While the fall of the Thai baht may have signalled the start of the Asia crisis, its economy and market may be in better shape than others in the region, al-though all analysts expect continuing volatility.
Bronwyn Curtis, chief ec-onomist at Nomura International in London places Thailand between the Korean market which has good pros-pects and Indonesia which faces continuing structural and political difficulties. “Overall it is not a matter of whether it is Thai bonds or Thai stocks. It is a matter of the currencies in Asia,” she says, adding, “Interest rates will stay high until the baht starts to steady but it won’t just be rates. It is a matter of credibility as well.”
Michael Kerley, fund manager at Invesco in London says: “Longer term, the market prospects are quite good but there is going to be quite a lot of volatility short term. By short term I mean most of this year.”
Murdo Murcheson, fund manager of Templeton In-vestment Management in Edinburgh agrees with this assessment with the market looking good over a five year period, though short term, the picture is less rosy. “It has had a one year bounce off its lows and has got a little ahead of itself, driven by the fact that the liquidity in the market is really very tight and it doesn’t take too much to move the market,” he says.
“The major issue for in-vestors is that we will see a huge amount of new capital being issued.”
He believes that this will not come from industrial buyers but from equity portfolio investors. “That will cap the market over 1998, so it will be very much liquidity driven and focused on the large end of the market.”
Kerley believes that the market has already seen a significant rally not only in equities but in currency so the market is well valued at the current level of earnings growth, GDP and expectations.
On restructuring Curtis says: “The IMF have agreed to revisions to the $17.2bn loan package and that is right. They have eased the budget restrictions, allowing a budget deficit of 1 or 2%.
“If Thailand goes along with most of the package - raising taxes, cutting spending, closing finance companies - then we should see some stabilising. It all looks a bit better, but if Indonesia goes down, it would take the baht with it while short term rates are still very high.”
The market at present does not support a traditional sectoral approach. Kerley says: “You buy stocks that you feel have got some kind of certainty in earnings or are trading at a significant discount to asset value.”
He recommends utilities, oil companies and airline companies which are currently trading on big premiums. John Lappin

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