RCEP could lift Thailand's agri-based sectors: Maybank Securities report

THAI-LISTED companies that could benefit the most from lower tariffs owing to the Regional Comprehensive Economic Partnership (RCEP), which came into force on Jan 1, include Tipco Foods and Malee Group, a report by Maybank Securities stated.

Other potential beneficiaries named in the report, which was released on Monday (Jan 3), are Hana Microelectronics, Cal-Comp Electronics, Sri Trang Gloves, SNC Former, Kang Yong Electric, Wice Logistics and Kerry Express.

The brokerage covers 4 of these counters, and gave "buy" ratings for 3 of the stocks - Hana Electronics, Wice Logistics and Kerry Express - at target prices of 102 bhat, 22.10 bhat and 45 bhat respectively. The counters last closed at 88.50 bhat, 19.20 bhat and 30.25 bhat.

The fourth stock, with a "hold" call, is Sri Trang Gloves, which last traded at 30.25 bhat. Maybank Securities' target price for the stock is 30 bhat.

Analyst Maria Lapiz came up with the view after reviewing a list of more than 39,000 Thai products that will see significant tariff reductions as a result of the RCEP, the world's largest free trade agreement.

The 39,366 items - most of which are from agri-based industries - will see zero tariffs over a 20-year period, and changes to the tariff for close to 30,000 of these items were immediately implemented.

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Of the 39,366 items, 11,104 items pertain to Thai products being exported to South Korea, such as frozen fruits (mangosteen and durian), pineapple juice and fishery products.

Some 8,216 items including seasoned vegetables, frozen pineapples and roasted coffee pertain to exports to Japan, while some 7,491 items, including flavoured pineapple, coconut juice, synthetic rubber and various car parts, relate to exports to China.

Noting these, Lapiz said Tipco Foods, which manufactures and distributes pineapple products and beverages, and canned food and drink producer Malee Group will benefit since South Korea has the highest number of products with tariff cuts on such products.

Hana, Cal-Comp, Sri Trang Gloves, SNC Former and Kang Yong Electric will benefit from China's cuts in tariffs on synthetic rubber, autoparts (sensor) and wires or cables for cars, she added.

Concerns remain that under RCEP, Thailand could be flooded with cheap manufactured and agricultural goods from China, which would pose difficulties for domestic businesses, especially SMEs and farmers.

But the issue of cost competitiveness has to be addressed, Lapiz said. "Tinkering production processes to lower production cost will take a long time to bear fruit. One area where Thailand can reduce cost is in logistics," she added.

Beyond cost cutting, logistics and e-commerce companies like Wice Logistics and Kerry Express also stand to benefit as RCEP's common origin rule throughout the bloc will simplify procedures to move cargoes across borders, Lapiz noted.

Over the past 10 years, the main Thai markets in RCEP have been China, Japan and Vietnam, comprising more than 50 per cent of exports, while 60 per cent of Thai imports have come from China, Japan and Malaysia.

Last year, Thailand had a U$25 billion trade deficit with RCEP and this was largely due to its high deficit with Japan and China.

Lapiz said the significant trade deficits, especially with Japan and China, "should narrow significantly", going by the simulation outcome by the Asian Development Bank over the next 20 years.

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