We expect some short-term weakness in the Thai stock market as foreigners should be big sellers, although they are already net sellers of the Thai market YTD. However, local investors are generally positive on the coup as they believe it has broken the political deadlock and thus will catalyse an economic recovery. We therefore expect the stock market to recover its losses in the next several weeks after the initial selloff.

How the Thai stock market performs over the next 12 months will depend on the following:

(i) What the Thai Army proposes e.g. who will be appointed to the Thai cabinet; how long the Army intends to stay in power and the timeline to the next election; whether the Army will be introducing any political reforms; what are these reforms and which parties will be consulted; whether the Army will rewrite the Thai constitution; and what the next fiscal budget starting October 2014 will look like. ??

(ii) What action, if any, anti-coup groups will take in retaliation to the Army?s coup.

(iii) The impact of (i) and (ii) on the Thai economy and corporate earnings in the next 12-months.

With no news on (i) and (ii) so far, we are unable to form a judgment on (iii) as yet. Currently, the risk to GDP and corporate earnings is to the downside.

Overall, we maintain our view that the political stalemate will be resolved eventually without any negative long-term impact on the Thai economy or the social stability of the country. Thailand has been in this situation before and these occasions have presented great investment opportunities. We remain positive on the longer-term potential of Thailand and the opportunities for Thai companies in the Indochina region.?We will be buyers of Thai stocks if there is a significant sell-off over the next several days or weeks. We will, of course, make adjustments to the portfolio as we get more information.


Indonesia has just finished its parliamentary election which was held on 9 April 2014. The result was fragmented, with the top party, PDI-P, securing only about 19% of the votes and the second winner (Golkar Party) securing 15% of votes. As a result no single party could secure the presidential election ticket (there is a requirement of 20% of seat or 25% of popular votes to nominate a presidential candidate). Golkar tying up with former General Prabowo Subianto?s camp means the Prabowo coalition ?controls? a sizable 52.1% of parliamentary seats (shown in the attached table. However, we are of the opinion that voters will select the Presidential candidates based on their individual strengths and not on party affiliation.? According to recent surveys, Jokowi is still ahead.

We believe that market will react positively when the Jokowi?Kalla tie-up wins the election in July because of two reasons. Firstly, a recent Deutsche Bank fund manager survey found 84% of fund managers said that they would add to their positions in Indonesia if Jokowi becomes the President. Secondly, based on India?s recent experience, the market rallied 4% in the month leading up to the elections as a Modi victory seemed more and more probable.

Milltrust ASEAN Fund Positioning

  • We are positioned to buy into the market on weakness for both Thailand and Indonesia.
  • Our cash position is now around 17.5% (plus another 5% upon acceptance of CMA?s general offer). Our exposure in Indonesia and Thailand is around 11% each in the fund.