Aberdeen New Thai star Adithep Vanabriksha says shrewd smaller companies are already capitalising on the opening up of Burma (Myanmar).
Thai firms have been quick to get a foot in the new market, Vanabriksha said, with companies such as Siam Cement striking deals to set up operations in the Southeast Asian republic.
‘Companies are building on this now, selling products and investing there,’ Vanabriksha said. ‘Now all roads lead to Myanmar.’
Along with Siam Cement, which accounts for some 6% of New Thai’s portfolio, Thailand’s state-owned PTT Exploration and Production, where 5% of the trust’s assets are exposed, last year agreed a deal to explore for oil and gas in two of Burma’s onshore petroleum blocks, an area spanning 13,000 square kilometres.
PTT, Thailand’s largest energy company, is one of a number of businesses that are keen to capitalise on Burma’s natural resources and recently told its investors Myanmar is a key hub for its Southeast Asian exploration efforts.
It has also been looking at whether to invest in a power plant in the Dawei industrial zone, located in southern Burma.
A host of Thai firms are spearheading a huge energy production project in the Dawei territory that will eventually involve the installation of pipelines to transport energy straight to Thailand.
Moreover, while it is no secret Burma is resource rich – with ministry of energy estimates tipping inland crude oil production at 9,300 barrels a day and its total natural gas supply at 17.4 trillion cubic feet – there is only one domestic oil company, Myanmar Petroleum Resources.
Elsewhere in his portfolio, Vanabriksha welcomed a raft of tax reforms announced in Thailand before Christmas, in particular the government’s decision to lower the personal income tax ceiling and introduce a string of new tax brackets.
The move, which took effect at the start of 2013 and benefited around two million tax payers, coincided with a 3% reduction in the rate of corporate income tax.
As a result, the manager of the £108 million trust said, sentiment had been boosted and he believes that even after strong gains in the Thai equity market in December, companies and their investors stand to reap the benefits of these reforms.
Thailand’s biggest risk
But while these steps intended to boost growth are positive, Vanabriksha cautioned that Thailand’s difficulties are far from over. He said the political landscape remains a risk, and despite navigating a change in leadership last year to post the investment trust sector’s best returns, Vanabriksha believes that instability within the Thai government will continue to pose a threat.
‘Terms are four years but the government changes more often and that can affect everything. I think the main risk here is politics,’ he said.
Vanabriksha added that former prime minister Thaksin Shinawatra, who was forced to relinquish power in 2006 following a military coup, remains an influential but divisive figure, and this could disrupt Thailand’s leadership.
As a bottom-up investor, Vanabriksha said he is confident he and the Aberdeen New Thai team can put these tensions to one side and find companies that can overcome these challenges.
Last year, the vehicle notched up a 56% share price total return and a net asset value total return of 49%, while the FTSE Thailand index gained 35%.
‘Thailand has had a lot of big picture macro problems over the last few years, such as the coup, problems snowballed from the yellow and the red shirts [supporters of and opponents of Shinawatra respectively] and it became a real mess,’ Vanabriksha said.
‘At a stock level though, we had a really good time. The companies are really good [in Thailand] and are doing well, and geographically they are well situated. Within a few hours’ flight Thailand is within reach of a two to three billion population.’