The bill successfully sailed through the pro-Thaksin lower house before being aborted by the government as evidence of discontent spread throughout Bangkok. By the beginning of last week, protesters occupied (albeit briefly) the Ministry of Finance, the Foreign Ministry and the army headquarters amongst other buildings, leading some commentators to speculate that an election will be called soon, which would be the third in just six years.
Whilst sentiment towards the Thai equity market has understandably turned more negative, as long-term investors we tend to view such instability as a potential opportunity. We expect some companies will have been incorrectly ‘thrown out with the bathwater’, inadvertently removing the good with the bad - we will continue to search for such mispricing. However, we will monitor the political environment in case of a substantial deterioration that may impact the long term fundamental worth of the companies we hold.
Our recent partial sale of mobile phone operator Advanced Info Services was due to expectations of rising competition and was not influenced by politics. Whilst Krung Thai Bank and real estate developer LPN could be impacted by a temporary slowdown in economic growth, current valuations provide a more than sufficient margin of safety for the portfolio, particularly when dividends are taken into account. Our other Thai holding, chicken, pork and shrimp producer CP Foods has been largely resilient to the sell off as its earnings turnaround continues to gather pace. In fact the stock was up 17.3% for the month of November versus a 4.9% fall in the Stock Exchange of Thailand Total Return Index in local currency terms.
These are fund manager views at the time of writing and may differ from those of other Henderson fund managers. The information should not be construed as investment advice. Before entering into an investment agreement please consult a professional investment adviser.
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