The Wall Street Journal offered an interesting look at the Thai stock market today, speculating that perhaps some value-based opportunities may be present. As the article notes:

“…The worsening political problems in Thailand could be a buy signal for its battered stock market. That is, if you’re an investor who can stomach the country’s alarming risk profile.

Stocks in Thailand are among the cheapest in Asia on a price-to-earnings basis, and the country’s economy is shaping up to be the only one in the region to grow faster this year than it did in 2007….

…Some analysts point to upstream energy companies such as PTT Exploration & Production as possible investments, while others favor the telecommunications sector, where cellular network provider Advanced Info Service is popular.

Citigroup said AIS has historically maintained much of its earnings growth during troubled times and its cash flows are robust. And while there is increasing competition in the sector, customer demand hasn’t been hit by inflation. Citigroup forecast AIS shares will hit 110 baht ($3.30) in the next 12 months — up 25% from Friday’s close of 88 baht. AIS shares have declined 9.3% since Jan. 1.

But with Thailand’s political feuds still bubbling, jumping into the country’s stock market remains a case of buyer beware.

…The political problems in Thailand, however, are of an entirely different order. In the eyes of many Thais, they represent nothing less than a contest between two philosophies of how to run this Buddhist kingdom: Should it be a popular democracy or a country steered by the strong arm of conservative establishment institutions, such as the military, its courts and its influential monarchy?

…The seemingly intractable situation worries many investors and investment banks. HSBC Global Research this month said the political risks were so great it had reversed its view on Thailand, now recommending investors be “underweight” in that market instead of “overweight.”

“The fundamental fissures in Thai society and politics — between the crown and democrats, urbanites and poor rural dwellers, the army and populace — need to be resolved before the current impasse will end,” HSBC said.

Still, there are potential opportunities for hardy investors.

Thailand’s government forecast the economy will grow 5% to 6% this year as long-delayed infrastructure projects get under way. That would be up from last year’s 4.8% growth rate. The Philippines, on the other hand, expects its economy to grow 5.6% to 6.6% this year, down from 7.4% last year. Vietnam is another country that has lowered growth targets as it tries to focus on combating inflation instead.

Thai Prime Minister Samak Sundaravej announced last week a $1.4 billion package of tax cuts and other measures to take the sting out of rising fuel prices and keep domestic consumption up. Finance Minister Surapong Suebwonglee expressed confidence that Thailand’s inflation rate will stay within its forecast range of 6% to 7% this year.

Where to Look

The trick to making the most of the promising economic situation is to figure out the stocks whose earnings are going to be most resilient to rising inflation and political troubles, J.P. Morgan equity analyst Sriyan Pietersz wrote in a research report this month.

Discount retailers such as Siam Makro, which closed down 2.50 baht at 84 baht Friday, could see increased sales as urban buyers switch from glitzy malls to more basic fare while rural shoppers increase their purchases in the wake of rising agricultural prices, he said.

PTT Exploration & Production — a unit of Thai oil and gas unit PTT — may also prove to have resilient earnings, J.P. Morgan predicted. PTTEP shares closed seven baht lower at 143 baht Friday. For the year PTTEP stock is down 9%.

Elsewhere, Bangkok-based Seamico Securities sees potential in some of the companies that operate industrial estates in Thailand as multinational manufacturers begin to look beyond China and its rising wage and land costs to possible production sites in Southeast Asia.

Seamico issued a “buy” last week on Amata Corp., which operates industrial estates in Thailand and its highflying neighbor, Vietnam. Seamico said Amata’s share price has bottomed out and that its fair value is 16 baht a share, or 54% higher than Friday’s close of 10.40. The stock is down 41% this year.”