Eric Mok, senior executive director and portfolio manager at Franklin Templeton Investments
Thailand’s government has set aside a budget of $24bn for infrastructure and logistics in 2018, according to the country’s Ministry of Transport. Mok said he expected that the government’s goal to improve the country’s infrastructure would spur demand in credit and financial services for individual projects.
One of the main infrastructure developments in Thailand is the Eastern Economic Corridor project − a highway linking up the Mekong River region, which includes Myanmar, Thailand, Laos, Cambodia and Vietnam. Apart from banks, local property developers and commodity producers are also likely to benefit from the project, Mok said.
In 2017, the average returns of Thailand’s stock market lagged behind those in other Asian countries. Mok said the major reason for the slowdown was the year-long period of mourning for the late King Bhumibol Adulyadej, who died in October 2016.
The mourning period tends to have an impact on economic and business activity. Mok added that following the end of mourning in October 2017, Thailand’s economy − the second biggest in Southeast Asia, after Indonesia − is expected to accelerate this year.
In Indonesia, the outlook for infrastructure development is also positive, Mok said. Having gained from the recent rise in commodity prices, the authorities in Indonesia are in position to plan bigger developments. Chinese coal and aluminium mining companies that own operations in Indonesia also stand to benefit, he added.
Shock absorbers?
The risks from external shocks are mitigated in Thailand and Indonesia because their economies are increasingly driven by domestic consumption rather than exports, Mok said. In 2016, emerging markets as a group generated an average of 67% of revenue domestically, Mok noted, citing data from Factset. The EM government balance sheets also benefit because most of the key countries have a lower average level of debt, as percentage of GDP, compared to that in developed markets.
Southeast Asia is also expected to reap investment opportunities from China’s massive belt-and-road infrastructure initiative, HSBC Private Bank’s head of investment strategy in Asia Fan Cheuk-wan said recently.
Mok co-manages the Templeton Asian Growth Fund. As of the end of last month, the fund was overweight in Indonesia and Thailand, which accounted for 20.5% and 18.5% of assets, according to FE.
By comparison, its benchmark, the MSCI All Countries Asia ex-Japan Index holds 2.59% in Indonesia and 2.63% in Thailand.
The fund’s major holdings include two commercial banks in Thailand, Kasikornbank and Siam Commercial Bank.
The fund’s 3-year performance against its sector, the MSCI AC Asia ex-Japan and Stock Exchange of Thailand Index
