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Indonesia And Thailand Face New Beginings: How Should Investors In Singapore React?

signboard success failureThis month, two of Singapore’s neighbouring countries are entering a new era in their political landscape.

In Indonesia, the country’s Constitutional Court confirmed that Mr. Joko Widodo is the official winner of the July 2014 Presidential Election despite complaints from opposing candidate, Mr. Prabowo Subianto. In Thailand, General Prayuth Chan-ocha has officially become its new Prime Minister after accepting a written royal command from the kingdom’s monarch. This means that both countries can now look forward to a new beginning of what hopefully would be progress.

Given Singapore’s close proximity with the two countries both geographically and economically, what should investors here be looking out for?

A rebound in the local economy

With stability comes an environment suitable for growth. But, many large Indonesia-based companies listed in Singapore have not had a good year in 2014 so far.

For instance, we can see from the chart below that apart from Jardine Cycle & Carriage Limited (SGX: C07), a number of other Indonesia-based companies such as Wilmar International Limited (SGX: F34)Golden Agri-Resources Ltd (SGX: E5H), and Indofood Agri Resources Ltd (SGX: 5JS), are all under-performing the Straits Times Index (SGX: ^STI) year to date. Incidentally, the latter trio of Wilmar, Golden Agri and Indofood Agri all have a focus on palm oil production. Singapore’s share market index has gained about 5.4% since the start of 2014 while the three palm oil outfits are all trading below where they were at the end of 2013.

With the renewed interests and optimisim in the Indonesian economy, does it mean there is a possibility of better days ahead for the three companies?

chart Indo

Source: Google Finance; year to date performance for Jardine Cycle & Carriage (blue), Wilmar (green), Golden Agri (orange), Indofood Agri (red).

On the other hand, we see a very different situation for shares related to Thailand. Both Thai Beverage Public Company Limited (SGX: Y92) and Sri Trang Agro Industry (SGX: NC2) have outperformed the STI for the year, chalking up a gain of 25% and 10% year-to-date respectively as seen in the chart below. Both of them have managed to outperform even though Thailand has experienced a series of rather chaotic political events this year.

Now that peace seems to be returning to Thailand, is the economy set for greater heights or has the expectations on Thailand-based companies been driven to unsustainable highs after the strong rally of the two companies this year?

chart thai

Source: Google Finance; Year to date performance for Thai Beverage (blue) and Sri Trang Agro (orange)

Foolish Bottom Line

The future of the economies of the two countries and the performances of the related companies would be interesting for investors to track for the next few years.

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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.