Amazing Thailand offers a new twist for investors

Rumours of a coup have been circulating in Bangkok for months, and so when it finally happened on Tuesday, few were taken by surprise. Ousted Prime Minister Thaksin Shinawatra was absent in New York when the Swat team entered his empty bedroom. Pricing in political uncertainty and mindful of the power vacuum, the SET last week was trading at the lowest price/earnings multiple and highest dividend yield in the region.

ôThis was not totally unexpected as there has been talk of a potential coup for some months. Everything appears to be peaceful and quiet,ö says Giovanni Di Prospo, executive at independent merchant bank Devonshire Capital, in Bangkok. ôIn view of past political wrangling and the delay in forming a new government this year, this could actually prove to be good for Thailand. This is of course providing that the military lets everyone know when theyÆre likely to step down and if a new government is formed within the next six months or so.ö

A senior credit officer at an international bank in Hong Kong forecasts little disruption to business in Thailand, observing that certain aspects of commerce were carrying on uninterrupted in Bangkok at the same time as the midnight coup was taking place. ôA coup in Thailand is like corruption in China," he adds. ôIt just comes with the territory, like the air you breathe.ö

But what of the direct investors?

Lehman Brothers has bought a comprehensive Thai property portfolio including high-end condominium, hotel and tourism interests, for which they have paid hundreds of millions of dollars. With ThailandÆs tourism high season approaching the situation must be a concern. However, Lehman declined to comment on the ramifications of the coup.

We phoned one of LehmanÆs new hotels, the Westin Grande in Bangkok, which confirmed that it remains open and has no shortage of room vacancies in upcoming months, assuming you fancy a holiday amid the tanks.

Distressed debt funds like Moe IbrahimÆs Asian Debt Fund are positioned in hotels elsewhere in Southeast Asia and see the uncertainty in Thailand as offering opportunities to expand its operations by attracting tourists who otherwise would have gone to the Land of Smiles. ôThis may be good for our hotel in Bintan, the Bintan Lagoon hotel,ö comments Ibrahim from Singapore.

It is unclear yet when or whether Thaksin will re-enter Thailand. But the Thai baht stabilised over the course of Wednesday as Bangkok workers enjoyed an unanticipated dayÆs vacation, and the customary diet of soap operas and ladyboy game shows returned to ThailandÆs televisions after a night of royally-authored music recitations. Meanwhile the commandoes man the barricades.

Robert Appleby, director of distressed debt fund ADM Capital in Hong Kong, says, ôWe are optimistic that things will get worse.ö

When the Thai stock market reopens there may be selling as shares held in nominee names that are beneficially owned by personae non grata get dumped. Keep fingers crossed, but donÆt yet bank on this becoming a distressed buying opportunity for illiquid assets, such as that dream beachfront villa in Phuket.