Mobius Says Thai Economy at Risk; SET Falls Most in Two Weeks

(Bloomberg) -- Mark Mobius, whose Templeton Asset Management Ltd. has invested in Thailand for two decades, says the nation’s political turmoil poses a risk to Southeast Asia’s second-largest economy. Stocks fell the most in two weeks.

“In the near and medium term, Thailand will need to restore consumer confidence and revive investment,” Mobius, who helps oversee $20 billion in emerging-market assets at San Mateo, California-based Templeton, said in an e-mail response to questions. “Failure to do so due to these political conflicts could present a risk to Thailand’s growth.”

Thailand’s benchmark SET Index dropped 0.9 to 449.91 at 10:02 a.m. as it resumed trading today after a three-day holiday marred by street clashes and weekend demonstrations that forced the cancellation of the Association of Southeast Asian Nations summit in the resort town of Pattaya on April 10. The protests left two dead and 123 injured.

The drop wiped out the SET’s gain for the year, compared with the 14 percent increase in MSCI’s developing-nation index. The Thai index tumbled 48 percent last year, the steepest drop since 1997, when the devaluation of Thailand’s baht triggered an economic crisis in Asia. The measure trades for 8.2 times its companies’ projected earnings for 2009, the lowest valuation among Asian equity benchmark gauges tracked by Bloomberg.

Abhisit

The demonstrations have dealt a blow to Prime Minister Abhisit Vejjajiva, 44, who called off the summit after so-called Red Shirt protesters stormed the meeting venue.

The group supports exiled former Premier Thaksin Shinawatra and says Abhisit came to power illegitimately in December. Opponents of Thaksin, in exile to avoid a two-year jail sentence for corruption, seized airports in the country last year. Abhisit said today Thaksin is in Dubai.

The past week of protests forced Abhisit to declare emergency rule April 12 after he failed to curb demonstrations, which have since subsided.

“The current political situation means that less foreigners will invest in the country and that portfolio managers may actually be sellers of equity,” investor Marc Faber, who publishes the Gloom, Boom and Doom report, said in an April 13 interview. “The two parties will not agree on anything for a long time to come and that has a negative impact on business and in particular tourism.”

The country relies on visitors for about 12 percent of its economy, according to the tourism authority.


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