A Guide to Investing in Thailand
There are some pretty surprising stats about Thailand if you aren’t too familiar with the country. It is 20th largest country in the world by population and when it comes to its economy, it ranks an impressive 32nd. The country has grown significantly in terms of economic strength and enjoys what would be described as “robust growth rates” driven by a thriving tourist industry and growing export market.
The country offers investors plenty of opportunities via EFTs, ADRs and of course the property market – a sector that offers investors excellent returns with minimal risk.
In this article we will explore the options that are available and point out some of the potential risks that everyone needs to be aware of.
Thailand’s economic performance in recent years has seen it become the second largest in Southeast Asia with only Indonesia performing better. However, it ranks only fourth in the region in terms of per capita income.
The growth of the Gross Domestic Product (GDP) has consistently averaged 4-5% p.a. A large number of car manufacturers have factories in the country along with several other businesses connected with the automobile industry.
The country continues to be a major export of rice and other agricultural commodities.
The Thai economy struggled after severe nationwide floods in 2011 but has seen an excellent resurgence since 2013. Inflation is marginally higher than the target and the country’s unelected leaders are doing all they can to bring this under control whilst wishing to protect the country’s economic growth. Some western analysts are sceptical but it seems other countries in the region retain confidence in Thailand.
ETFs in Thailand
One popular method of investing in Thailand is via Exchange Traded Funds (ETF) which are seen as offering diversification to investment portfolios as there is little to no correlation with western traded securities.
US investors have flocked towards the iShares MSCI Thailand Capped ETF which already has $300 million in total net assets.
This is viewed as the best fund for gaining exposure to the expanding Thai economy. This particular fund holds over 130 different securities that are split between a range of different sectors.
Buying Thailand ADRs and Stocks
Many investors will seek to achieve greater exposure to the Thai economy and will invest in American Depository Receipts (ADRs), basically American traded securities that will reflect foreign equities.
The problem with ADRs is that they lack diversification however they do allow investors to take advantage of more unique opportunities. ADR’s with banks such as Bangkok Bank and Siam Commercial Bank are some of the most popular and perhaps reflect the confidence in the banking sector in Thailand.
Property in Thailand
The property market in Thailand is booming especially in the capital Bangkok. Resort cities such as Pattaya and Phuket are also witnessing increasing investors coming from other parts of Asia, mainly China. Chinese investors usually look for properties valued at less than THB10 million and have become attracted to rental guarantee concepts in resort cities. Returns of between 5% p.a. and 10% p.a. are quite common.
Obviously, investors need to choose properties wisely but there is excellent potential to obtain capital appreciation and a regular income.
The Thai economy, like many globally, faces high levels of exposure to the Chinese economy. As mentioned, the country has struggled to meet inflation targets although this has been seen to have aided growth.
The strong Thai baht also makes Thai products and services more expensive but the currency is generally viewed as stable. Overall, there are a few risks but no more so than investing in other emerging markets and it should be recognised that Thailand is developing rapidly.