Investing Post-Covid - Thailand
As presented in the early findings, there is limited data within the public domain to point to the impact of theCOVID-19 pandemic on investor behavior in Thailand. Below are a collection of data points that provide insights on the general atmosphere, investor confidence, the real estate sector, and private bank investors.
GENERAL INSIGHTS ON INVESTMENT IN THAILAND POST-COVID
- Overall, private investment in Thailand declined by approximately 10.7% in 2020 as a result of the COVID-19 pandemic.
- According to Deloitte, “massive monetary and fiscal easing measures implemented in various countries, along with the gradual lifting of lockdowns, will likely slow the appreciation of the US Dollar. The US Dollar is therefore unlikely to strengthen as much as it did in late Q1/2020 when there was a dash for cash in global financial markets.”
- The depreciation of the baht is linked to the volatile exchange rate.
- In an effort to stimulate the economy, the Thai government initiated a set stimulus packages.
- “Policy rate slashed to a historic low of 0.5%”
- “Soft loans of THB 500 billion to SMEs through commercial banks and a loan payment holiday of 6 months.”
- “Mutual Fund Liquidity Facility (MFLF) to ensure liquidity in bond market.”
- “Corporate Bond Liquidity Stabilisation Fund (BSF) to provide THB 400 billion for the purchase of bonds from distressed corporates.”
- Investor confidence is measured by the Fetco Investor Confidence Index (ICI). The most recent release of data, on January 12, reflects a “bullish zone despite a dip of 19.1% to 130.63 from the preceding quarter, when it was in the very bullish zone following progress in vaccine development in early November 2020.”
- “Positive factors supporting investor confidence were the prospect of ongoing inflows, domestic economic growth and a 40% increase in listed companies' earnings.”
- On January 4, the Thai government announced a series of initiatives which are designed to help overall investment in the country. Though these are not germane to personal investors, the data has been included as it helps to illuminate the total picture of the country’s investment outlook.
- “Projects with realized investments of at least 1 billion baht (USD33 million) within 12 months from the promotion certificate issuance, will be eligible for an additional 50% corporate income tax (CIT) deduction for a period of 5 years, on top of the standard 5-8 years CIT exemption.”
- “Existing businesses of all sizes applying for investment under the digital technology adoption program in systems and activities such as software integration, artificial intelligence (AI), machine learning or big data analytics by the end of 2022, will, if approved, be granted a 50% corporate income tax exemption for 3 years on their existing businesses.”
- “Genomics Thailand project located at Burapha University in the Eastern Economic Corridor (EEC) (has been granted) the similar status as EECi, EECd, EECa and EECmd, which are dedicated to specific targeted industries. Investments in these areas will be entitled to additional tax incentives from the Board of Investment.”
- Data from the most recent National Statistical Office data in 2019, “from a population of 21 million households, 59.2% (12.7 million households) have reserve funds available for less than 3 months of normal expenses and up to 7 million households with reserve savings valid for 1 month.” This is likely to greatly impact personal investing in the short-term, post COVID.
INSIGHTS SURROUNDING REAL ESTATE INVESTING
- According to Savills, “Asia Pacific real estate transactions fell 28% in the first half of 2020 and economies continue to suffer as a result of domestic lockdowns and the disruption of international supply chains.”
- Savills analysts see a gap emerging in the region for real estate investment in the wake of COVID-19. The difference is seen in “core investors who are looking to double down on sustainable income streams and opportunistic players, who are looking for distress or at least mispricing opportunities. In the middle, the investment landscape has shifted for a number of value add players in a rental growth constrained environment.”
- Currently, asset management has been the primary focus, but analysts expect that to be re-weighted because “investors will be carefully considering their sector and geography allocations.”
HIGH NET-WORTH INVESTING
- Siam Commercial Bank (SCB) reported in January 2021 that its “strategic portfolio management advice for private banking clients (over-performed) by delivering a rate of return as high as 14.9% within a year, from 1/1/2020 to 12/31/2020.”
- Analysts from SCB offer the following advice going into 2021. “Clients should continue to properly diversify their risk. For a moderate asset allocation portfolio it is recommended that investors divide their holdings into 60% equities and 40% fixed income in line with the direction of the global economic recovery trend that is expected to slowly improve after the distribution of the COVID-19 vaccines to people around the world.”