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The Thai Capital Fund Reports Second Quarter Earnings JERSEY CITY, NJ--(MARKET WIRE)--Aug 22, 2008 -- The Thai Capital Fund, Inc. (the "Fund")
(TF - News), a 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 June 30,
2008 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. Daiwa SB Investments (Singapore) Limited, the Fund's investment adviser, provides SCBAM with advice regarding investments through the Investment Plan and manages the Fund's assets held outside the Investment Plan. SECOND QUARTER EARNINGS RESULTS For the quarter ended June 30, 2008, the Fund earned net investment income of U.S. $451,000 (equivalent to income of U.S. $0.14 per share), resulting in net investment income for the six months ended June 30, 2008 of approximately U.S. $451,000 (equivalent to income of U.S. $0.14 per share). Net realized and unrealized losses from investment activities and foreign currency transactions for the quarter ended June 30, 2008 were approximately U.S. $5,772,000 (equivalent to a loss of U.S. $1.82 per share). As a result, the net realized and unrealized losses for the six months ended June 30, 2008 were approximately U.S. $3,756,000 (equivalent to a loss of U.S. $1.18 per share). In comparison, for the quarter ended June 30, 2007, the Fund earned net investment income of approximately U.S. $409,000 (equivalent to income of U.S. $0.13 per share), resulting in net investment income for the six months ended June 30, 2007 of approximately U.S. $516,000 (equivalent to income of U.S. $0.16 per share). Net realized and unrealized gains from investment activities and foreign currency transactions for the quarter ended June 30, 2007 were approximately U.S. $4,844,000 (equivalent to a gain of U.S. $1.53 per share). As a result, the net realized and unrealized gains increased to approximately U.S. $5,271,000 (equivalent to a gain of U.S. $1.67 per share) for the six months ended June 30, 2007. On June 30, 2008, the total net assets of the Fund were approximately U.S. $38.7 million. The net asset value per share on that date was U.S. $12.23, based on 3,163,037 shares outstanding. In comparison, on June 30, 2007, total net assets were approximately U.S. $37.7 million, equivalent to a net asset value per share of U.S. $11.94, based on 3,157,405 shares outstanding. The Fund generated a negative investment return of 7.84% for the six months ended June 30, 2008, when measured against the net asset value per share of U.S. $13.27 calculated on December 31, 2007. In comparison, the Stock Exchange of Thailand ("SET") Index decreased 9.80% for the same period, in U.S. dollar terms. As of June 30, 2008, the Fund had 94.77% of its net assets invested in Thai common stocks and 4.73% in Thai cash instruments. The remaining assets were made up of 0.38% in short-term U.S. Dollar Treasury Bills and time deposits and liabilities in excess of other assets of 0.12%. As of August 21, 2008, the Fund had total net assets of approximately U.S. $34.0 million, equivalent to a net asset value per share of U.S. $10.76. On that same date, the Fund's shares on the American Stock Exchange ("AMEX") closed at U.S. $9.75, representing a trading discount of 9.39% to its net asset value per share. THAI ECONOMIC REVIEW In the first six months of 2008, the SET Index closed at 768.59, down 89.51 points or 10.43% from the December 31, 2007 close of 858.10. The SET was volatile during the period along with global equities due to concern that a U.S. economic slowdown as a result of the sub-prime mortgage crisis might extend to real sectors and other major countries. Moreover, higher oil prices and rising inflation threatened domestic confidence. Meanwhile, a resurgence of political tensions in Thailand implied reduced optimism for a strong increase in public and private sector investment spending. Throughout the period, local institutions were net buyers at Baht ("Bt") 13.9 billion including retail investors at Bt72.9 billion. Foreign investors were net sellers at Bt.86.9 billion. The reasons the Thai market tumbled can be divided into four topics as follows: 1) The threat of inflation: We are forecasting the June Consumer Price Index to have risen 9.11% year-on-year with core inflation up 3.73%. Even worse inflation numbers can be anticipated in the future with global crude prices rising to nearly US$140/barrel and the lag time for higher energy and crude prices to be factored into overall consumer prices. The Bank of Thailand ("BoT") has already warned about double-digit inflation ahead and that its priority has shifted to fighting inflation, rather than supporting growth. This means interest rates will be increasing very soon and economic growth projections will likely need to be further revised downward. 2) Rising interest rates: As expected the BoT raised its one-day purchase rate by 25 basis points ("bps") to 3.50% at the July 16th meeting of the Monetary Policy Committee. We also expect increases totaling 50 bps in subsequent meetings, bringing the 1-day repo rate to 4.00% by year-end. More importantly, Thai commercial banks are in the process of raising interest rates on their own, due to stronger-than-expected loan growth up to May and rising loan-to-deposit ratios. The government bond yield curve already reflects this increase in interest rates. 