A Taste of Thai

06/02/2006 12:00 am EST


Carlton Delfeld

Editor, The La Jolla Letter and Pacific Gains

Carl Delfeld is a noted authority on global investing, as well as a specialist in both exchange traded and closed end global funds. Here, the advisor looks towards Thailand, where recent political turmoil has created a potential buying opportunity.

"Thailand Prime Minister Thaksin Shinawatra's recent resignation is a major opportunity for investors willing to step into a temporary political vacuum. The king has presided over Thailand since 1946 and is revered by all. As in the past, when the political temperature reaches a boiling point, a curt nod from the king is enough to send even the most imperious prime minister packing. This safety valve is a key part of Thailand's constitutional monarchy and helps it to maintain stability in times of crisis.

"Investors should not stay on the sidelines until a new premier is soon selected; they should act now to take advantage of an undervalued Thai market. With a land area more than twice the size of Wyoming, Thailand is a youthful, solid middle-income country with a consumer-oriented middle class. Its economy is well diversified and rich in natural resources, and has a vibrant manufacturing sector and strong exports.

"The Thai market has lagged largely its Asian peers because of the political turmoil. Gross domestic product growth for 2006 should match or better last year's 4.5%, and fuel subsidies have been cut, relieving pressure on the national budget. International capital flows to Thailand remained stable during the crisis but will likely ramp up quickly once calm is restored. History shows that the Thai market is both resilient and explosive. Thailand's benchmark index rose 115% in 2003.

"I suggest investors use the closed-end Thai Capital Fund (TF ASE), managed by Daiwa SB Investments. It is trading at a 4% premium to net asset value, with a share price of $10.15, just shy of its 52-week high in January of $10.88. Another option is the Thai Fund (TTF NYSE), although we note that this closed-end fund was recently trading at a 16% premium to its net asset value. It's a little rich. The king has acted, and so should you."

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