Business & Finance
Business and Finance
Business and Finance
Tue, March 1, 2011 The Thai Capital Fund Reports Fourth Quarter Earnings
JERSEY CITY, NJ--(Marketwire - March 1, 2011) - The Thai Capital Fund, Inc. (the "Fund") (
The Fund's investments in Thailand are made through a wholly owned investment plan (the "Investment Plan") established under an agreement between SCB Asset Management Co., Limited ("SCBAM"), the Fund's investment manager, and the Fund. The Fund's investments through the Investment Plan are managed by SCBAM, located in Bangkok, Thailand. Daiwa SB Investments (Singapore) Limited, the Fund's investment adviser, provides SCBAM with advice regarding investments through the Investment Plan and manages the Fund's assets held outside the Investment Plan.
Fourth Quarter Earnings Results
For the quarter ended December 31, 2010, the Fund incurred a net investment loss of approximately U.S. $67,000 (equivalent to a loss of U.S. $0.02 per share), resulting in net investment income for the year ended December 31, 2010 of approximately U.S. $821,000 (equivalent to income of U.S. $0.26 per share). Net realized and unrealized gains from investment activities and foreign currency transactions for the quarter ended December 31, 2010 were approximately U.S. $2,457,000 (equivalent to a gain of U.S. $0.74 per share). As a result, the net realized and unrealized gains for the year ended December 31, 2010 were approximately U.S. $19,689,000 (equivalent to a gain of U.S. $6.20 per share).
In comparison, for the quarter ended December 31, 2009, the Fund incurred a net investment loss of approximately U.S. $49,000 (equivalent to a loss of U.S. $0.02 per share), resulting in net investment income for the year ended December 31, 2009 of approximately U.S. $427,000 (equivalent to income of U.S. $0.13 per share). Net realized and unrealized gains from investment activities and foreign currency transactions for the quarter ended December 31, 2009 were approximately U.S. $1,715,000 (equivalent to a gain of U.S. $0.54 per share). As a result, the net realized and unrealized gains for the year ended December 31, 2009 were approximately U.S. $13,758,000 (equivalent to a gain of U.S. $4.34 per share).
On December 31, 2010, the total net assets of the Fund were approximately U.S. $51.2 million. The net asset value ("NAV") per share on that date was U.S. $14.89, based on 3,440,992 shares outstanding. In comparison, on December 31, 2009, total net assets were approximately U.S. $36.9 million. The NAV per share on that date was U.S. $11.62, based on 3,172,313 shares outstanding. The Fund generated an investment return of 56.83% for the year ended December 31, 2010, when measured against the NAV per share of U.S. $11.62 calculated on December 31, 2009. In comparison, the Stock Exchange of Thailand ("SET") Index increased 55.63% during the same period, in U.S. dollar terms.
As of December 31, 2010, the Fund had 94.26% of its net assets invested in Thai equities and 11.91% in Thai cash instruments. The remaining assets were made up of 0.05% in short-term U.S. dollar time deposits and liabilities in excess of other assets of (6.22).
As of February 28, 2011, the Fund had total net assets of approximately U.S. $46.2 million, equivalent to a NAV per share of U.S. $13.49. On that same date, the Fund's shares on the NYSE Amex closed at U.S. $11.97, representing a trading discount of 11.27% to its NAV per share.
Fourth Quarter Market Review & Outlook
For the quarter ended December 31, 2010, the SET Index increased 57.46 points or 5.89% to close at 1,032.76. The market drivers included the continuous capital inflow into the Asian markets, strong economic and earnings growth expectations and the attractive foreign exchange gain. On the other hand, negative factors that pressured the market in an on-and-off fashion included capital control measures, European crisis concerns, China's monetary tightening policy and political risks.
The Thai stock market remained on an upward trend rising by 0.94% to close at 984.46 in October 2010 with much greater volatility after breaching the psychological resistance level of 1,000 points. Two major drivers for market turbulence in October were concerns about capital control measures after the Thai Baht appreciated against the U.S. Dollar to a pre-crisis level and slower capital inflows as investors largely priced in the second Quantitative Easing policy announced by the U.S. Federal Reserve.
The Thai stock market rose modestly by 2.10% to close at 1,005.12 in November 2010, as the early optimism from the U.S. Fed's announcement of the second Quantitative Easing did not last long. In the middle of the month, concerns about the European debt crisis and China's plan to cool inflation and control the property market weighed on Asian stock markets. However, around month-end, the decision of the Thai Constitutional Court to dismiss the dissolution case against the Democrats helped reduce the political tension and revive the Thai stock market.
The Thai stock market extended gains in a moderate fashion rising by 27.64 points or 2.75% to close the year at 1,032.76 on December 31, 2010, as external factors were very turbulent. While U.S. economic figures and the market trend in December were resilient, there was high market volatility in Europe on debt crisis concerns and in China on monetary tightening, which led to the swing in the SET Index. Tension in the Korean peninsula also accounted for volatility. Meanwhile, buying by local institutions in tax-deductible funds (LTF & RMF) was the major supporter for the SET Index.
In the first half of 2011, high inflation will be a key concern in the region as a result of economic recovery and a stronger outlook for commodities, especially crude oil. Medium-term global oil demand growth forecast for 2011-2015 is expected to grow at 1.6% per annum driven by a view that a typical year will experience global economic growth of about 4.0% per annum over the period. Consequently, regional central banks are expected to increase their interest rates to curb inflation. The sectors that benefit from higher inflation include the energy, commodities, banking and commercial sectors.
