Thai investors rush to cash in on AEC
Thai consumer product manufacturers and the energy sector are continuing their overseas investment spree to capitalise on new growth triggered by the imminent integrated Asean market.
The Asean Economic Community (AEC) is home to 603 million people and offers many opportunities, said ML Chayotid Kridakon, JPMorgan's managing director and senior country officer for Thailand.
The low-interest-rate environment, reasonable asset prices and solid balance sheets have also encouraged outbound investment by Thai companies, he said.
Companies including Thai Union Frozen Products Plc, Siam Cement Plc, PTT Plc, Thai Beverage Plc and Charoen Pokphand Group have led the flurry of outward investment in recent years.
ML Chayotid said Thailand was also increasingly an investment destination for multinational companies keen on capturing dynamic growth in Southeast Asia.
Foreign companies are eyeing Thailand and Indonesia as their manufacturing hubs in the region, but Thailand has an advantage with better supply chains, he said.
JPMorgan is financial adviser for the initial public offering of Osotspa Co, the country's oldest consumer product conglomerate. Osotspa is restructuring its group to seek listing on the Stock Exchange of Thailand next year.
Meanwhile, Benjamin Shatil, JPMorgan's economist in the emerging Asia research group, forecasts Thailand's GDP growth will reach 4.2% this year after dismal growth estimated at 0.5% last year.
Thailand's overall economic outlook remains uncertain in 2015 and is largely dependent on the government's spending plans, he said in a research paper.
The 4.2% growth projection takes into account a 25-basis-point cut in the policy rate and public investment in small projects such as road expansion where investment can be kick-started rapidly.
"If large infrastructure projects such as high-speed trains can begin this year, growth will be higher than 4%," he said.
On the contrary, if small investment projects are delayed, it could hurt GDP by 0.8-1 percentage point, said Mr Shatil.
Regarding the oil price slump, he estimated that Thailand's headline inflation would probably slip below the central bank's lower-end inflation target of 1.5% this year.
"Low inflation will give space for a rate cut, but it is not the main factor," Mr Shatil said, adding that a policy rate reduction was expected if fiscal stimulus failed to boost the economy.
JPMorgan also forecast that the US Federal Reserve would start normalising interest rates in June but a rate rise in the world's largest economy would have only a minor effect on capital movements in the Thai market, as foreign investors' holdings of equities and bonds are relatively small.
Foreign investors pulled almost 200 billion baht out of the Thai bourse in 2013 and offloaded another 36 billion baht last year.