One of the best investment strategies I’ve embraced over the years is to purchase cheap assets following a market crises or stock-market crash. Though it’s not advisable to plunge into that distressed market immediately following a plunge in values, it certainly pays in spades to wait a few months and then establish a position. It’s a classic contrarian investment approach employed by value investors like myself since 1992 and it has yet to fail, assuming you’re a patient investor.

Thailand now ranks as one of the most undervalued markets in the world following a military coup last September and a botched attempt at currency and stock-market controls in December. In mid-December, the Thai SET in Bangkok crashed 15% in a single day, erasing its gains for the calendar year; from its low on January 9, 2007, the Thai bourse is just 9% above its worst level and still a considerable 15% off its 52-week high. In fact, Thailand was one of the worst-performing markets last year while just about every stock-exchange surged in a great year for global equities.

Thailand is infamous among global investment circles as the most fickle government, triggering the 1997 Asian financial crisis and subsequently introducing currency controls in December and then curbing those restrictions several days later. The government has a history of issuing policies only to modify or entirely scrap regulations thereafter as it deems appropriate. That’s what happened last December amid a massive stock-market decline.

What makes Thailand incredibly mouth-watering as an investment now is the recent appointment of Chalongphob Sussangkarn as finance minister in February. The new finance minister, who worked at The World Bank, is highly regarded by investment analysts as pro-market friendly. On March 9, Sussangkarn issued a statement claiming that “there will be no policies that will shock the market; government policies must be implemented to boost confidence, not destroy it.” The new finance minister is a liberal economist, criticizing the capital controls, warning they might potentially destroy the Thai bond market. He also recently indicated that he favored a gradual relaxation of restrictions, which have already been eased substantially.

I visited Bangkok in February. This country is one of Southeast Asia’s most dynamic economies, enjoying a strategic location near booming Vietnam and other trading centers close by, including Singapore, Malaysia and Indonesia. It is the largest economy in the region after China and South Korea, and also home to the strongest performing currency in 2007 versus the American dollar, up 7%. The Thai SET is the cheapest-priced market in the region, trading at just 10 times trailing earnings and yielding 4.5% in dividends. Most companies traded on the SET also pay big dividends – in a rising currency. By contrast, the MSCI Emerging Markets Index, which includes Thai stocks, trades at 16 times trailing earnings and yields 2.3%.
To revive the flagging economy, hit by recent botched currency and capital controls, the central bank cut its overnight repurchase rate by 0.25% to 4.5% last month, a much-needed jolt for economic growth.

The way I see it, recent developments in March have set the stage for a recovery in Thai stocks this year. Lower interest rates, deeply discounted stocks, a gradual scrapping of capital controls and the appointment of a pro-market finance minister strongly suggest that Thailand’s military government has begun to appease foreign investors.

In the May issue of The Sovereign Individual, I’ll be plugging the world’s top-performing Thai fund, trading at a 6% discount to net asset value and up a cumulative 200% over the last five years.

It always pays to buy low – and sell high. Thailand is next on my buy-list.