Mobius sees value in Thailand

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Despite the political unrest in Thailand, Mark Mobius, executive chairman at Templeton Asset Management, still sees plenty of value in the country. In this exclusive interview, he tells CNBC’s Bernard Lo why.

I am keeping a close eye on Thailand in order to determine a good entry point. The chart is posted below the video.

Source: CNBC, April 26, 2010.

Source: StockCharts.com

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Mobius on Thailand

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The paragraphs below come courtesy of Mark Mobius, emerging markets guru and executive chairman of Templeton Asset Management.

I have received numerous queries on the current situation in Thailand since the violence on Saturday, April 12, where 21 people were killed and over 800 injured.  We believe that this clash, the worst in 2 decades, will definitely result in political changes for the country with more political participation of the “red shirts”, who form the core of the protest movements that are considered anti-government. We are more bullish on the long-term opportunities for the Thai economy and market.

We believe the declaration of emergency rule in Bangkok, the Thai capital, will not change the situation and may even result in greater resistance. We understand that there is growing sympathy among the rank-and-file military for the red shirts, based on various reports.

The authority of Prime Minister Abhisit Vejjajiva has also certainly been harmed by the violence. The army chief General Anupong Paochinda has said that “a house dissolution should be the answer,” and Abhisit had said that he would be willing to dissolve parliament by the end of the year. However, that will not be acceptable to the opposition, especially since they feel he is stalling for time so that he can push more money into the rural areas and gain more support.

Indeed, there are now signs that various forces are finding opportunities for the ruling parties to bow out gracefully. There is also news that Thailand’s Election Commission just recommended that Abhisit’s ruling Democratic Party be prosecuted for allegedly accepting illegal campaign donations. That would go to the courts and if the verdict is guilty, it would lead to the party being dissolved and forced from office. Such a development would lead to new elections.

Calling elections, however, will not resolve the longer-term issue, which is a societal divide between the ruling urban elite and the rural masses. This needs to be addressed. Otherwise, a win by parties aligned to the “red shirts” will likely lead to the “yellow shirts”, who are considered pro-government and royalist supporters, taking to the streets and vice versa. We expect further unrest.

Tourism accounts for about 6 to 7% of Thailand’s GDP, and the country is likely to fall short of its 2010 target of attracting 15.5 million visitors. While tourism’s direct impact on GDP is not significant, the indirect implications are higher as an estimated 20% of employment in Thailand is directly or indirectly linked to tourism. At this time, employment remains tight in Thailand.

Continued demonstrations and political uncertainty will lead to delays in stimulus projects, affecting rural income and consumer confidence. We believe that this could potentially reduce the country’s GDP growth rate to a range of 2 to 3%. Thailand’s Fiscal Policy Office estimated that last weekend’s deadly clashes could cost the Thai economy $1.58 billion in lost revenue this year. However, exports are expected to remain strong as long as the global economic recovery continues.

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