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Trust Insider: Aberdeen New Thai offers lesson in single country risk

by James Carthew on May 06, 2014 at 00:01

Trust Insider: Aberdeen New Thai offers lesson in single country risk

For a while, when I first started looking at the investment company sector, it seemed as though single country funds were deeply unpopular.

Part of the problem might have been that their focus on a single country made it easy for activists to hedge the underlying portfolio but I think the perennial problem with these funds is that countries fall in and out of favour with investors. Aberdeen New Thai (ANT) is a survivor, however.

Launched in 1989 it has coped with a number of booms and busts, including the Asian currency crisis and the credit crunch. Its long-term performance looks very good – since launch its shares have risen almost fourfold – but there have been periods when it has struggled.

Single country funds exhibit a much greater degree of political and economic risk than regional ones, as Ukraine Opportunities is finding out now. Often, with hindsight, these periods turn out to be buying opportunities but occasionally investors will lose faith to such an extent that the fund ends up being wound up.

Political crises, floods and external economic problems have beset Thailand in recent years and now it is attracting attention for all the wrong reasons as rival political factions vie for control. Despite the image many have of an easy-going country, politically it is quite unstable, with 18 coups or attempted coups since 1932.

The government is headed by Yingluck Shinawatra, whose brother Thaksin was ousted as prime minister by a military coup in 2006. They are supported by the red shirt faction, composed mainly of the rural population who are encouraged by populist measures such as rice subsidies. They face off against the yellow shirts, who are mainly made up of the middle and upper class.

They rail against the corruption they say is associated with the Shinawatras. Street protests, sometimes turning violent, have been a long-running feature of the dispute.

In January 2014, the government declared a state of emergency to cover the period leading up to the election, planned for February. This was not lifted until the middle of March.

Protesters disrupted the elections however. These returned the government to power but street protests continued. In March the constitutional court declared the elections invalid, as they hadn’t been held on one day as required by the constitution.

Thai companies are getting on with things as best they can. At the start of 2014 Aberdeen thought the Thai economy, which had been generating 4-5% growth, could manage to match this pace in 2014.

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