Thailand Retains Attractiveness for Investment, Despite Floods

Thailand should recover well from the disastrous floods, as impacts - including those on banks and non-bank corporates - should be short-lived, said Mark Mobius, a global investor and emerging markets fund manager.

"We believe Thailand should also remain an attractive place for foreign direct investment (FDI) due to location advantages, a supportive business environment and highly competitive workforce. While devastating in the near-term, we believe that impact from the flooding should prove short-lived, and that Thailand should recover well from this disastrous event," he said in his note in Franklin Templeton Management's website.

The executive chairman of Templeton Asset Management expects the banking sector to be among the sectors to be negatively impacted, as the floods inundated seven industrial estates and 10 per cent of agricultural farm land. As a result of a downgrade in projected economic growth by the Thai central bank of about 2 per cent for 2011, "we anticipate bank earnings could drop by more than 2 per cent."

He also expect margins for consumer companies to be hard hit as a result of higher raw material prices as well as higher distribution costs. However, that could balance out if those companies are able to raise prices. "We anticipate energy companies should not be impacted as negatively given that demand for energy will likely be increasing."

"While the consequences of the flood damage will negatively impact Thai corporate earnings, we believe the long term outlook for Thailand remains strong. In addition to the corporate tax cuts and various stimulus packages that have already been announced, the Thai government plans to spend Bt400 billion (US$13 billion) on investments in dams, irrigation and water management to restore the country," he said.

Source: The Nation
3rd November 2011