The Thai Capital Fund, Inc. (the "Fund") (NYSE Amex: TF), an
emerging markets closed-end management investment company seeking
long-term capital appreciation through investment primarily in
equity securities of Thai companies, today announced its results
for the quarter ended March 31, 2012 and commented on the economic
outlook for Thailand.
The Fund's investments in Thailand are made through a wholly
owned investment plan (the "Investment Plan") established under an
agreement between SCB Asset Management Co., Limited ("SCBAM"), the
Fund's investment manager, and the Fund. The Fund's investments
through the Investment Plan are managed by SCBAM, located in
Bangkok, Thailand.
First Quarter Earnings Results
For the quarter ended March 31, 2012, the Fund earned net
investment income of approximately U.S. $30,000 (equivalent to
income of U.S. $0.01 per share). Net realized and unrealized gains
from investment activities and foreign currency transactions for
the quarter ended March 31, 2012 were approximately U.S. $7,287,000
(equivalent to a gain of U.S. $2.04 per share).
In comparison, for the quarter ended March 31, 2011, the Fund
earned net investment income of U.S. $76,000 (equivalent to income
of U.S. $0.02 per share). Net realized and unrealized losses from
investment activities and foreign currency transactions for the
quarter ended March 31, 2011 were approximately U.S. $1,734,000
(equivalent to a loss of U.S. $0.50 per share).
On March 31, 2012, the total net assets of the Fund were
approximately U.S. $43.2 million. The Fund's net asset value
("NAV") per share on that date was U.S. $12.11, based on 3,564,814
shares outstanding. In comparison, on March 31, 2011, the Fund's
total net assets were approximately U.S. $49.6 million. The NAV per
share on that date was U.S. $14.41, based on 3,440,992 shares
outstanding. The Fund generated an investment return of 20.38% for
the three months ended March 31, 2012, when measured against the
Fund's NAV per share of U.S. $10.06 calculated on December 31,
2011. In comparison, the Stock Exchange of Thailand ("SET") Index
increased 19.94% during the same period, in U.S. dollar terms.
As of March 31, 2012, the Fund had 96.23% of its net assets
invested in Thai equities and 3.65% in Thai cash instruments. The
remaining assets were made up of 1.13% in short-term U.S. dollar
time deposits and liabilities in excess of other assets of
1.01%.
As of May 10, 2012, the Fund had total net assets of
approximately U.S. $42.6 million, equivalent to a NAV per share of
U.S. $11.94. On that same date, the closing price for the Fund's
shares on the NYSE Amex was U.S. $11.52, representing a trading
discount of 3.52% to its NAV per share.
First Quarter Market Review
In the first quarter of 2012, the SET Index closed at 1196.77,
an increase of 171.45 points or 16.72% with daily average turnover
of Thai Baht 30.46 billion and foreign net investment of Thai Baht
82.77 billion. In January 2012, the SET Index posted strong
performance as external factors supported investments in risk
assets. U.S. economic figures generally exceeded expectations
during the month, notably those related to the U.S. labor market.
More importantly, stress in European bond and money markets eased
after the 3-year long-term refinancing operations ("LTRO") program
from the European Central Bank ("ECB") was effective in boosting
the liquidity in the banking system. Strength in the energy sector
and to a lesser extent telecom sector drove the strong performance
of the SET Index, while the Thai banking sector underperformed the
market due to uncertainty about the fees to be charged for the
Financial Institutions Development Fund. The SET Index continued
its bullish pattern in February 2012, as foreign investors
continued to be in 'risk-on' mode and poured liquidity into Asian
markets, including the SET. Increased confidence that Greece would
escape disorderly default on its debt and signs of ample liquidity
from both the ECB and the United States Federal Reserve were major
reasons behind the improved risk appetite. The energy sector led
the pack after tensions between Western countries and Iran drove
oil prices to a high level during the month.
The SET Index remained on an upward trend in March 2012, in
response to the favorable results of the Greek private sector bond
swap, a second LTRO and the overall resilience of U.S. economic
data. Investors' cautious views on bonds and commodities resulted
in a swap into stocks. Domestic plays like the bank, telecom and
property sectors led the rally, while the energy sector declined
slightly during the month.
Despite the risk that the strong performance of the SET Index
over the past six months may be reversed due to the weak global
economic environment, particularly in Europe, we believe the
loosening monetary policies from major central banks, such as the
United States Federal Reserve, the ECB, and the Bank of Japan, have
given increased liquidity to the financial system and have reduced
the global equity market downside risk. However, we believe there
are remaining risks for the markets, including the slowdown of the
Chinese economy and concerns in Europe regarding Spain's fiscal
problems. Therefore going ahead, we expect that stock markets,
including the SET, will still be subject to many risks and will be
somewhat volatile, especially given that current valuations have
risen over the past year.
