There is a good reason investors have been clamouring to invest in emerging markets.
With the West spinning its wheels, the truth is there’s a good deal of money to be made in these markets in 2012.
One emerging market I like is Thailand.
That’s true even though Thailand has only been in the news recently for its terrible floods, which have disrupted supply chains worldwide.
That’s understandable; the floods drove down Thai gross domestic product by no less than 9% in the fourth quarter of 2011.
Nevertheless, the level of global disruption caused by these floods indicates just how crucial Thailand has become to the world economy.
And since the place is now well run, and looks to be set to have a nice catch-up year in 2012, with further decent growth in 2013, as investors we’d be wise look carefully there.
Thailand: A Real Emerging Market
Here’s why things have changed for the better in Thailand.
From 2001 to 2011, Thailand was engaged in a massive power struggle between the election-winning Thaksin Shinawatra, who drew support mostly from rural areas, and the Bangkok elite.
Prior to that Thailand had developed very rapidly until the 1997 Asian crisis, but the great majority of its development had been in Bangkok, with innumerable wasteful real estate prestige projects.
Thus Thaksin’s reorientation of the economy towards rural areas was a good idea.
But the Bangkok elite did not take kindly to it, and from 2005 engaged in street protests, prosecutions and undemocratic governments, slowing Thailand’s economic development as foreign investors became deterred.
That changed in July 2011. Thaksin’s sister Yingluck Shinawatra won a big enough victory in the general election that she could not be stopped.
Accordingly, Thaksin’s policies of free market economic development with an emphasis on rural areas rather than Bangkok have again been implemented.
As a result, Thailand’s growth prospects look good, with The Economist’s team of forecasters predicting 6% growth in 2012, after a flood-affected 0.1% in 2011 and GDP of $346 billion. In 2013 growth is forecast to be 4.6%.
Thai inflation is also low at around 3% and the government deficit is moderate at around 3.4% of GDP. Debt is also well under control even with a central bank that has been loosening somewhat to bring rapid recovery from the floods.
With interest rates still at a reasonable 2.8%, there seem few economic obstacles to Thailand’s growth.
Political obstacles are a different matter; though the government’s opinion poll ratings remain high; the opposition remains embittered and is heavily concentrated in the capital.
Thailand’s economy is somewhat short on energy and minerals but well balanced between manufacturing and services, with a strong agricultural sector. Thailand is a major exporter of rice and fishery products.
In the manufacturing sector, its labour costs are now relatively low compared to other Southeast Asian centres and competitive with coastal China, so it benefits greatly from participation in China-centred supply chains.
Its tourism sector is spectacularly successful. With 19 million visitors in 2011, up 20% from the previous year, Thailand has doubled the volume of ten years earlier. Bangkok is now third behind London and New York among top city destinations.
Thailand has a substantial oil industry but is nevertheless a substantial importer, so the country would benefit from an easing in global commodity prices.
For investors looking for emerging market growth, Thailand is not a bad place to start.
Martin Hutchinson
Global Investing Strategist, Money Morning (USA)
Publisher’s Note: This is an edited version of an article that first appeared in Money Morning (USA)
From the Archives…
A Better Inflation Bet Than Gold?
2012-03-23 – Kris Sayce
3D Printing: How “Desktop Factories” Will Create the Next $1 Trillion Industry
2012-03-22 – Michael Robinson
How to Invest in the Fastest-Growing Energy Business of the 21st Century
2012-03-21 – Aaron Tyrrell
Why You Should Build Your Wealth Using the Biggest BRICS Possible
2012-03-20 – David Thomas
Oil Getting Ready For Its Next Rally
2012-03-19 – Dr. Alex Cowie
For editorial enquiries and feedback, email letters@moneymorning.com.au
