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JPMorgan expects more Thai IPOs

Thailand’s currency rally will help reverse a slump in its market for initial public offerings (IPOs) and provide fire-power for overseas acquisitions by Thai companies, according to JPMorgan Chase & Co.

IPOs will benefit from prospects of the strong baht and a heightened profile for the country as a rebound in international travel accelerates, said Marco Sucharitkul, JPMorgan’s country head for Thailand. The currency has strengthened by about 12 percent versus the dollar the past six months, with a more than 5 percent jump this month alone, making it the best-performer in Asia during those periods.

An early litmus test for the IPO market will be a share sale by SCG Chemicals Pcl, which is planning IPO of as much as $3 billion—a record for Thailand. Parent firm Siam Cement Pcl delayed the sale in October, citing risks to the global economy, energy market volatility, high inflation and China’s lockdown situation.

“With the baht getting stronger, that changes views on the market; we believe that foreign interest is coming back,” Marco said in an interview. “At the same time, Asian corporates – including Thai companies – are looking to expand overseas and a strong Thai baht will be favorable for local firms with global ambitions.”  Among positive signs is the benchmark SET Index this month touching its highest level since April, with global funds sending a net $590 million so far into Thai stocks—adding to a record $5.96 billion of inflows 2022, according to data compiled by Bloomberg. Also, the government said Monday that 11.2 million foreign tourists came in 2022, beating the target of 10 million, and the tourism authority expects about 25 million this year.

About $4.1 billion was raised through Thailand IPOs in 2022, a drop of 0.5 percent from the previous year. Still, the contraction would have been worse, had there not been supportive demand from local investors.

“If you look at the IPOs in Thailand that managed to take off last year, 70 percent to 80 percent were taken up by local funds,” Marco said. “Foreign demand was low as the US dollar was strong compared with the currencies in the APAC region.”

Still, the baht’s recent rally is unnerving Thai exporters, manufacturers and some companies that complain the currency’s rapid gain is eroding their competitiveness and the nation’s economic recovery, according to local trade groups. The Thai National Shippers’ Council said in statement Tuesday that the central bank should delay raising interest rates and stabilize the currency to help exporters.

The currency traded at about 32.727 per dollar as of 2:27 p.m. in Bangkok, compared with an average exchange rate of 35.06 per dollar in 2022. The country’s exports in December dropped 14.6 percent from a year earlier, more than economists expected, the commerce ministry said Tuesday.

The baht’s performance will prompt Thai firms to renew their efforts to invest abroad, with the pandemic having quashed most plans, Marco said.

There were few overseas acquisitions of any note by Thai companies last year, according to Marco. In 2021, PTT Global Chemical Pcl purchased Allnex Holding GmbH, a European specialty chemicals maker, for €4 billion ($4.35 billion), while Central Group and its partners bought Selfridges & Co. for £4 billion ($4.95 billion) in one of the biggest UK retail deals in years.

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