GRAPHIC: Thai auto-parts shares: link.reuters.com/nyb25w By Viparat Jantraprap BANGKOK, July 6 (Reuters) -- Thai auto-parts shares have unwound all the gains that they made in the past 12 months as heavily indebted households in Southeast Asia's second-biggest economy tightened their purse-strings and refrained from new purchases.
The automotive and parts subindex in Bangkok has fallen 0.4 percent so far this year. While that drop was smaller than the 1.3 percent decline in the benchmark SET index, it deepened a downtrend that began in September last year. The fall has also reversed all the gains that the subindex made after May last year when the junta took over the government and removed months of political uncertainty.
Thai auto shares - comprising component makers such as Somboon Advance Technology Pcl and Thai Stanley Electric Pcl - surged 50.5 percent in 2012 as a tax incentive scheme for first-time car buyers boosted domestic auto sales. Since 2013, sales have fallen as the effect of the government scheme faded. The debt taken to fund those purchases has returned to haunt the market as the Thai economy cools. Yet analysts say auto shares have probably hit a bottom and point investors to now attractive valuations. The auto subindex's earnings multiple of 14.5 is well below the broader market's 16.9.
Analysts are also bullish on exports. While auto production for the Thai market slumped 15 percent in January-to-May from a year earlier to 287,920, output for exports rose nearly 9 percent to 495,633. Global car makers are gearing up to boost exports from their Thai plants, with Toyota Motor Thailand and General Motors Thailand unveiling such plans last week. The industry, a sector promoted by the Thai government, will also benefit over the next three to five years from the second phase of the Board of Investment's (BOI) eco-car project, which has so far drawn participation pledges from Japanese automakers including Toyota Motor and Honda Motor.
"Indeed, there are signs of recovery in the second half of 2015, especially in the area of car exports," said Siros Satrabhaya, Thailand's branch manager at J.D. Power Asia Pacific, a regional automotive research firm. "The recent depreciation of the baht and the measures taken by the Bank of Thailand will help to improve the competitiveness of the nation's exports." (Editing by Ryan Woo)