The Thai baht rally will help reverse a slump in its market for initial public offerings 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% versus the United States dollar the past six months, with a more than 5% 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 expected to revive its offering 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.
JPMorgan is among advisers for the planned offering, and Marco expects the issuance after mid-year.
"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 favourable for local firms with global ambitions."
Among the 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.
About $4.1 billion was raised through Thailand IPOs in 2022, a drop of 0.5% 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% to 80% 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 baht’s performance, however, 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.
