Thailand Indonesia and the Phillippines (TIPs) have seen restructuring and are coming back onto fund...
Thailand Indonesia and the Phillippines (TIPs) have seen restructuring and are coming back onto fund manager radar screens, according to Margaret Gadow, senior fund manager at Gartmore.
While Thailand and Indonesia are experiencing positive economic situations, both continue to labour under political uncertainty. The economic backdrop in Thailand is positive, says Pinakin Patel, head of emerging markets at RSA Investments. He adds: 'Consensus is that GDP growth will be about 2.4% and some analysts are looking to upgrade this. Leading indicators for the Bank of Thailand and export business are picking up.'
The political backdrop is more negative, however. He says: 'President Thaksin Shinawatra came into power last year with the intention of bringing Thailand forward. He was a leading businessman who owned Thailand's largest cellular company, Advance, but he has not brought as much reform as expected, despite tourism and foreign exchange reserves being strong.'
Indonesia has a similarly strong economic background and political concerns, says Patel. 'Tourism has picked up and GDP was 3.3% last year, and has accelerated to 3.6% as exports continue to pick up,' he adds.
President Megawati Sukarno-putri came into power about a year ago but there are splits within her parliament and the pace of reform is uncertain, he says. 'Economically, the country is getting better but it is starting from a very low base.'
Gadow adds: 'There are concerns about the Thai and Indonesian industrial banking and legal systems. There are around three to five stocks that are interesting and Telecom Indonesia is the best performing. For the 12 months to 25 March 2002, the share price rose 39.24%.'
The Phillippines is also in a better economic situation, says Patel. 'GDP was 3.8% in the fourth quarter of last year and this year it looks as though it will be 3.8% for the whole year,' he says. 'GDP growth for the whole of last year was 3.4%.'
The current account surplus is positive and foreign exchange reserves are also up. President Gloria Macapagal-Arroyo came in with a mandate of change but she still needs to move the government away from cronyism and corruption,' Patel notes.
Gadow says: 'As banks clean up their act it is getting harder for these sort of markets to be ignored. The past five years have been brutal for Asia. There has been a lot of soul searching and they are becoming more professional.' Patel is selectively positive on these markets. He says: 'We like consumer-oriented stocks and are steering away from businesses that have any links with governments.
'The impact of lower interest rates on the consumer gives them more spending power and pushes up retail and housing sales.' He cites Gudan Garam, the largest cigarette company in Indonesia, and Sayem Cement, the largest cement company in Thailand. He says: 'Sayem Cement is benefiting from consumer spending power and has restructured.'
Positive economic TIPs backdrop.
Thai GDP prospects to be upgraded.
Telecom Indonesia is a good performer.
Improving portfolio diversification
Hanging on the telephone
German recession concerns