Bogged down by policy uncertainty under military rule, Thai companies are spreading out.
Thai businesses invested a record US$13 billion abroad last year, dwarfing inflows of US$1.6 billion, according to the UN Conference on Trade and Development.
By contrast, companies in Singapore and Indonesia cut investment overseas last year, while deals by Malaysian firms slumped to the lowest level in a decade.
Three years after the military seized power in a coup, Thailand’s economy is losing its might with growth rates that are lagging peers in Southeast Asia. As consumers rein in spending, companies including Asia’s biggest cement maker, Siam Cement PCL, are turning to overseas markets.
Investment abroad totaled US$2.9 billion in January to April, according the central bank data.
“With robust, but moderating growth in the home market, Thai companies have been comparatively more ambitious in seeking to become regional or even global champions,” Deutsche Bank AG head of mergers and acquisitions for Southeast Asia Eugene Gong said in an e-mail.
Siam Cement, the largest producer in Asia by market capitalization, bought a Vietnamese manufacturer of building materials in March in a deal valued at US$440 million, while BCPG PCL, an owner of clean-energy projects, announced plans in April to pay as much as US$358 million for a stake in Singapore’s Star Energy Group Holdings.
Overseas acquisitions announced by Thai companies totaled US$1.5 billion so far this year, compared with US$1.7 billion in the same period a year ago, according to data compiled by Bloomberg.
That figure stands at almost US$48 billion in the past five years compared with US$19 billion in the previous five.
The biggest areas of investment from 2011 to last year were in finance, extraction of crude oil and natural gas, manufacturing of beverages and food, and wholesale trade, according to central bank data.
The top destinations were other nations in Southeast Asia, particularly Cambodia, Laos, Myanmar and Vietnam.
By contrast, domestic conditions remain subdued. Consumer confidence has weakened, while private investment has slumped this year.
A stronger currency and rising cash pile are also helping to drive investors overseas. Thai companies hold about US$36 billion in cash, 44 percent more than five years ago, according to data compiled by Bloomberg.
Bangchak Petroleum PCL, owner of BCPG, said the baht’s appreciation provides it with an opportunity to invest overseas at a cheaper cost. The downside is that revenue from abroad is lower when converted into the local currency, it said in an e-mail.
The baht, little changed yesterday, has gained more than 5 percent against the US dollar this year, the best performer in Southeast Asia.
The currency was also among the few gainers in Asia last year.
In 2015, outward investment slid to US$1.7 billion at the same time that the currency lost almost 9 percent.
Thai companies benefit from factors such as strong domestic cash flows and access to debt capital at highly attractive terms, Morgan Stanley cohead of investment banking for Southeast Asia David Aronovitchsaid in an e-mail.
“Business owners are increasingly confident to make significant forays overseas,” Aronovitch said. “This, of course, is due to attractive growth rates available in adjacent markets, with large populations characterized by high expected growth and attractive potential returns.”
Siam Cement sets aside about US$1.5 billion a year on capital spending for its overseas projects in Southeast Asia, which include a plant in Vietnam and a packaging business in Indonesia, the company said in an e-mail.
Cement plants in Myanmar and Laos started operating this year, it said.
The surge in outflows is set to continue with significant investment in projects starting from scratch, Geneva, Switzerland-based UN Conference on Trade and Development analyst Astrit Sulstarova said.
“Greenfield investment is a driving force of Thai companies’ international expansion,” Sulstarova said. “Total investment of announced greenfield projects amounted to US$15 billion in 2016, a historical high. The implementation of these projects will result in a large amount of outward FDI [foreign direct investment] from Thailand.”
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to