Product glut and China are big issues

Low liquidity also keeps investors away

Strong competition and a continuing global oversupply of apparel products continue to depress the prospects of export-dependent Thai textiles, clothing and footwear companies.

The sector average realised returns of 23.8% for the year, slightly up on 23.0% for the three-year period.

Thai-made products are increasingly being squeezed by Chinese apparel makers, who are dumping goods at cheap prices due to their country's low-labour costs.

Thai Rayon, capitalised at 4.03 billion baht, took top spot in the sector, with 94.7%, 43.2%, 35.5% and 5.3% in one-, three-, five- and 10-year total shareholder returns, or TSR.

Following closely behind was TTL Industries, capitalised at 772 million baht, earning 86% one-year TSR, three-year (43.7%), five-year (35.5%) and 10-year yields of 5.4%.

The poorest-performing long-term play was Tuntex, capitalised at 850 million baht. It yielded -43.3%, -34.2% and -34.2%. Bangkok Rubber was the poorest performer last year, with a one-year TSR of -47.1% on market capitalisation of 479 million baht.

An analyst at Asset Plus Securities said the textiles, clothing and footwear sector was not an attractive choice for investment funds as Thailand was losing its global competitiveness to Chinese products.

Most of the Thai companies in the sector have built their reputations by serving as main contractors for top labels such as Nike, Adidas, Reebok, Clark's, Banana Republic, Next and Guess.

``It's time for them to think of how to differentiate themselves and upgrade their production and create their own brand names in the world market,'' the analyst said.

Another problem was that some shares had such low liquidity that investors could not buy some of the more attractive stocks, analysts said.

The outlook for the local footwear market in the short- and medium-term does not look particularly bright amid a global oversupply that looks set to continue for the foreseeable future.

``Those who can deliver products on time, provide good service and target high-end markets will survive,'' the analyst said.

Narong Chokwatana, a consultant to Bangkok Rubber Plc, part of the Saha Group of consumer products companies, acknowledged that the local footwear industry would be stagnant in the next six months.

``However, there is still a lot of potential in the market, particularly for firms that can adjust themselves by improving service and product quality,'' he said.

The company obtained new orders beyond its expectations last year and more orders are expected this year.

``Clients have more choices and footwear products are seasonal products. We will maintain our best service, particularly in terms of product delivery,'' Mr Narong said.

Boonkiet Chokwatana, a director of People's Garment Plc, another business unit of the Saha Group, said the group's policy was to focus more on dividend payments, not gains on share prices, which tended to attract investors only for the short term.

People's Garment Plc reported a net profit in 2002 at 73.79 billion baht, up from 63.7 million baht the year before. Earnings per share rose to 10.25 baht from 8.85 baht. _ Sukanya Jitpleecheep

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