Thailand will attract increased foreign investment and infrastructure spending, a “more significant driver” of growth that will boost industrial estate developers such as Amata Corp., according to JPMorgan Chase & Co.
Foreign direct investment that increased to $7.4 billion in the first half of 2010 is poised to accelerate in 2011, Sriyan Pietersz and Adrian Mowat wrote in a report dated yesterday. Japan and China may be “key players” in the spending that may also boost Hemaraj Land & Development Pcl and Rojana Industrial Park Pcl, the analysts wrote.
Ford Motor Co. and Mazda Motor Corp. said in August they plan to spend $350 million to expand a jointly owned pickup truck factory in Thailand, shrugging off the country’s worst riots in almost two decades. Investment commitments from automobile and electronics companies that include Nissan Motor Co. and Toshiba Corp. exceed $2 billion, according to JPMorgan.
“The strength of the Japanese yen could drive another wave of investment into Thailand, historically Japan’s largest investment destination in Southeast Asia,” the analysts said. “We also see scope for increasing investment by Chinese corporates or multinational corporates operating in China as cost pressures accelerate.”
The increased infrastructure and corporate spending may help banks and other companies such as Glow Energy Pcl and Thai Tap Water Supply Co., according to the analysts.
Japan’s yen climbed to a 15-year high against the U.S. dollar, prompting the government this month to sell the currency for the first time since 2004. In China, foreign companies Honda Motor Co. and Foxconn Technology Group have been forced to raise wages following strikes and suicide attempts.
As foreign investment accelerates, domestic capital expenditure is likely to lag behind given the “slack” in overall capacity, with utilization rates at about 67 percent in July, according to JPMorgan.
Still, capacity utilization rates in the petroleum, chemical, pulp and paper, and construction materials industries are at relatively elevated levels, offering “scope for a modest recovery” in capital expenditure, the brokerage said.
“Given the relatively large scale of operations and high capital intensity in these sectors, corporates may seize the opportunity for expansion given Thai baht strength and cheap cost of funds,” the analysts said.
Thailand’s economy may grow as much as 7.5 percent in 2010, the fastest pace in 15 years, according to a July 23 forecast by the central bank. Improving prospects for the economy have helped to drive a 29 percent gain in the benchmark SET Index this year and lifted the baht to a 13-year high.
source – www.bloomberg.net