Experts urge investment in listed firms with low forex exposure

Fund experts have suggested investment is focused on listed companies that have a relatively low export revenue ratio and foreign debt, in a bid to minimise the impact of foreign-exchange volatility.

Speaking at the “Capital Market Research Forum” yesterday, Pipat Luengnaruemitchai, assistant managing director of Phatra Securities, said he expected forex movements to continue to be volatile, which means investors should select funds that engage in hedging or invest in listed companies that have little or no exposure to foreign-currency dealings.

The strong baht has negatively impacted the export sector, and listed companies with a major focus on overseas sales might need to be closely tracked, he said.

Thiti Tantikulanan, executive chairman at Kasikorn Securities, told the forum that forex movements were expected to become more volatile if the Federal Reserve ended its quantitative-easing programme, China’s next key manufacturing index did not improve, and the ongoing problems in Cyprus remained unresolved.

He said that if the next Purchasing Managers’ Index in China did not improve, the valuation of the baht and Thai stocks would be reduced, and the baht could weaken further. 

However, he added that investors in the stock and bond markets overseas had a higher chance of making losses from forex than from offshore investment.

Prapas Tonpibulsak, chief investment officer at Krungsri Asset Management, said investors should focus on fund managers that avoid funds with exposure to the US dollar, as excessive currency appreciation or depreciation could damage the return on investment.

He said forex movement was based on the country’s fundamentals, competitiveness, interest rate and any intervention by the central bank. Foreign funds will, therefore, still flow into Thailand because of the Kingdom’s attractive fundamentals and the returns achievable when compared with the US and other Western markets. Prapas said Thai operators and exporters in the past had enjoyed lower wage costs and inflation despite the baht’s strength, enabling them to compete in the global market.

Now, however, Thai manufacturers are lacking competitiveness because of the severe flooding in 2011 that hit their operations, plus higher operating costs as a result of the increase in the minimum wage.

The baht’s strengthening early this year has pressured the competitiveness of Thai operators even further, he said.

The private sector is, therefore, demanding that the Bank of Thailand speed up measures to tackle the unit’s strength and prevent the lack of competitiveness worsening yet further, he added.