In the run-up to many elections – the recent British election, for example – there has been conflicting evidence to the clear outcome.
Another challenge is that no one announces an upcoming coup, and it is never clear how long the status quo will persist. As an investment manager, I find that politics is important as it can materially impact investment returns.
But is the long-term impact less significant than one might suspect?
Here we will explore some of the past challenges faced by investment decision-makers to see if there are lessons to be gleaned.
Thailand, 1932
Over the past century, Thai politics has been more colourful than most. The absolute monarchy was abolished in 1932 and since then the country has had 25 general elections and 19 coups d’état, of which 12 toppled the governing powers.
In spite of this, the country is one of only a few in the world to never have defaulted on its sovereign debt. Two of Thailand’s more recent coups happened in the past 10 years and over this time, the market has performed well. Thailand’s stock market and investor returns have seen virtually no impact over the medium term.
Including dividends, the Stock Exchange of Thailand Index has risen more than 300% in U.S. dollar terms over about the last decade. In this same period, the S&P 500 Index increased 120%.
Today, Thailand’s military is in power once again. The investment community appears relatively unconcerned by the situation. We might, however, be a bit more cautious than most in this regard; King Bhumibol Adulyadej is 87 years old and struggling with poor health.
He has served as Thailand’s monarch for almost 70 years and the successional transition might be tougher than many expect.
Myanmar and Singapore in the 1960s
Now let us consider some issues an investor would have faced some five decades ago by comparing the two former British colonies of Myanmar (formerly Burma) and Singapore.
At the start of the 1960s, Myanmar was one of the world’s largest rice exporters. About the size of the state of Texas, it had a population of nearly 25 million.
By contrast, Singapore was a swampy little island off the southern tip of what is now Malaysia with no natural resources and a population of just 1.9 million.
In terms of raw potential the investment decision was a “no brainer.” Texas-sized Myanmar was a respected exporter of agricultural produce and with land size and population advantages, the country had obvious potential.
However, an investment decision would have been complicated as both countries had political problems; in 1965, Singapore became the first country in modern history to unwillingly become independent when it was expelled from the Federation of Malaysia.