In 2011, Thailand's major GDP growth drivers are expected to be domestic consumption and investment activities from both the private and government sectors. Higher purchasing power is expected from the Thai consumer due to a government initiative to raise civil servants' salaries and raise minimum wages. Also, soaring agriculture prices such as corn and rubber will directly boost farm income as a majority of the Thai population works in the agricultural sector. This should result in massive purchasing power in the retail sector.
On the other hand, the property sector will definitely be pressured by rising inflation, even if some developers have an almost 100% secured backlog. Moreover, the Bank of Thailand clearly stated that it will do anything possible to prevent a property bubble from developing. As a result, the Bank of Thailand had launched loan-to-value limits months ago and promised to raise ratios if it sees speculative activities in the property sector.
Fundamentally, the SET Index in 2011 is expected to provide only marginal upside, driven mainly by the higher earnings-per-share ("EPS") forecast mostly in the energy and domestic consumption related sectors, as well as the continuation of foreign fund inflows into regional stock markets while the region still provides a strong growth outlook, even though softer than last year. The Thai Baht is expected to continue its appreciation trend but only in a narrow range between Baht 29/USD and Baht 30/USD, which is expected to deliver little damage to exporters. In terms of valuation based on forecasted EPS growth of 28.4% for 2010 and 17.8% for 2011, the Thai stock market is trading on price-to-earnings ("PER") for 2010 of 14.5x, PER for 2011 of 12.4x and price-to-book value of 2.05x with a dividend yield of 3.56% (Source: Bloomberg forecast as of 12/30/2010).
We expect to maintain the current position in portfolio sectors for the first quarter of 2011 because we expect earnings momentum to continue. However, we might reallocate to focus more on domestic sectors rather than sectors relating to exports. Overall market sentiment is still positive and we expect the SET Index by year-end 2011 to be around 1,150 to 1,200, but we also expect that market movement for this year will be in a wide sideways fashion. The Fund's cash level may be volatile as well, since we may move to a higher cash position in order to cope with market volatility.
The ten largest equity classifications of the Fund held at December 31 2010 were: Percentage of Industry Net Assets --------------------- ------------- 1. Energy 20.95% 2. Construction 17.66 3. Banks 13.66 4. Property Development 10.04 5. Commerce 8.35 6. Electronic Components 7.51 7. Agribusiness 4.92 8. Petrochemicals 4.81 9. Finance & Securities 4.44 10. Communication 1.92 The ten largest equity positions held by the Fund at December 31, 2010 were: Percentage of Issue Net Assets --------------------------------------------- ------------- 1. The Siam Cement Public Co., Ltd. 8.00% 2. PTT Public Co., Ltd. 7.94 3. Kasikornbank Public Co., Ltd. 7.80 4. Delta Electronics (Thailand) Public Co., Ltd. 7.51 5. Dynasty Ceramic Public Co., Ltd. 5.59 6. Charoen Pokphand Foods Public Co., Ltd. 4.92 7. PTT Chemical Public Co., Ltd. 4.81 8. Banpu Public Co., Ltd. 4.66 9. Thanachart Capital Public Co., Ltd. 4.44 10. Bangkok Bank Public Co., Ltd. 3.88 QUARTERLY RESULTS OF OPERATIONS* Net Realized And Unrealized Gains (Losses) on Net Increase Investments and (Decrease) in Net Foreign Net Assets For the Quarter Investment Currency Resulting Ended Income (Loss)* Transactions* From Operations --------------- ------------------ ------------------ ------------------ Total Per Total Per Total Per (000's) Share (000's) Share (000's) Share -------- -------- -------- -------- -------- -------- March 31, 2010 $ 122 $ 0.04 $ 3,735 $ 1.18 $ 3,857 $ 1.22 June 30, 2010 506 0.16 506 0.16 1,012 0.32 September 30, 2010 260 0.08 12,991 4.12 13,251 4.20 December 31, 2010 (67) (0.02) 2,457 0.74 2,390 0.72 -------- -------- -------- -------- -------- -------- For the Year Ended December 31, 2010 $ 821 $ 0.26 $ 19,689 $ 6.20 $ 20,510 $ 6.46 ======== ======== ======== ======== ======== ======== March 31, 2009 $ 66 $ 0.02 $ (975) $ (0.31) $ (909) $ (0.29) June 30, 2009 326 0.10 8,444 2.67 8,770 2.77 September 30, 2009 84 0.03 4,574 1.44 4,658 1.47 December 31, 2009 (49) (0.02) 1,715 0.54 1,666 0.52 -------- -------- -------- -------- -------- -------- For the Year Ended December 31, 2009 $ 427 $ 0.13 $ 13,758 $ 4.34 $ 14,185 $ 4.47 ======== ======== ======== ======== ======== ======== PER SHARE SELECTED QUARTERLY FINANCIAL DATA Share For the Quarter Ended Net Asset Value Market Price** Volume** --------------------- ------------------- ------------------- --------- High Low High Low (000's) --------- --------- --------- --------- --------- March 31, 2010 $ 12.84 $ 10.92 $ 10.82 $ 8.65 180 June 30, 2010 13.22 12.28 11.30 9.80 193 September 30, 2010 17.36 13.16 15.18 10.61 351 December 31, 2010 18.60 14.77 17.38 12.75 510 March 31, 2009 $ 7.53 $ 6.66 $ 7.21 $ 5.85 149 June 30, 2009 10.10 7.24 9.40 6.19 109 September 30, 2009 11.45 9.47 9.78 7.68 188 December 31, 2009 11.75 10.93 10.70 9.02 171 * Net of Thai withholding tax. ** As reported on the NYSE Amex.
