Thailand a beacon of hope for investors in emerging Asian markets: seminar

The United Kingdom-based global investment company hosted a seminar titled "2023 Global Outlook: Embrace the Perfect Storm" in Bangkok on Tuesday.

Darunrat Piyayodilokchai, Abrdn's head of equities Thailand, explained the Thai equity market's upbeat outlook to three key positive factors: strong economic recovery momentum; supportive foreign information fund, especially from the tourism industry; and a short-term catalyst, such as the general election in May.

"This year, tourism will be critical to Thailand's growth. Tourist arrivals in 2023 have been revised from 20-22 million to 25-28 million. Every million people contributes 0.3% to the country's gross domestic product (GDP). So, tourism will contribute approximately 1-1.75% to GDP this year, helping to offset the export sector, which tends to slow with global recession," she stated.

Despite the global recession, export slowdown, high costs, earnings decline, political tensions, foreign exchange volatility, and the impending implementation of a local financial transaction tax in May, Darunrat believes Thailand would be able to manage the risk.

Thailand will be one of two Asian countries with higher growth in 2023 than in 2022, according to Abrdn. The country's growth rate is expected to increase to 3.6% this year, up from 3.3% last year.

Pongtharin Sapayanon, Abrdn's head of fixed income and asset allocation Thailand, suggested that of all asset investments (equities, fixed income, bonds, real estate, commodities, and foreign exchange), Asia's emerging market is preferable due to the region's positive growth and China's reopening.

However, investors must be selective and conservative. This means they must carefully consider the fundamentals of each asset, such as corporate profitability, investment grade bonds and credits, commodity demand and supply balance, and a long history of consistent dividends, he explained.

Aside from Thailand, Abrdn recommends that Thai investors look for opportunities to grow their portfolio in China.

According to Nicholas Yeo, Abrdn's director and head of equities, the property sector and Covid-19 may be two factors holding China back, but the easing of its policy after its post-Covid reopening, rapid development of its own innovation, and significant revenue growth reliant on the domestic market make Asia's largest economy promising.

He emphasised that China is investible, but it takes time and expertise.

China is one of the few major economies that does not experience inflation. Flexible government policies can be implemented, he noted.

Meanwhile, there is an opportunity for equity in China because 62% of the country's household pension allocation is heavily invested in real estate, which is a risky investment. Hence, China is encouraging its people to shift from real estate to the capital markets (equities and fixed income).

Jeremy Lawson, Abrdn's chief economist and head of research institute, said the global economy is still facing multiple and reinforcing headwinds this year, particularly recession, inflation, and geopolitical tensions.

According to him, inflation will be the most worrying and troubling factor when it becomes more persistent as a result of labour market tightness, wage growth, and higher expectations.

This scenario will force major central banks, particularly the US Federal Reserve, to keep raising interest rates in order to halt inflation and contain it at the 2% target. The continued hike in interest rates may result in a slowing of business activity and, eventually, cause a recession.

Although the inflation peak has already passed, Lawson warned that core inflation (excluding food and energy prices) is likely to be stickier, forcing central banks to continue to tighten policy in 2023, making the next 12 months globally occupied with recession.

However, there are some opportunities for investors during this global downturn. Lawson suggested gradually increasing exposure to high-paying companies, then take advantage of alternatives that are truly uncorrelated to traditional equity and fixed income markets, and to not overlook China.