remains there,” Andrew Swan, head of Asian equities at the world’s biggest money manager BlackRock Inc, said in a summit interview in Hong Kong on Wednesday. Political unrest could also threaten the country’s credit rating, which all three major rating agencies currently have on a stable rating of BBB+/Baa1, in the investment grade category.