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By Khettiya Jittapong and Orathai Sriring
BANGKOK, March 28 Continuing political
uncertainty, derailed infrastructure plans and sliding domestic
demand are making big Thai companies look more keenly at
investing elsewhere in the neighbourhood rather than in
Southeast Asia's second-largest economy.
At the Reuters ASEAN Summit, two of the country's largest
companies, Siam Cement PCL and Charoen Pokphand (CP)
Foods PCL, outlined growth strategies that are now
firmly focused outside their home country.
"We are investing more in ASEAN and less in Thailand, where
we focus on high value-added products," Siam Cement chief
executive Kan Trakulhoon said during an interview in Reuters
Bangkok office on Thursday.
CP Foods told the summit how it is targeting 75 percent of
company revenue to come from foreign operations within the next
five years, up from 65 percent currently.
"Growth in emerging countries will surpass the domestic
market," said chief executive Adirek Sripratak, noting his
company plans to expand in nearby Philippines and Vietnam.
On Friday, there was another piece of gloomy data on the
Thai economy, as factory output fell for the 11th straight month
in February, by 4.4 percent compared with a Reuters poll
forecast for a 3.5 percent drop.
For months, the outlook for growth has worsened even though
officials hope exports - which account for about 60 percent of
the economy - will rise and lift the economy this year.
The central bank recently cut its 2014 economic growth
forecast to 2.7 percent, compared with 4.8 pct last October,
just before anti-government protesters took to the streets to
seek the removal of Prime Minister Yingluck Shinawatra.
A decision earlier this month by the Constitutional Court to
annul the result of the Feb. 2 general election has plunged the
country into political limbo, raising fears that the economy
will struggle to pick up speed anytime soon.
"If political crisis is prolonged, Thai cement demand is
likely to be negative," said Siam Cement's Kan, who runs the
country's largest industrial conglomerate.
PRICEY POLITICAL 'OVERHANG'
That political uncertainty has been weighing on foreigners
who invest in Thai securities. A March 14 research note from
Nomura showed foreigners have been net sellers of Thai equities
this year, with net sales of $837 million. Indonesia and
Philippines by contrast have seen net purchases by foreigners of
$1.01 billion and $171 million, respectively, so far in 2014.
"If I look across the region, I would say there are better
prospects than Thailand right now until we get some sort of
resolution to the political overhang that remains there," Andrew
Swan, head of Asian equities at the world's biggest money
manager BlackRock Inc, said in a summit interview in
Hong Kong on Wednesday.
Political unrest could also threaten the country's credit
rating, which all three major rating agencies currently have on
a stable rating of BBB+/Baa1, in the investment grade category.
"If ongoing political uncertainty continues to drag, the
country might be on a watch list," Ng Kheng Siang, head of Asia
Pacific fixed income at State Street Global Advisors, which has
just over $2 trillion in assets under management, told the
summit on Tuesday.
Some corporates in Southeast Asia are generally overlooking
Thailand in favour of the faster-growing markets of Myanmar and
Cambodia, as well as further afield in Asia.
Singapore's Oversea-Chinese Banking Corp.,
Southeast Asia's second largest lender, said that despite a fall
in valuations in Thailand, it has little appetite to make any
acquisitions there at present.
"Culturally the Greater China market appeals to us a bit
more than the Thai market," said the lender's chief executive
Samuel Tsien, who is currently trying to buy Hong Kong's Wing
Hang Bank Ltd.
The chief executive of PT Astra International,
Indonesia's largest listed company by market capitalisation,
said it anticipates that Southeast Asia's largest economy could
overtake Thailand as the region's biggest auto market within two
years. Thailand is also a major production base for
international auto manufacturers, but Indonesia is hoping to
supplant it in coming years.
REDUCED INVESTMENT PLEDGES
Thailand's troubles are hurting its investment numbers. In
the first two months of 2014, pledges from foreign investors
were 43 percent lower than a year earlier - and those from
Japanese investors were down 63 percent.
"FDI this year may be less than $8 billion, the average
long-term rate, because manufacturing FDI will disappear quite a
bit as investors are waiting to assess the situation," said
Pimonwan Mahujchariyawong, an economist at the Kasikorn Research
Center in Bangkok.
However, some portfolio investors still see opportunities.
The $12 billion Templeton Asian Growth Fund, run by
emerging-markets investor Mark Mobius, increased its allocation
for Thailand to 27.12 percent in February, up from 24.7 percent
at the start of the year, according to data from Lipper.
That's a bet economists believe could still pay off in the
long-term, with Thailand's proximity to Myanmar, Vietnam, Laos
"Its integration into manufacturing supply chains around the
region suggests that FDI flows will remain positive in the
medium term," said Benjamin Shatil, an economist at JPMorgan in
Follow Reuters Summits on Twitter @Reuters_Summits
(Additional reporting by Nishant Kumar in HONG KONG; Writing by
Rachel Armstrong; Editing by Richard Borsuk)