Central bank to ease investment rules

Beer Chang is available everywhere in Thailand. Source: Wikimedia

The Thai central bank has said it would allow its citizens to invest directly in overseas securities this month, as part of a plan announced in 2015 to encourage capital outflows to hold down the baht.

From July 20 individuals or firms with deposits or securities of 100 million baht (US$2.85 million) or more can directly invest up to US$5 million per year in overseas securities, Bank of Thailand Assistant Governor Chantavarn Sucharitakul announced on Tuesday.

The Thai authorities have been trying to weaken the baht to boost exports, which have fallen over the past three years and have been a significant drag on the economy.

The junta is gambling on more than US$18 billion in stimulus measures to help boost domestic demand and prevent an export slump. The central bank has forecast economic expansion at 3.1 per cent for 2016, compared with 1-3 per cent for Singapore, whose economy is Asean’s most vulnerable to swings in global demand.

The Thais alcohol consumption appears to be on the rise.

Thai Beverage shares, which brews the ubiquitous Beer Chang and Mekhong “rum”, have risen 36 per cent to a record this year, benefiting from rising Thai consumption, where stimulus and low interest rates have driven the benchmark index to the highest level in nearly 12 months.

Singapore’s equities market, in contrast, is suffering from feeble growth from banks and oilrig manufacture. Thai Beverage, with distilleries in Thailand, Scotland, Ireland, China and France, has returns in 2016 that are almost triple that for the second-highest performing stock on the Straits Times Index.

Malaysia’s Affin Hwang Asset Management Bhd and London’s J O Hambro Capital Management are buying Thai Beverage shares, convinced the stock has further to rise despite record valuations, as it offers a haven from global market instability and may benefit from any restructuring plans.

“With slowing global growth, whatever shows potential or sustainable growth attracts a premium,” said Kar Tzen Chow of Kuala Lumpur-based Affin Hwang Asset, which oversees about US$7.6 billion. “ThaiBev’s spirits business continues to be stable and the beer business has shown a recovery.”

More than 90 per cent of Thai Beverage profits were domestic last year, Bloomberg said.

“The fundamentals for Thai Beverage are very strong, with earnings supported by increasing domestic consumption in Thailand,” said Nicholas Teo of KGI Fraser Securities Pte in Singapore. “In contrast, profits at traditional Singapore industries such as banks, shipyards and real estate are deteriorating.”

Year-on-year beer sales have risen 61 per cent, lifting the brewery operation’s contributions to group revenue to 33 per cent from 23 per cent, while spirits remained the big earner.