Thai business shuns regime, invests overseas

Thai business shuns regime, invests overseas

Siam Cement Plc is the largest foreign investor at a time of record outbound FDI by Thai companies. (Photo via
Siam Cement Plc is the largest foreign investor at a time of record outbound FDI by Thai companies. (Photo via

Thai businesses invested a record $13 billion (442 billion baht) abroad in 2016, dwarfing inflows of $1.6 billion (54.4 billion baht), according to the United Nations Conference on Trade and Development.

Investment abroad totalled $2.9 billion (98.6 billion baht) in January to April, according to the central bank.

This was a unique Thai action. In contrast, companies in Singapore and Indonesia cut investment overseas last year, while deals by Malaysian firms slumped to the lowest in a decade.

Three years after the military seized power in a coup, Thailand's economy is losing its might with growth rates that are lagging peers in Southeast Asia. As consumers rein in spending, companies including Asia's biggest cement maker, Siam Cement Pcl, are turning to overseas markets.

"With robust but moderating growth in the home market, Thai companies have been comparatively more ambitious in seeking to become regional or even global champions," Eugene Gong, head of mergers and acquisitions for Southeast Asia at Deutsche Bank AG, said in an email.

Siam Cement, the largest producer in Asia by market capitalisation, bought a Vietnamese manufacturer of building materials in March in a deal valued at $440 million, while BCPG Pcl, an owner of clean-energy projects, announced plans in April to pay as much as $358 million for a stake in Singapore's Star Energy Group Holdings.

Overseas acquisitions announced by Thai companies totalled $1.5 billion this year, compared with $1.7 billion in the same period a year ago, according to data compiled by Bloomberg.

That figure stands at almost $48 billion in the past five years compared with $19 billion in the previous period.

Weak Sentiment

The biggest areas of investment from 2011 to 2016 were in finance, extraction of crude petroleum and natural gas, manufacturing of beverages and food, and wholesale trade, according to the central bank. The top destinations were countries in Southeast Asia, particularly Cambodia, Laos, Myanmar and Vietnam.

By contrast, domestic conditions remain subdued. Consumer confidence has weakened, while private investment has slumped this year.

A stronger currency and rising cash pile are also helping to drive investors overseas. Thai companies hold about $36 billion in cash, 44% more than five years ago, according to data compiled by Bloomberg.

Bangchak Petroleum Pcl, owner of BCPG, said the baht's appreciation provides it with an opportunity to invest overseas at a cheaper cost. The downside is that revenue from abroad is lower when converted to the local currency, it said in an email.

The baht has gained more than 5% against the dollar this year, the best performer in Southeast Asia. The currency was also among the few gainers in Asia in 2016. In 2015, outward investment slid to $1.7 billion at the same time that the currency lost almost 9%.

Thai companies benefit from factors like strong domestic cash flows and access to debt capital at highly attractive terms, David Aronovitch, Morgan Stanley's co-head of investment banking for Southeast Asia, said in an email.

"Business owners are increasingly confident to make significant forays overseas," Aronovitch said. "This, of course, is due to attractive growth rates available in adjacent markets, with large populations characterised by high expected growth and attractive potential returns."

Siam Cement sets aside about $1.5 billion a year on capital spending for its overseas projects in Southeast Asia, which includes a plant in Vietnam and a packaging business in Indonesia, the company said in an email. Cement plants in Myanmar and Laos started operating this year, it said.

The surge in outflows is set to continue with significant investment in projects starting from scratch, said Astrit Sulstarova, an analyst at Unctad in Geneva.

"Greenfield investment is a driving force of Thai companies' international expansion," Sulstarova said. "Total investment of announced greenfield projects amounted to $15 billion in 2016, a historical high. The implementation of these projects will result in a large amount of outward FDI from Thailand."

Do you like the content of this article?

Indonesia extends Covid-19 movement curbs until Aug 2

JAKARTA: Indonesian President Joko Widodo said on Sunday that Covid-19 restrictions would be extended from July 26 to Aug 2, though he said infections and hospital bed occupancy rates in some provinces in Java had declined.


Golden homecoming

Olympic star "Tennis" Wongpattanakit will return home on Monday with the rest of the taekwondo team, with family members and fans waiting to greet her at Phuket airport.


Typhoon In-Fa drenches eastern China

NINGBO, China: Typhoon In-Fa uprooted trees and drenched communities in knee-deep water in parts of eastern China, but there were no reports of major damage as it made landfall on Sunday.