Mr Syme regarded Indonesia as a greater risk to the region than Thailand. It is one of a group of emerging markets, which also includes Brazil and Turkey, that look “quite stressed”. Indonesia has a current account deficit, and has suffered capital outflows, which has led to currency weakness, he said.
Mr Syme argued that it is a difficult time for some emerging markets, particularly in southeast Asia, as US bond yields are rising. For Thailand, which has run a current account surplus in recent years, the consensus forecast has moved to expecting a small deficit this year. “We are not expecting a political or economic crisis in Thailand, but it is a harder environment in which to have difficult politics,” observed Mr Syme.
He pointed to the Royal succession as another source of potential political risk in Thailand. The King has the admiration and affection of the country, but there are suggestions that his son may not command the same respect.
Mr Lebovitz highlighted the significance of investor sentiment, with recent months serving as a reminder that emerging markets are risky investments and investors need to do their due diligence.
“We are adamant that it is not just about buying a broad basket of emerging markets; it is really about evaluating companies within specific countries to make sure you are making a sound investment. Don’t just throw money at emerging markets,” he said.
Mr Syme observed that there are some good bottom-up stories in Thailand, although he is more cautious on domestic cyclicals such as financials, cement companies and retailers. Overall, he is neutrally positioned on the market.
Nevertheless, Mr Lebovitz does not regard the unrest in Thailand as a reason for investors who have remained in emerging Asian markets to run for the exit. “It is not the beginning of a long-run deterioration in the Thai economy. It is just a little bit of a bumpy ride at the moment as these things get sorted out,” he said.
On the contrary, he argued that the political unrest in Thailand, and also in Ukraine, can be regarded as “positive developments” from a “long-term fundamental standpoint” – even though it may not feel like it.
According to Mr Lebovitz, people want fairer and more developed governance. Such events are part of the transition process for emerging markets on their sometimes-painful journey towards becoming developed markets.
Indeed, Mr Lebovitz expects the markets of emerging Asia to begin to pick up as the economies start improving over the next few quarters.
