Foreign investors unfazed by problems in Thailand
BANGKOK: The one remaining three-bedroom apartment at The Park, a luxury condominium complex under construction in the heart of Bangkok, goes for $1 million. How about a discount, given the concerns about political stability in Thailand?
“We have no discounts - the price is fixed,” said Kanokrak Rerksopist, a saleswoman, as she showed a visitor around the display unit.
Kanokrak does not need to haggle: Thais, Europeans and other foreigners have bought up all but a handful of units in the 28- and 35-story towers, which are scheduled to open later this year.
Whether it is buying high-end real estate or shares in the Thai stock market, foreigners are pumping money into Thailand these days, apparently confident that the generals who seized control in the September coup will eventually hand back power and the country will return to political normalcy.
This week, foreigners have helped push the Thai stock exchange to its highest level since the financial crisis that began here a decade ago, with net foreign purchases Monday and Tuesday of $300 million, according to Keith Neruda, head of Thailand research at UBS Securities in Bangkok.
“I dont think it was coming in on any specific news,” Neruda said of the sudden cash infusion. “I think it was out there and looking for a home.”
Part of the reason Thailand has continued to attract foreign investment, analysts have said, is that fund managers are so preoccupied with finding decent returns on the trillions of dollars they manage that events that once scared them away - bombings, military coups and general political instability - are discounted or glazed over.
With the foreign money flowing in, the baht has continued its upward march against the dollar, advancing 0.2 percent to 34.19 Wednesday, a level last seen in September 1997.
“Investors have become increasingly insensitive to political risk,” said Frederic Neumann, the chief Thailand economist for HSBC in Hong Kong. “The moment political risk eased a little bit in Thailand, money was just pouring in the door.”
Neumann said a similar thing was happening in Pakistan, where clashes Tuesday between the police and supporters of a radical mosque in Islamabad left at least 10 people dead.
“This Taliban-style gang takes control of a mosque and the currency is soaring ahead and the stock market is booming,” Neumann said. The Karachi Stock Exchange index has risen about 38 percent since the beginning of the year.
In Thailand, the political situation is still unsettled. The general who led the September coup, Sonthi Boonyaratglin, has suggested that elections that were promised for this year could be pushed back to 2008. A group appointed by the generals has drafted a new constitution, but the timing and success of a nationwide referendum to ratify it remain in question.
What seems to have cheered investors is the generals moves against the man they removed from power, Thaksin Shinawatra. In recent weeks, Thaksins assets were frozen, he was charged with corruption and he and 110 of his allies were banned from politics for five years.
“It looks like the junta is getting its act together,” Neumann said. “People are starting to look beyond the elections of November or December or whenever.”
Yet the economic outlook for the country is mixed. Exports of Thai cars, electronics and agricultural products continue to surge - one reason for the continued appreciation of the baht. But the banking system now has one of the highest levels of nonperforming loans in Asia, 8.7 percent, according to Neruda, of UBS. By contrast, bad loans account for 2.9 percent of lending in Singapore and 0.6 percent in Hong Kong.
With domestic consumption low, the government hopes to prime the pump with a larger budget deficit planned for next year. Yet much of the increase is in military spending, which may not trickle down into the general economy.
Despite these doubts, foreigners continue to show considerable confidence in Thailand.
From January to May this year, the Thai Board of Investment received applications for 123 billion baht, or $3.9 billion, worth of foreign investment, up 35 percent from the same period last year.
The main Thai stock market index, largely driven by foreign buying, has risen about 21 percent since the beginning of the year. Foreign investors have bought $3 billion more than they have sold on the Thai stock exchange since January. Thai investors have been net sellers of the same amount.
Foreign tourists continue to arrive in record numbers despite the New Year bombings in Bangkok that killed three bystanders and the Muslim insurgency in southern Thailand. From January to April, 5 percent more foreign tourists arrived at Bangkoks international airport than in the same period last year. In Phuket, the increase was 21 percent and in Chiang Mai, 9 percent. Overall, about 14 million tourists visited Thailand in 2006.
