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13 December 2010 ~ 42 Comments

Should You Invest in Thailand?

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It’s pretty common to hear advice not to bring your money to Thailand. Leave it in your home country is the mantra, due to changing visa regulations, the inability of foreigners to own land in Thailand and simple conservatism on the part of many. Is it really that unsafe to bring money into Thailand for investment purposes?

I have to think that the answer to that question is “No”. Over the past few years there has been a huge influx of foreign money into Thailand’s equity markets. It is this influx that is partially responsible for the strength of the Thai baht. Investors in Europe and America are disillusioned with the historically low yields on bonds and stocks in their own countries and are moving offshore in droves to chase yields. Thailand has those high yields in the form of dividend bearing stocks. If the professional money feels safe investing in Thailand then why wouldn’t you? You can see below how well the Thai stock market has done over the past year. (SET Index in orange and MSCI Emerging Markets Index in green)

Is it totally safe? Nothing in the investment world is ever completely safe and Thailand is after all an emerging market. However you do get compensated for your risk with the average dividend yield currently at 2.99% and many companies with yields much higher than that. Here are 4 high yielding SET listed stocks for your consideration.

KANG YONG ELECTRIC PUBLIC COMPANY LIMITED (KYE – Yield 9.88%)
This is a Thailand-based manufacturing company. It manufactures household appliances, such as electric fans, refrigerators, water pumps, and washing machines. Its products are sold under the brand name Mitsubishi Electric and the company works together with the Japanese company Mitsubishi Electric Corporation who provides assistance with the design, manufacture and development of products. Currently close to half of its sales are domestic and the other half come from Japan. Worth looking into as the Thai middle class grows and demand for its products grows.

ADVANCED INFO SERVICE PUBLIC COMPANY LIMITED (ADVANC – Yield 12.53%)
AIS is an investment holding company engaged in the operation of cellular mobile telephone networks. It is the largest such company in Thailand and has paid out 100% of profits in the form of dividends over the past 4 years. It is also committed to continue doing so. In addition, the Company also invests in other subsidiaries covering integrated telecom business, which includes the import and distribution of handsets and accessories, voice and data communication service via telephone and optical fiber, payment business via mobile phone, distribution of cash card, call center service, international telephone and gateway, and a network operator and telecom service provider.

ELECTRICITY GENERATING PUBLIC COMPANY LIMITED (EGCO – Yield 5.53%)
EGCO is an investment holding company with investment in power generation and supply, as well as comprehensive energy services providing operation, maintenance, engineering and construction services to power plants and other industries in Thailand and overseas. Not surprisingly it is a high dividend payer, just as this sector is all over the world.

GOODYEAR (THAILAND) PUBLIC COMPANY LIMITED (GYT – Yield 7.46%)
Goodyear (Thailand) Public Company Limited engages in the manufacture, distribution, and sale of passenger tires, truck tires, and aero tires in Thailand and internationally. It offers its products through wholesalers, multi-branded dealers, and ‘Goodyear Eagle Store’ branded retailers. Goodyear (Thailand) Public Company Limited operates as a subsidiary of Goodyear Tire & Rubber Co. With the backing of the parent company and the cheap availability of the raw rubber it’s no wonder that GYT hits the radar for an investment opportunity in Thailand.

As a bonus the tax rate on dividends in Thailand is a low 10% flat rate. Thai residents have no obligation to declare dividends for these SET listed companies on their personal taxes. In addition, when you sell your shares there are no capital gains taxes in Thailand for SET listed shares. Talk about a favorable tax jurisdiction.

While these stocks currently pay a favorable dividend that does not mean they will always do so. As with any investment there are risks involved and it is prudent to do your own research to determine if a stock is appropriate for you and if you feel it will provide a good return. When looking at dividend paying stocks you should get an idea of the consistency of the companies cash flow, the strength of the company within its industry and sector, the outlook for the earnings potential over the long term and the strength of the company balance sheet.

Keep in mind also that many Thai shareholders treat the stock market as a place to gamble and wide price swings are not unheard of. Investing in stocks for dividends is typically a long term investment and should not be influenced by short term price swings. If you’ve done your research well and keep tabs on the news that may affect your investments you should be in a good position with your holdings. To get more detailed financial information on SET listed stocks visit the SET Securities in Focus page

DISCLAIMER: I do not currently own any of the stocks mentioned in this article. These are not stock recommendations and it is your responsibility to do your own research prior to investing in any stock or other investment vehicle.

Posted by Steve Walters () in Thailand Financial

About the Author

Steve Walters started Thailand Musings in 2006 after meeting and marrying Golf on the site Thai Love Links. The site was started as a way to share information about Thailand, it's people, culture and traditions and has grown substantially since that time. As a long time visitor to the Kingdom Steve hopes you enjoy his thoughts and observations about Thailand and it's culture. He can be contacted here.