Another factor that should bring the attention of investors all
around the world is the Federal Open Market Committee meeting on
April 24-25, 2012. The focus will be on the United States Federal
Reserve chairman's wordings about the U.S. economic situation and
likelihood of a Quantitative Easing-3 ("QE3") after the end of
Operation Twist in June 2012. If the economy is better than
expected, the potential QE3 will decrease. At the moment, however,
it seems that markets have prepared for potential QE3. So we expect
investors will focus more on the perceived outlook for the U.S.
economic situation.
In Thailand, April 2012 is the month of quarterly earnings
result announcements by banks and Thai companies reported strong
earnings results, as Thai investors had expected. We believe this
is because last year's flooding in Thailand resulted in companies
needing loans to reconstruct their operation. Since the results
were as good as expected, non-bank sectors results are also
expected to improve, compared the fourth quarter of last year.
Results from non-bank sectors should be announced by mid-May
2012.
The major potential risk in Thailand currently is inflation. Due
to high consumption of imported oil, high oil prices will result in
potential inflation. The risk of inflation will be even worse if
the government's implementation of a minimum wage policy, which
will start in April 2012, does not come out as expected as some
academics have predicted that this policy will cause increased
inflation.
In April 2012, the SET Index is likely to be traded in an
estimated range of 1150-1250 points as foreign investors are not
likely to reduce their positions soon. In terms of valuation based
on forecasted earnings per share growth of 20.8% for 2012, the Thai
stock market is trading on price-to-earnings ratio for 2012 of
12.8x, price-to-book value ratio of 2.0x with a dividend yield of
3.63% (Source: Bloomberg forecast as of March 30, 2012). Compared
to the 5-year historical average valuation of price-to-earnings of
14.9x, price-to-book value ratio of 1.7x and a dividend yield of
4.2%, the valuation of current Index is still cheaper in terms of
price-to-earnings but is a bit expensive in terms of price-to-book
value and dividend yield.
The equity classifications of the Fund held at March 31, 2012
were:
Percentage of
Industry Net Assets
1. Energy 23.85%
2. Banks 16.02
3. Communication 11.93
4. Commerce 10.25
5. Property Development 7.68
6. Food and Beverage 7.56
7. Construction 6.77
8. Petrochemicals 6.00
9. Media & Publishing 2.24
10. Transportation 2.03
The ten largest equity positions held by the Fund at March 31,
2012 were:
Percentage of
Issue Net Assets
1. PTT Public Co., Ltd. 10.83%
2. Advanced Info Service Public Co., Ltd. 8.50
3. PTT Exploration & Production Public Co., Ltd. 5.98
4. Charoen Pokphand Foods Public Co., Ltd. 5.95
5. CP ALL Public Co., Ltd. 5.85
6. The Siam Cement Public Co., Ltd. 5.81
7. Kasikornbank Public Co., Ltd. 4.04
8. Bangkok Bank Public Co., Ltd. 3.90
9. Krung Thai Bank Public Co., Ltd. 3.88
10. Thai Oil Public Co., Ltd. 3.58
QUARTERLY RESULTS OF OPERATIONS*
Net Realized
And Unrealized Net Increase
Gains (Losses) on (Decrease) in
Investments and Net Assets
For the Quarter Net Investment Foreign Currency Resulting
Ended Income (Loss)* Transactions* From Operations
----------------- ------------------ ------------------
Total Per Total Per Total Per
(000's) Share (000's) Share (000's) Share
-------- -------- -------- -------- -------- --------
March 31, 2012 $ 30 $ 0.01 $ 7,287 $ 2.04 $ 7,317 $ 2.05
======== ======== ======== ======== ======== ========
March 31, 2011 $ 76 $ 0.02 $ (1,734) $ (0.50) $ (1,658) $ (0.48)
June 30, 2011 347 0.10 (2,952) (0.86) (2,605) (0.76)
September 30, 2011 321 0.09 (6,513) (1.84) (6,192) (1.75)
December 31, 2011 11 0.00 3,173 0.91 (6,192) 0.91
-------- -------- -------- -------- -------- --------
For the Year Ended
December 31, 2011 $ 755 $ 0.21 $ (8,026) $ (2.29) $(10,455) $ (2.08)
======== ======== ======== ======== ======== ========
PER SHARE SELECTED QUARTERLY FINANCIAL
DATA
Net Asset Market Share
For the Quarter Ended Value Price** Volume**
------------------- ------------------- ---------
High Low High Low (000's)
--------- --------- --------- --------- ---------
March 31, 2012 $12.23 $10.05 $11.61 $ 8.64 610
March 31, 2011 $15.12 $13.15 $14.00 $11.22 301
June 30, 2011 15.33 10.77 13.31 9.08 141
September 30, 2011 11.93 9.16 10.37 8.07 187
December 31, 2011 10.65 8.49 9.19 7.21 180
* Net of Thai withholding tax. ** As reported on the NYSE
Amex.
The Thai Capital Fund, Inc. Contact: John J. O'Keefe
Telephone: (800) 933-3440 or (201) 915-3054 www.daiwast.com Email
Contact
Thai Capital Fund (AMEX:TF)
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