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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

Fourth quarter 2013 GDP growth was at a much lower run rate than this, however, at just 0.6%. Exports are 70% of GDP. However, as Thailand’s major trading partners are Japan, China, Europe and the US, they are not getting much external help. Prices of some agricultural exports have been falling as a result.

Overall exports fell in January. The political uncertainty and weak external demand have led to a fall in investment by companies. There has also been a knock-on effect on consumer confidence, evidenced by a 46% year-on-year drop in car sales.

Aberdeen Asset Management does not think Thai stocks are particularly attractively valued at the moment, though it does have a reputation for being conservative. After a strong run of performance by the Thai market, the middle part of 2013 was problematic. The trigger was the Federal Reserve announcement it was considering reining in quantitative easing. Downgrades to economic growth in August were also unhelpful (technically Thailand was in recession in the first half of 2013) and, to compound this, the baht was also weak.

ANT is managed by a team based in Thailand. They try to generate capital growth (income is a by-product). As with other Aberdeen funds, the team is tasked with constructing a portfolio of well run, good quality companies with low leverage and good long-term cash flows.

ANT’s portfolio is fairly concentrated, with 35-40 holdings. The top 10 account for just over 50% of the fund. They do make significant bets against the benchmark. Current overweights are to the insurance, media and finance sectors, with underweights in communications and technology.

Today ANT trades on a discount of about 16% which is towards the lower end of its recent range. It has a market cap of £79 million, which makes it a bit on the small side and harder for its directors to recommend buy-backs. It faces a liquidation resolution if its discount exceeds 15% on average over the 12 weeks before year-end (28 February).

As I write this, ANT’s final results are due and I fear this liquidation resolution might have been triggered. It would be a shame if this fund disappeared, especially if its liquidation was forced while Thailand is out of favour.

James Carthew is a director of Marten & Co

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