Catch the Vietnam train now before it overtakes Thailand
Thai investors looking for good returns and expansion into the region should consider Vietnam, which one high-profile fund manager believes is poised for a regional leadership role sooner than most people think.
"It won't be a long time before Vietnam takes over from Thailand as the bigger economy and Thai investors should start to take a note of the country," says Marc Faber, who advises many large funds and also writes the widely read Gloom Boom and Doom newsletter.
With a 98% literacy rate and the high determination of its people, Vietnam will likely replace Thailand as the region's second-largest economy after Singapore, he says.
"The fact that countries such as Vietnam are going to grow at a faster pace than those such as Thailand will present an opportunity for investors."
Apart from Vietnam, the investment guru says there's a lot of opportunity in other countries such as Taiwan and China, where the equity markets have performed just around average levels.
"If you look at Taiwan, the market is trading at just around two times bond yields _ this is a simple sign of the market being cheap," he says, referring to the 4% yield on equities against 2% for government bonds.
"In China, although the market has already gone up, it still offers good value and can still go up, whereas India also offers good value in the long term," he said.
Mr Faber says that investors in the regional economies should have little to fear going into the future, even if there were to be a recession in the United States.
"The US has been going through some rough times and even if there was a recession, companies would continue to look for outsourcing to help them lower the cost structure," he said.
"This is the first time in the history of capitalism that we have poor countries that are making an impact on the world _ countries such as China and India where nearly 2.3 billion people reside."
The fact that China and India now consume nearly a quarter of global resources has created a chain reaction that has pushed global economic growth in a synchronised manner.
"The raw-material demand has prompted countries such as Latin America to show growth, where as demand for oil has prompted a boom in the Middle East, apart from the growth that we see in the US and Europe," he says.
"The Chinese and Indian markets have become the engine of growth for Asia and the world."
The wealth transfer taking place from the developed nations to the developing nations is a new phenomenon that will lift the standard of living of Asian people, while those of developed nations have remained stagnant for the past two decades.
Commenting on investment themes, Mr Faber says he likes real estate in the region. "Look at the urbanisation of Asian cities," he says.
"The urbanisation rate in Thailand is around 30%. China is also around 37%, while in India it's around 30%, and the western countries have 98%. This is an indication that we have huge potential for the real-estate market going forward.
"They say that at around $3,000 per square metre, land in cities such as Bangkok is expensive," he added. "You pay three times that amount in cities such as London, New York and Boston.
"Even cities such as Manchester had similar rates of real estate way back in late 1800s, but all they have remaining is a football club," he said, referring to the time when the English city was the world centre of industrialisation.
"Although in some parts of the region we have seen a decline in real estate prices, in the long term there is a huge value in buying assets in the region," Mr Faber adds.
He says investments in REIT (real-estate investment trusts) in countries such as Singapore were a good option as the yields were higher than on 30-year US government bonds.
By Umesh Pandey - The Bangkok Post - October 20, 2006.
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