In a note to customers this past week, KGI published their estimates of the impact that recent Thai-Cambodian tensions have had on the on the Thai economy and stock market.
KGI have estimated that the impact on Thai GDP to date has been negligible given the limited value of international trade between the two countries. According to Bank of Thailand (‘BOT’) figures, Thai exports to Cambodia run at approximately US$100-150 million a month, or less than 1.0% of Thailands total export value. Imports to Thailand from Cambodia are even less, amounting to 0.1% of total imports into Thailand. There is also no significant level of investment from Cambodia in Thailand.
Value of Thai Exports to Cambodia ($m, LHS); % to total export value (RHS)
Source: Bank of Thailand, KGI, CLC Asia
Political risk discount on Thai bourse
However, the impact on the Thai stock exchange could be much higher if the current dispute leads to an increased degree of political tension. Based on the MSCI Thailand Index, Thailand is currently trading at a 35% discount to its regional peers, with the potential for this discount to widen as exiled Thaksin Shinawatra seems intent on lobbing political hand grenades from the Cambodian side of the border.
MSCI Thailand SET relative to MSCI EM Asia Index, 2004-2009 (%)
Source: Bloomberg, KGI, CLC Asia
Thaksin, who could not be accused of lacking hubris, seems to be picking his moments well of late to antagonize his opponents in both the Thai government and the Privy Council. In unprecedented comments to the Times of London, the self-exiled Thaksin speculated on the largely taboo subject of Thai royal succession, giving highly positive views on the character of the likely next monarch of Thailand, Crown Prince Vajiralongkorn. These comments occurred at the same time as police began arresting a number of investment bankers suspected of spreading false rumours about the health of King Bhumibol Adulyadej, rumours which allegedly caused an 8% drop of the SET on the 15th of October.
Following this interview, the Cambodian government announced that Thaksin would accept a role as a government economic advisor and would be travelling to the country to give an economic lecture to senior Cambodian officals and economists. The resultant protests from the Thai government, and a formal request for his extradition, were rejected by the Cambodian Prime Minister Hun Sen, who labelled the request as political.
Thaksin’s appearance in Cambodia, the calculated diplomatic snubs by Hun Sen, as well as Thaksin’s speculation about succession issues at a time when the King was hospitalized, points to a slightly desperate man willing to raise uncertainty in Thai politics as a way of engineering his eventual return.
The political downside for Thaksin to all of this is the loss of some popularity by appearing close with Cambodia, a country Thailand has long been at odds with over a number of territorial disputes. The upside for him however is that his presence in Cambodia highlights the impotence of the Thai government to do extradite him back to Thailand, and adds to the overall impression of the current Democrat government as being broadly week and ineffective.
About CLC Asia
CLC Asia is a political and market intelligence advisory firm. We specialise in:
• political risk analysis
• market intelligence
• government relations
• policy advisory