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Thai princess disqualified from election bid, equity markets up year-to-date

Jeffrey Tan
Jeffrey Tan • 5 min read
Thai princess disqualified from election bid, equity markets up year-to-date
SINGAPORE (Feb 18): As Thailand gears up for its first general election since a military coup five years ago, an unlikely prime ministerial candidate was announced last week. On Feb 8, Thai princess Ubolratana Rajakanya raised eyebrows when she threw her
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SINGAPORE (Feb 18): As Thailand gears up for its first general election since a military coup five years ago, an unlikely prime ministerial candidate was announced last week. On Feb 8, Thai princess Ubolratana Rajakanya raised eyebrows when she threw her hat into the ring to challenge Prime Minister Prayut Chan-o-cha, the incumbent. Her controversial candidacy, however, was subsequently disqualified by the Election Commission of Thailand.

“All members of the royal family have to abide by the principle of being above politics and politically neutral,” the EC said in a statement on Feb 11. This came after King Maha Vajiralongkorn called her bid “extremely inappropriate”. Princess Ubolratana posted on her personal Instagram account: “I am sad that the sincere intention to work for the country and us Thais has created a problem that shouldn’t happen in this day and age.”

Princess Ubolratana is the elder sister of the Thai king and a popular figure in the entertainment industry. The Thai Raksa Chart Party, which nominated the princess, is a splinter party of the Pheu Thai Party, which is said to be closely associated with fugitive former prime minister Thaksin Shinawatra. Thai Raksa last won the election in 2011, but was ousted by the military in 2014. The party is now at risk of being dissolved for allegedly drawing the monarchy into politics.

So far, the impact of this development on financial markets has been minimal. The Thai stock market was “briefly perturbed”, as investors were caught by surprise, while the Thai baht was seen as “overbought” by some parameters, according to DBS Group Research. Crucially, the research house says the formation of a stable government is beneficial for the country’s growth prospects, especially the continuation of large public-sector investment projects.

The SET index is up 5.7% this year, closing at 1,652.64 poi nts on Feb 14. The baht has appreciated 3% against the US dollar. Thai Beverage, which is listed on the Singapore Exchange, closed 18% higher at 72 cents. Similarly, the Straits Times Index ended up 6% at 3,253.16 points. Elsewhere, US indices closed higher. The Dow Jones Industrial Average, Standard & Poor’s 500 and Nasdaq Composite Index rose 9.5%, 9.8% and 11.8% to close at 25,543.27 points, 2,753.03 points and 7,420.378 points respectively. Japan’s Nikkei 225 was up 8.1% to end at 21,139.77 points. In Hong Kong, the Hang Seng Index ended up 10% at 28,432.05 points.

Rising volatility

While global stock markets are off to a good start this year, investors should not be complacent. A more challenging environment may be here to stay, given the uncertainties facing the global economy, according to Schroders. This is in spite of the view of some “experienced” market participants that the gruelling 2018 may be a precursor to a better 2019, adds the fund house. There are several uncertainties. For one, the speed at which quantitative easing is scaled back and global interest rates rise from this point onwards is unclear, says Schroders. For another, in addition to other geopolitical tensions, trade relations between the US and China have yet to be resolved. All these have contributed to falling share price correlations, and rising volatility and performance “dispersion” — a measure of the difference between the best- and worst-performing stocks — the fund house says.

While volatile markets may present opportunities at a lower valuation, investors may underestimate the challenges ahead. “As volatility and dispersion increases, you are raising the opportunity set for stock pickers. Rather than thinking about what product to use, investors need to think about their time horizons and avoid making knee-jerk reactions. Selloffs can provide opportunities, so being patient and not too focused on the short term is critical,” says Chris Taylor, head of alpha equity at Schroders. Meanwhile, US corporates in general have done well in the current earnings season. About 331 companies, representing 82% of the S&P 500, have reported their fourth quarter results, according to Bank of America Merrill Lynch (BOAML).

Notably, US energy and communication services companies posted better results. This lifted US earnings per share by 14% y-o-y, says BOAML, and is 0.5% above analysts’ expectations at the start of January and 2% above the bank’s forecast. “This would represent the smallest beat since 2Q2011 (when EPS missed forecast),” the bank adds.

In Singapore, the earnings season is also underway. Among the stocks that have outperformed expectations is NetLink NBN Trust, which beat its IPO projections across a number of metrics. For 3QFY2019 ended Dec 31, Netlink reported revenue of $89 million, 3.4% more than forecast, driven by higher diversion revenue as well as ducts and manholes service revenue. The margin for earnings before interest, taxes, depreciation and amortisation was firm at 70.6%, in line with projections. Additionally, profit after tax was $19.6 million, or 17.6% higher than projected. OCBC Investment Research has kept its “buy” rating for the stock with a fair value of 90 cents, pending an analyst briefing with management.

The week ahead

Next week, several blue-chip companies are scheduled to release their quarterly results. Property developers CapitaLand and City Developments will do so on Feb 20 and 21 respectively. Sembcorp Marine and its parent Sembcorp Industries will also release their financial statements on Feb 20 and 21 respectively. DBS Group Research will announce its results on Feb 18, while Oversea-Chinese Banking Corp and United Overseas Bank will do so on Feb 22. All eyes will be fixed on the Singapore Budget, which is expected to be announced on Feb 18. Finance Minister Heng Swee Keat is scheduled to deliver the Budget statement in Parliament at 3.30pm, according to the Ministry of Finance.

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