Usually political turmoil is a showstopper for investment. When governments crumble, the resulting uncertainty sends stock buyers and debt financiers heading for the hills.
But one nation bucked that trend last week. Picking up a big cash injection for its oil sector—even as it faces unrest that has completely decimated the government.
That's Thailand. Where investors piled into a $1 billion bond issue for state oil firm PTTEP. During a time when the country is officially under a military coup d’etat.
PTTEP sold the perpetual bond at a subdued rate of 4.875%. With the order book reportedly being massively oversubscribed—at $5.6 billion.
Interestingly, some 80% of the issue was reportedly taken up by institutional money managers globally. Suggesting these professionals have little issue with current political problems in PTTEP’s home country.
That’s a surprising observation. Given that Thailand is right now completely without a functional government. A consequence of former Prime Minister Yingluck Shinawatra having been deposed for corruption. And subsequent infighting between political factions prompting the armed forces to intervene and take charge.
Smaller issues than this have completely derailed bond placements in other countries. So what do investors like so much about the PTTEP deal?
Perhaps it’s a sense that Thailand’s political problems are ephemeral. The country has indeed had no fewer than 12 coups in recent history—and come through all of them more or less unscathed.
But the big orders on the bond deal may also tell us something about the petroleum sector here. Namely, that Southeast Asian oil—and particularly gas—markets are some of the strongest on the planet.
The investor confidence is also a confirmation that PTTEP is one of the most established and advanced national oil firms on the planet. Quickly catching up to worldstage players like Malaysia’s Petronas.
All of which suggests a good spot for investment and for new projects. We’ll be seeing a lot more news coming here—and not just about the politics.
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Here’s to a billion-dollar bet in baht-land,
By Dave Forest
