Does Death Matter? The Case of Thailand

Kim Isykan, from Truewealth Publishing, considers how deaths of political or royal leaders can have dramatic effects on the economy and investment opportunities… 

Sometimes, the death of a political leader can create a great buying opportunity. On the surface, it looks like this might the case in Thailand.

I call this the “Death Watch” investment strategy: In countries where a single individual holds a lot of influence, death can be a big driver of asset prices. Sometimes the death of a political leader can throw a country’s entire government structure into chaos. In the subsequent chaos – and hasty selling by portfolio investors who don’t know what’s going on – great opportunities emerge to buy cheap stocks (or other assets) at depressed valuation levels.

Thailand looks like a textbook setup for the Death Watch. Last week, the country’s 88-year old king, Bhumibol Adulyadej, passed away. Bhumibol wasn’t any regular king: He was a universally revered, near-holy figure in Thailand who had been the country’s ultimate arbiter since 1946. In a deeply divided country, the king enjoyed a unique status that enabled him to bring people and politicians together.

What’s worse: The king’s son, Crown Prince Maha Vajiralongkorn, will be a terrible replacement – assuming he’s even crowned. He’s a gambling, womanizing playboy on his third wife. He spends much of his time at a spa in Germany. He is as universally disliked in Thailand as his father was adored.

Political uncertainty is Thailand’s only certainty

Political crisis is Thailand’s middle name. The military has overthrown the government 12 times since 1932. The country’s state of political affairs is predictably unpredictable.

I was in Thailand just days after the most recent coup, in May 2014. A national curfew was in place. Photos in the international media showed angry protestors screaming into the frightened faces of policemen cowering behind large plastic shields stirred my imagination.  My flight into Bangkok was two-thirds empty. “This is a one-in-100-years type of political crisis,” a (clueless) talking head on CNBC claimed shortly after the coup.

I had never been to a country where martial law was in effect… or where the government had just been toppled through a coup. I didn’t know what to expect. Camouflaged militia bristling with military hardware on every corner? Fields of barbed wire in downtown Bangkok?

There was nothing of the sort. At the time I wrote this:

“I saw no soldiers, no tanks… not even any police. During my entire time in Thailand, I saw nothing remotely out of the ordinary.

Of course, every coup is different, but Bangkok was just another city going about its regular business. I didn’t see any protests while I was there. And as far as I could tell, Bangkok under martial law was just like Bangkok any other day… except that because of the curfew, the day ended at 10 p.m... and there was no CNN or BBC to watch, as a number of television channels were blocked after the coup.”

A lot of people in Thailand were happy that the military had stepped in. And the stock market rose in the months after the coup. So what does this say about what happens next for Thailand?

Business as (almost) usual

The king had been on death’s doorstep for years. And years of strife have resulted in deep – and worsening – fissures throughout Thai society. Meanwhile, Thailand hasn’t held elections since the May 2014 coup, and probably won’t for at least another year or two.

Despite this political uncertainty, Thailand’s stock market has been one of the best performing in the region in 2016 so far. After a brief drop in share prices last week after the death of the king, Thailand’s stock market is still up 17 percent in 2016. And that’s not unusual for Thailand. In the weeks after past bouts of political uncertainty, such as coups, Thailand’s stock market has risen.


Most investors stay away from political risk. Usually, risk equals uncertainty… and most investors hate uncertainty. As a result, the valuations (such as the price-to-earnings (P/E) ratio) of the stock markets of countries with high levels political risk are often lower than the valuations of markets where there’s less political risk.

This makes sense. If you know that the market environment is going to be almost the same tomorrow, and next month, and next year, you’re probably going to be willing to pay more (that is, a higher valuation) for shares – than if there’s a high risk that policies, senior government officials, the rule of law, and a lot of other things, are going to be very different soon.

“Teflon Thailand” – as it’s sometimes dubbed – has been a magnet for investment despite military coups, natural disasters (like the 2004 tsunami), paralysing protests, and political turmoil.

And today, the Thai stock market trades at a P/E of just over 19. That compares to 14.7 for the MSCI Asia ex Japan index, 12.6 for Hong Kong, and less than 12 for Singapore. It’s almost as high as the MSCI All Countries index, which is pulled up by the high valuations of the US market (which is the largest component of this index).


The relatively high valuation of the Thai stock market is in part because the companies listed on the exchange are posting positive earnings growth of 6 percent in dollar terms. That compares to an anticipated 3 percent decline in earnings for the components of the MSCI Asia ex Japan index (and drops of 9 and 5 percent for Hong Kong and Singapore, respectively). Investors are willing to pay more for earnings growth, than they’re willing to pay for markets where earnings are falling.

Still, the valuation premium of Thai shares compared to other markets in the region seems high. Even if Thailand shrugs off the death of the king, it’s hard to make an argument that new political uncertainty – with the renewed scope for a lot of other challenges and problems – will attract investors.

So I don’t think there is a “Death Watch” opportunity in Thailand just now. But if you disagree and believe that there is, one easy way to buy shares in Thailand is through the iShares MSCI Thailand Capped ETF on the New York Stock Exchange (ticker: THD). In Singapore, look at the db x-trackers MSCI Thailand Index UCITS ETF (ticker: LG7), and in Hong Kong, db x-trackers MSCI Thailand Index UCITS ETF (ticker 3092). (However, bear in mind our warningabout Deutsche Bank ETFs.)

Kim Signature

Kim Iskyan