Franklin Templeton’s Mark Mobius comments on Thailand

Recent events may have spooked investors in Thailand, but long term emerging markets investor Mark Mobius, who manages the Templeton Emerging Markets Investment Trust, has looked beyond the politics.

Throughout its history, Thailand has been subject to periods of political instability that have at times given cause for concern among investors. In the past few months, investor sentiment has reflected the political uncertainty, putting Thailand in the news. Violent demonstrations by supporters of Thailand’s traditional Bangkok-based elite have raised concerns regarding the government’s stability under the pro-populist policy Prime Minister Yingluck Shinawatra, which draws its support from the poorer and more rural north and east of the country.

Despite the political unrest, we certainly have not lost confidence in Thailand and believe its economy can bounce back, as it has time and again, from such adverse events. The country has actually been given the moniker “Teflon Thailand” for its resilience in the face of such past events and problems.

I can’t say for sure how the political situation in Thailand will ultimately play out, but I do believe there will be some changes, and I also believe the fundamental direction of the Thai economy should be able to remain on a growth track.

Regardless of the macroeconomic or political climate, we are bottom-up stockpickers and continue to look for opportunities to invest where we see potential on an individual-company level.

Will Thailand’s Government Topple?

In the past few months, protesters have attempted to topple the Thai government, triggering a slide in the Thai baht and its stock market, which posted negative performance in 2013 and was near flat year-to-date through late February. In December, my team and I were in Bangkok and were surprised to find little evidence that business and the busy shopping areas of the city were being interrupted by the political disturbances at that time. The main tourist areas were also largely unaffected. Our visit came just before King Bhumibol Adulyadej’s 86th birthday, so it is likely that the demonstrations were muted in respect for the king, who is held in high regard. Today, there is fear that continuing political demonstrations could begin to impact business, infrastructure projects and particularly the important tourism industry, which accounts for about 9% of the Thai economy. We have heard anecdotal evidence that some tourist bookings have been canceled as a result of the unrest.

If the past is any indication, the impact on tourism of the recent protests could prove relatively short-lived. When Ms. Yingluck Shinawatra’s brother Thaksin Shinawatra was ousted in 2006 in a military coup, there was little impact on tourism. And in 2013, Thailand welcomed a record number of visitors. So, if the demonstrations are having an impact, the overall picture doesn’t seem bleak at this time. MasterCard’s Global Destination Cities Index ranked Bangkok the world’s most-visited city in 2013, with nearly 16 million international visitors.

Of course, if there is a great deal of violence there is no question that the impact will likely be felt this year. Nevertheless, our experience in Thailand through a great deal of political change and turmoil over the years indicates that the bedrock of Thai sensibility and practicality has eventually prevailed, and historically, when the turmoil has ended, it has generally been back to business as usual.

The Thai stock market can be volatile (as all markets can be) but Thailand’s market has proven resilient during past trials and tribulations. While short-term volatility is likely to continue to impact Thailand’s market as news events unfold, we believe Thailand will eventually find a way out of this latest crisis.

Fortunately, elections in early February, strongly opposed by the People’s Democratic Reform Committee (which has led many anti-government protests), didn’t result in heightened violence. However, voting was disrupted in some areas of the country and it may take several more months to complete the process and fill vacant parliamentary seats. Unfortunately, protests were continuing into mid-February, most recently involving rice farmers, distraught over the government’s failure to pay for rice bought under a subsidy scheme, one of Shinawatra’s signature policies. The subsidy program is threatening to destabilize the budget.

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