Emerging Markets Equities

Invested in Thailand

Even with Thailand generally being at an economic standstill, good companies continue to do well though valuations remain elevated.
March 2019
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In 1932, Thailand peacefully changed its governmental system from an absolute monarchy to a constitutional monarchy. This friendly nation with vast lands of fertile soil, and borders with Myanmar, India, Indonesia, Malaysia, Laos and Cambodia, was set to thrive.

Fast forward to the military coup in 2014, and the country has been at an economic standstill ever since. Today, Thailand remains under military junta, having had 29 prime ministers, 20 constitutions, and 12 successful coups (out of 19 attempted).

While macro-wise this has led to time being wasted in terms of infrastructure spending and other regulatory advancements, good companies continue to do well though valuations remain elevated. It is likely that the Pheu Thai party that was ousted by the military in 2014 will get back into power again. We have seen time and again that when the military steps in, the ousted party grows even stronger. Even if they regain power, they will have to deal with a politically entrenched military who will continue to loom large over the government. This year’s elections come with a notable caveat – previously scheduled elections have been postponed every year since 2014. Despite these headwinds, Thailand has successfully managed to double its GDP per capita from the pre-Asian Financial Crisis peak.

In Thailand, we have a single investment in one of the leading banks, Kasikorn Bank. The bank was established in 1945, as Thai Farmers Bank, by the Lamsam family. The Lamsam family still has a large stake in the bank, albeit diluted during the Asian Financial Crisis, which is why the bank’s culture remains conservative. We like that the bank is biased towards SME (small and medium enterprises) and considers various sustainability factors before lending. During our trip, it was impressive to see technology playing a larger role in Thailand, where two-thirds of Kasikorn Bank’s customers use online and mobile platforms. The bank expects this number to reach 80% in 2019. Faster loan approvals for existing customers, convenience, and cost savings will benefit not only shareholders but also stakeholders, strengthening Kasikorn Bank’s positioning for many years to come.

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