Long-term Investments in Cambodia: A Psychological Rollercoaster for Thailand's Firms
Businesses in Thailand perceive minimal immediate impact from the ongoing tensions with Cambodia, authors advise maintaining vigilant observation.
The ongoing heat between Thailand and Cambodia ain't no fundamental risk, claims UOB Kay Hian Securities. Thai firms with stakes in Cambodia are cruising through with nary a hitch in their operations. Krungsri Securities advises keeping a keen eye on the situation.
Amidst the renewed Thai-Cambodian beef, analysts predict that companies listed on the SET with a Cambodia presence might face just short-term "mental" turbulence. Most businesses are still rolling on their original plans—solidifying faith in their long-haul resilience.
Kitpon Praipaisarnkit, Exec VP at UOB Kay Hian Securities (Thailand), chatted with Krungthep Turakij, saying that this ain't the first dance between the two neighbors, and these bust-ups have popped up every now and then for the past two decades. These squabbles rarely influence long-term trade or investment connections. Every once in a blue moon, patriotic passions may bring on short-term boycotts of Thai products, but they're usually fleeting.
He hammered on that any effects on Thai firms in Cambodia are of the mind. There's likely to be a temporary dip in sales and service receipts, but no radical shift in the business fundamentals.
For instance, Carabao Group Plc (CBG) is all systems go with plans to erect a factory in Cambodia. It's all part of a broader plan—like setting up energy drink factories in Myanmar—to cut production costs compared to exporting pre-made goods. This low-cost strategy keeps the price competitive.
Thai goods and services are generally a hit in the regional markets, with a strong fanbase. Therefore, any sales lull is expected to be temporary and unlikely to head off expansion or factory construction plans.
On a related note, Kornpat Worachet, Exec Vice President and Head of Research at Krungsri Securities, added that the Thai-Cambodian spat may shadow the sentiment of SET investors with Cambodian exposure, but the day-to-day biz ops remain unaffected. Nevertheless, fluid geopolitical changes should be tracked closely.
He mentioned that the extensive economic effects are tricky to pin down at this point. Markets are currently pricing in the risk on a mental level. Watch this space for signs of increased geopolitical risk or any policy changes by the Cambodian government that could swerve business proceedings.
Asia Plus Securities studied the situation and broke down sector-wise exposures:
- Beverages: CBG may catch a cold.
- Healthcare: Hospitals will likely remain unscathed.
- Power Generation: Most firms studied don't have a Cambodian presence, except BGRIM, which operates solar power in the neighborhood.
- Energy: OR has a presence.
- Retail: Retailers like CPALL, CPAXT, and BJC have a foothold in Cambodia.
- Media: MAJOR runs six cinemas in the region.
- Construction Materials: Cambodia is a key player in the border trade market for Thai cement companies such as SCCC and SCC.
- Agri-Food: CPF has investments in Cambodia.
Despite the current tension, analysts remain positive: the core of Thai firms with Cambodian investments stays rock-solid.
- TAGS
- Cambodia
- Stock Exchange of Thailand
- Analysts
- UOB
- Krungsri Securities (KSS)
- investment
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Enrichment Data:
Long-term Resilience- Expansion Plans: Thai firms continue to pursue their expansion plans in Cambodia, despite the ongoing tensions.
Potential Opportunities- Defense Industry: The increased military presence and heightened cybersecurity concerns in the region could present opportunities for defense contractors and cybersecurity firms. Thai firms with a diverse portfolio could indirectly benefit from these investments.- Cross-border Infrastructure: The resolution of tensions could lead to opportunities for cross-border infrastructure projects, which could boost investments and benefit Thai investors in the long term.
Enrichment References:1. Thai Firms Optimistic About Long-term Business in Cambodia2. Defense Stocks: A Hedge Against Geopolitical Risks3. ASEAN Infrastructure Funding Needs
- The continued investments by Thai firms in Cambodia suggest a strong belief in the long-term resilience of their businesses, despite the ongoing political tensions.
- The heightened military presence and increased cybersecurity concerns in the region could potentially offer opportunities for defense contractors and cybersecurity firms, indirectly benefiting Thai firms with diverse portfolios.
- The resolution of the political issues between Thailand and Cambodia may lead to opportunities for cross-border infrastructure projects, which could encourage investments and benefit Thai investors in the long term.
- In sectors such as beverages, retail, and agri-food, Thai firms like Carabao Group Plc (CBG), CPALL, CPAXT, BJC, and CPF have established a presence in Cambodia, potentially impacted by the current tensions.