3) Political tensions: Previously, we had pegged political uncertainty as the biggest variable for the stock market. It may still be the key wild card, as Thai politics are notoriously difficult to predict. Clearly, the move by anti-government protesters to Government House was one of the major factors that drove the market down in June. That the protests did not result in any violence was one of the major factors for the market's subsequent rebound. The market is factoring in political risks on a day-by-day basis. We believe the government will survive the no-confidence debate and that should be seen as a short-term positive before the legislative break. Taking a longer-term perspective, nothing really has been resolved. The opposing forces are clearly determined to butt heads again and this will most certainly be another worry point for the market down the road. Most notably, there are several pending court verdicts that may turn into flash points for the market. 4) Downward revision in Gross Domestic Product ("GDP") forecasts: We have already lowered our GDP growth projection for this year from 6.0% to 5.5%. However, given the economic impact of rising inflation, higher interest rates and the current political stalemate, we believe that domestic consumption and investment projections may need to be revised downward yet again. It is increasingly looking like economic growth already peaked in 2008 at 6.05% in the first quarter of 2008. However, amid the negative factors, we still foresee the light at the end of tunnel. We think high oil prices are the main root cause of the regional panic sell off. Also, the factors that pushed oil prices up are real global demand of oil consumption, the over-statement of China demand for the Olympics and geopolitical conflict in the Middle East. The last factor is unpredictable but the tension between Iran and the United States seems to be subsiding. The over-statement of China demand for the Olympic games, not only for oil but also for many commodities, such as iron ore and coal, is expected to decline as well. Thus, after the games, we expect that the price of oil will reflect only actual global demand and the price could settle somewhere between $100-120 per barrel for a quarter or two. This could help world inflation decline to an acceptable level, for the Thai economy 4-5% inflation is considered a normal level. Another one of the few positives supporting the Thai stock market should be the anticipation of generally positive second quarter 2008 earnings results to be released from July 18 until August 15. The energy sector, which accounts for roughly one-third of market capitalization and more than 40% of total stock market earnings, should turn in very good second quarter 2008 results, as should commodity related companies. Meanwhile, the second largest sector, banking, should also show strong performance on the recent pick-up in loan growth and still quite wide interest margins. The flip side of this is that it is very difficult to forecast future earnings for energy and commodity plays beyond the second quarter of 2008. As the market discounts bad news, it also discounts the good news.
The ten largest equity classifications of the Fund held at June 30, 2008
were:
Percentage of
Industry Net Assets
-------- -------------
1. Energy 24.74%
2. Banks 21.57
3. Property Development 14.51
4 Media & Publishing 7.26
5. Communication 6.49
6. Commerce 5.75
7. Health Care Services 3.69
8. Food & Beverage 2.43
9. Petrochemicals 1.56
10. Mining 1.25
The ten largest equity positions held by the Fund at June 30, 2008 were:
Percentage of
Issue Net Assets
----- -------------
1. PTT Exploration and Production Public Co., Ltd. 14.94%
2. Kasikornbank Public Co., Ltd. 10.82
3. Bangkok Bank Public Co., Ltd. 9.90
4. PTT Public Co., Ltd. 6.76
5. Advanced Info Service Public Co., Ltd. 4.66
6. Bangkok Chain Hospital Public Co., Ltd. 3.65
7. Amarin Printing & Publishing Public Co., Ltd. 3.54
8. L.P.N. Development Public Co., Ltd. 3.11
9. BEC World Public Co., Ltd. 2.80
10. CP ALL Public Co., Ltd. 2.38
QUARTERLY RESULTS OF OPERATIONS*
Net Realized
And Unrealized Net Increase
Gains (Losses) on (Decrease) in
Net Investments and Net Assets
Investment Foreign Currency Resulting From
For the Quarter Ended Income (Loss)* Transactions Operations
--------------- ----------------- ----------------
Total Per Total Per Total Per
(000's) Share (000's) Share (000's) Share
------- ------- ------- ------- ------- -------
March 31, 2008 $ -0- $ -0- $ 2,016 $ 0.64 $ 2,016 $ 0.64
June 30, 2008 451 0.14 (5,772) (1.82) (5,321) (1.68)
------- ------- ------- ------- ------- -------
For the Six Months
Ended June 30, 2008 $ 451 $ 0.14 $(3,756) $ (1.18) $(3,305)$ (1.04)
======= ======= ======= ======= ======= =======
March 31, 2007 $ 107 $ 0.03 $ 427 $ 0.14 $ 534 $ 0.17
June 30, 2007 409 0.13 4,844 1.53 5,253 1.66
September 30, 2007 160 0.05 3,476 1.10 3,636 1.15
December 31, 2007 (136) (0.04) 1,334 0.42 1,198 0.38
------- ------- ------- ------- ------- -------
For the Year Ended
December 31, 2007 $ 540 $ 0.17 $10,081 $ 3.19 $10,621 $ 3.36
======= ======= ======= ======= ======= =======
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, 2008 $13.97 $11.75 $13.55 $ 9.45 392
June 30, 2008 14.50 11.89 13.60 10.86 300
March 31, 2007 $10.33 $ 9.38 $11.88 $ 9.15 610
June 30, 2007 11.94 10.63 13.20 10.65 597
September 30, 2007 13.73 11.74 15.85 10.35 608
December 31, 2007 14.09 12.35 15.48 12.05 402
* Net of Thai withholding tax.
** As reported on the American Stock Exchange, LLC.Contact: Contact:
John J. O'Keefe
Telephone: (800) 933-3440
(201) 915-3054
http://www.daiwast.com
Email Contact
Source: The Thai Capital Fund
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