Is the Latest Political Crisis in Thailand a Hidden Opportunity?

Thailand, popularly known as the land of a thousand smiles, does not seem to have much to smile at for the past few years with the country plagued with one political crisis after another.

Just a few months ago in Dec 2013, after facing huge pressure from anti-government protests led by opposition parties, Prime Minister Yingluck Shinawatra was forced to dissolve the country’s Parliament and called for early elections. The situation has since exacerbated with yesterday morning’s announcement that Thailand’s army had declared martial law throughout the country in a bid to maintain peace and order. With such developments, the latest crisis seems to have no end in sight. Can this be a hidden opportunity for investors?

How can you get exposure to Thailand?

There are more than a handful of companies listed in Singapore that have exposure to Thailand. For one, Thai Beverage (SGX: Y92), a component of the Straits Times Index (SGX: ^STI), is the largest beer brewery in the kingdom. The second largest telecommunications company in Thailand, Total Access Communication (SGX: B2W), has a dual listing in both Thailand and Singapore. Even Singtel (SGX: Z74), the company with the largest market capitalisation here, has good exposure to Thailand as through its holdings in the country’s largest telecommunication company, Advanced Info Service.

In the smaller cap segment, we have companies like Sri Trang Agro Industry (SGX: NC2). The company is a fully integrated rubber outfit – it owns rubber plantations, operates processing plants, and distributes rubber products – with a 9% share of the global rubber market.

What are the risks?

Investors who feel the current political crisis might be a temporary challenge for Thailand can include those aforementioned companies in their watchlist should prices fall due to contagion. However, it is also important to note that there are other more company-specific risks that investors might get with those companies besides the political uncertainties they face Thailand.

For ThaiBev, the industry it’s in – alcoholic and non-alcoholic beverages –  is undergoing consolidation in the Southeast Asian region and it is yet to be seen how the company will perform in the new environment.

For the telecommunication outfits, there’s the risk of market saturation to contend with; the mobile market penetration rate in Thailand is already more than 120%, meaning that people in Thailand all own more than one mobile number on average. Such a situation might restrict the growth of the industry going forward.

As for Sri Trang Agro, the rubber industry is in a downturn and there is no sign of any recovery on the way. In fact, the Thai government had even sold down its national rubber inventory earlier this month, piling even more pressure on rubber prices that are already depressed.

Foolish Summary

My colleague David Kuo had recently spoken to newswire BBC and mentioned how Thailand has had 11 military coups over the last 72 years. More often than not, the country has bounced back stronger after each political crisis it has faced and that might be an indication of what we can expect from the aftermath of the latest one. As such, any widespread sell-off of Thai-related companies might present possible bargains.  But as it is, there are still important company-specific risks involved and investors should know what they are getting into with each investment.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.