Thailand, the Philippines and Malaysia are not the tigers they once were, according to Alistair Camp...
Thailand, the Philippines and Malaysia are not the tigers they once were, according to Alistair Campbell, investment manager at Aegon Asset Management. The countries are suffering from varying degrees of political atrophy and all are affected by a fall-off in demand for electronic products in the US, he says.
Aegon remains out of Thailand and the Philippines and is underweight in Malaysia, according to Iain Wells, investment manager for emerging markets at the group.
Wells says it is a grim time for economies such as Malaysia, which rely on exports. The dip in demand for these products, has contributed to the drop in growth of GDP figures ' there was a 3.2% increase in the first quarter of 2001 compared to an 11.7% increase for the same period of last year.
Wells says: 'There is even scope for disappointment with the 6% target set for the year. The poor situation is made worse by the unpredictable political environment.'
Wells hopes the situation will improve and says prime minister Mahatir Mohammed sacking his finance minister may herald the appointment of someone more independent of the political process. This could signal a determination to end some of the cronyism that afflicts the region, he says.
In the meantime, the power companies are reasonably secure, Wells argues. Malakoff is a power generator which, he believes, has the capacity to expand into new projects and offer good earnings potential.
Another index heavyweight is power utility Tenaga but its growth potential is limited by regulations that limit tariff increases, according to Wells.
In the current economic and political climate, defensive stocks are taking precedence in Aegon funds. 'The plantation company IOI has a healthy balance sheet and palm oil has hit the bottom of its price cycle,' says Wells. 'Companies like these are good at the moment because they are relatively politics free.'
In the Philippines, the close relationship between business and politics is stifling investment, according to Wells. However, there is hope that new president Arroyo has power to shake things and enable sectors such as electricity to become more independent. Wells says: 'There is a power bill set to go through parliament but we have yet to see how aggressive she will be in implementing reforms.'
The only stocks worth purchasing in Thailand are in the consumer sector, according to Andrew Salton, portfolio manager at Old Mutual. He cites Big C and Siam Makro as examples of resiliant companies based on the domestic economy. Another company performing relatively well, he says, is Advance Info, the country's largest mobile phone company. Oil and gas companies are also holding up because of high world prices, he adds.
'The banking system remains a mess,' according to Salton. 'There is uncertainty at the extent of the slowdown and the restructuring process is being slowed down by opposition from politicians.'
Political problems are also keeping the Philippine economy in a poor state, Salton says. The situation is exacerbated by the high concentration of companies in the tech sector which rely on exports to the US, where demand has slipped, he adds.
Telecoms potential in Thailand.
Defensive sectors doing well in Malaysia.
Sentiment may improve in Malaysia.
Three funds to watch
Adviser tech review