Foreigners flee Thai stocks as patience wanes over pledges

[BANGKOK] Foreign investors are selling Thai stocks at the fastest pace this year as the nation's military government struggles to deliver on pledges to revive economic growth.

Overseas funds unloaded a net US$774 million of Thai shares in July as the benchmark SET Index fell 4.3 per cent. The baht is trading near the weakest level in more than six years after slumping 3.4 per cent against the US dollar last month.

The selloff suggests international money managers are losing patience amid falling exports, weak corporate earnings and a contraction in manufacturing. Prime Minister Prayuth Chan-Ocha has failed to make much headway on planned investments in transport infrastructure, disappointing investors who had bet the projects would help kick-start Southeast Asia's second- largest economy.

"We still don't see any bargains," said Roshan Padamadan, a Singapore-based money manager at Luminance Global Fund. "A dark cloud is hanging over the horizon."

The finance ministry last week cut its forecasts for exports and gross domestic product growth for a third time this year. A factory output index has fallen every month but one since March 2013, while exports have declined each month this year.

The government has disbursed less than half the 450 billion baht (S$17.85 billion) earmarked for roads, mass transit and other infrastructure projects in the fiscal year ending Sept 30.

The SET Index dropped 0.4 per cent to 1,434.79 as of 10.22am in Bangkok on Monday, heading for the first decline in three days. The baht fell 0.1 per cent.

TOURISM BOOST

The SET gauge entered a correction in July after dropping 11 per cent from its Feb 13 peak. The measure trades at 13.7 times projected 12-month earnings, or 8.7 per cent more expensive than its five-year average.

Foreign outflows may abate as traders with short-term strategies may have already sold their holdings, said Juckchai Boonyawat, the Bangkok-based chief distribution officer at Manulife Asset Management Co International investors have sold US$1.24 billion of Thai stocks so far this year, following withdrawals of US$1.09 billion in 2014 and US$6.21 billion in 2013.

"Overseas investors with a long-term strategy are the ones who still hold Thai stocks," Mr Juckchai said. "We expect the government's spending to come into effect from the fourth quarter onward. We are overweighting some construction companies, which will directly benefit from that state spending." Thailand's tourism sector is also getting a boost from the baht's 6.4 per cent plunge over the past six months.

The SET Tourism & Leisure Index has risen 7.3 per cent this year, compared a 3.8 per cent decline for the benchmark gauge.

Still, lackluster earnings in the broader market are deterring investors. Profits for SET index companies grew less than 4 per cent in the three months ended June 30, after declining for three straight quarters through March, according to data compiled by Bloomberg.

"Listed companies' earnings growth has been disappointing as a result of the weak economy," said Win Phromphaet, the head of investment at Social Security Office, which overseas about US$37 billion as Thailand's largest investor.

BLOOMBERG