Thai Elections, Thai Funds (TTF, TF)

When your own markets are quiet ahead of a Christmas holiday, it’s frequent that investors turn to look at news in overseas markets for impacting events.  This weekend there was an election in Thailand, and this is a big event for the country when you consider that the country had a military coup in 2006.  The People Power Party apparently won 232 sets out of a 480-seat parliament (according to a Bloomberg report) , slightly short of a majority, so it will have to form alliances with other parties to hold a "majority coalition."  As always, there are always revisions that could come into play, and if you have been to or have lived in emerging market economy countries you will know that rapid changes can happen without notice, warning, or logic. 

What is important here is that if these election results stand after challenges and recounts (and perhaps if the military allows it to stand), is that this will likely reverse many of the policies in place since the 2006 military coup.  One of the most important policies for foreign investors is the capital controls that had been in place.

The September Thai coup actually had very little impact as far as the two funds that US investors use to invest in Thailand, and despite Thailand being one of the weaker Asian growth markets the closed-end funds are up in dollar terms since then.

Thai Fund Inc. (NYSE: TTF) traded under $10 at the time of the September 2006 military coup and has spent most of the last six months in a $12 to $14 trading band.  Shares of the closed-end fund closed at $13.07 Friday.  This closed-end fund has a $207.6 million market cap and trades about 118,000 shares on an average trading day.

Thai Capital Fund Inc. (AMEX: TF) also traded under $10 at the time of the September 2006 military coup and its shares have spent most of the last six months in a $12 to $15 trading range.  Shares of the closed-end fund closed at$12.85 Friday.  This closed-end fund has only a $40 million market cap and trades only about 18,000 shares on an average trading day. This fund has a $0.20 year-end distribution of capital.

As always, investors who trade closed-end funds have to take into consideration the premiums and discounts to net asset values.  Barron’s lists both funds as having a premium of more than 10% to their net asset values, although that list is as of September 30, 2007.

If you sense more doubt here about the election process and the aftermath being less assured compared to other news reports around the globe, it is because many government changes in emerging markets end up looking like a soccer match.  The key difference is that lives are often lost and the score is never really official and the game is never declared over.

Jon C. Ogg
December 24, 2007