Aberdeen New Thai investment trust’s chief investment officer has warned of economic headwinds for the Asian country after it fell into a technical recession.
Adithep Vanabriksha said Thailand had experienced two consecutive quarters of negative growth this year meaning it fell into a technical recession for the first time since 2008.
He said the situation was not helped by a number of government initiatives that attempted to bolster the economy, including a farming initiative that pushed up the price of rice and a subsidy on cars that ended last year, meaning sales have slumped in 2013.
Meanwhile, the central bank dropped rates to weaken the Thai baht after it reached a 16-year high earlier in the year, but soon after the money started flowing out of emerging markets amid fears the US Federal Reserve would reduce support for its own economy.
Mr Vanabriksha said one of the main casualties of the economic dip had been exports, which he said are expected to grow by 4 per cent in 2013, a sharp fall from recent years.
But he said Thailand had an advantage above other countries in the region because of the vast range of products it exported.
He said this meant it was able to increase trading with countries in the Association of SouthEast Asian Nation region to make up for the decline in demand from developed markets, which he said were still recovering from the economic crisis.
Mr Vanabriksha argued that the slowdown Thailand had experienced was “normal” and in line with other emerging market countries.
He added the government was still investing in services to support its burgeoning tourism sector. He said the country had seen a 17 per cent year-on-year rise in tourism, with airports struggling to deal with demand.
Elsewhere, the manager said the £108m trust had benefited from its large weighting in small caps, with just more than half the portfolio in companies with a market cap below $2.5bn (£1.5bn).
“Smaller companies are traditionally under-researched with management capable and qualified in areas where we feel we have competitive advantage,” Mr Vanabriksha said.
“We go to them, do the research, and wait for the market to realise them.”
The trust has roughly 2.2 per cent in cash which the manager said he expected to use to reinvest in companies he had previously owned once their prices had fallen.
Aberdeen New Thai board focusing on growth
Aberdeen New Thai Investment Trust’s non executive director Peter Bristowe has said his “focus is on growing the trust” and increasing its assets under management.
The trust issued 5.2m shares in the year to February 2013 and now has more than £100m in assets under management - up from £23m in 2005.
But the board had to buy 12,000 shares back in August this year as the shares fell below the price they started 2013 at.
Trusts usually buy back shares to help reduce the gap between the share price and the net value of the trust’s assets, known as the discount. The trust currently sits on a discount of 13.5 per cent but this is less than the average for the seven-strong AIC Asia Pacific sector.