SOURCE: Thai Capital Fund

February 24, 2009 16:09 ET

The Thai Capital Fund Reports Fourth Quarter Earnings

JERSEY CITY, NJ--(Marketwire - February 24, 2009) - The Thai Capital Fund, Inc. (the "Fund") (NYSE Alternext US: TF), a closed-end management investment company seeking long-term capital appreciation through investment primarily in equity securities of Thai companies, today announced its results for the quarter ended December 31, 2008 and commented on the economic outlook for Thailand.

The Fund's investments in Thailand are made through a wholly owned investment plan ( the "Investment Plan") established under an agreement between SCB Asset Management Co., Limited ("SCBAM"), the Fund's investment manager, and the Fund. The Fund's investments through the Investment Plan are managed by SCBAM, located in Bangkok, Thailand. Daiwa SB Investments (Singapore) Limited, the Fund's investment adviser, provides SCBAM with advice regarding investments through the Investment Plan and manages the Fund's assets held outside the Investment Plan.

FOURTH QUARTER EARNINGS RESULTS

For the quarter ended December 31, 2008, the Fund incurred a net investment loss of U.S. $197,000 (equivalent to a loss of U.S. $0.06 per share), resulting in net investment income for the year ended December 31, 2008 of approximately U.S. $432,000 (equivalent to income of U.S. $0.14 per share). Net realized and unrealized losses from investment activities and foreign currency transactions for the quarter ended December 31, 2008 were approximately U.S. $7,300,000 (equivalent to a loss of U.S. $2.32 per share). As a result, net realized and unrealized losses for the year ended December 31, 2008 were approximately U.S. $18,991,000 (equivalent to a loss of U.S. $6.01 per share).

In comparison, for the quarter ended December 31, 2007, the Fund incurred a net investment loss of approximately U.S. $136,000 (equivalent to a loss of U.S. $0.04 per share), resulting in net investment income for the year ended December 31, 2007 of approximately U.S. $540,000 (equivalent to income of U.S. $0.17 per share). Net realized and unrealized gains from investment activities and foreign currency transactions for the quarter ended December 31, 2007 were approximately U.S. $1,334,000 (equivalent to a gain of U.S. $0.42 per share). As a result, net realized and unrealized gains increased to approximately U.S. $10,081,000 (equivalent to a gain of U.S. $3.19 per share) for the year ended December 31, 2007.

On December 31, 2008, the total net assets of the Fund were approximately U.S. $23.2 million. The net asset value per share on that date was U.S. $7.32, based on 3,167,316 shares outstanding. In comparison, on December 31, 2007, total net assets were approximately U.S. $42.0 million, equivalent to a net asset value per share of U.S. $13.27, based on 3,163,037 shares outstanding. The Fund generated a negative investment return of 44.14% for the year ended December 31, 2008, when measured against the net asset value per share of U.S. $13.27 calculated on December 31, 2007. In comparison, the Stock Exchange of Thailand ("SET") Index decreased 49.34% for the same period, in U.S. dollar terms.

As of December 31, 2008, the Fund had 93.81% of its net assets invested in Thai common stocks and 4.67% in Thai cash instruments. The remaining assets were made up of 2.16% in short-term U.S. dollar time deposits and liabilities in excess of other assets of 0.64%.

As of February 19, 2009, the Fund had total net assets of approximately U.S. $22.8 million, equivalent to a net asset value per share of U.S. $7.21. On that same date, the Fund's shares on the NYSE Alternext closed at U.S. $6.35, representing a trading discount of 11.93% to its net asset value per share.

FOURTH QUARTER MARKET REVIEW

After enjoying a strong and sustained period of expansion with Gross Domestic Product ("GDP") growth averaging 5.5% per year over the past decade, Thailand cannot escape the adverse consequences of deteriorating global economic conditions. We forecast negative real GDP growth (-0.8% YoY) for 2009, the worst performance by the economy since the Asian financial crisis of 1997-98.

In our forecasts we assumed weaker aggregate demand (including private sector consumption and investment) and a sharp contraction in international trade and services income from abroad. Fiscal policy measures are likely to play only a limited role in supporting domestic demand in the near term partly because disbursement of public funds is often delayed. Also while political risk seems to have eased and various stimulus packages are in the pipeline, the new government's actions are circumscribed by the fiscal year 2009 budget drawn up by the previous administration. No large-scale infrastructure projects should be expected to begin anytime soon.

We anticipate a sharp economic slowdown during the fourth quarter of 2008 ("4Q08") and the first quarter of 2009 due mainly to a contraction in external demand for Thai goods and services, though demand for imports (mainly consumer goods) could remain strong. Economic activity will remain at low ebb for most of 2009, with a slight pick up towards year-end.

We are not seeing much upside potential for the first half of 2009 and we are also hopeful that there is not much downside either. We are expecting the SET to trade in the 380 to 450 range, with the key factors for the first half relating to earnings and dividends.

--  Corporate results for 4Q08 and full year 2008 to be announced by
    the end of February should not be too positive. We most likely will not see
    the typical boost in the market from the shift in valuations due to the
    uncertain outlook for this year. We are forecasting average earnings-per-
    share growth this year of only 1.89%.
    
--  On the positive side, listed Thai companies are in a relatively
    strong financial position and can maintain very attractive dividend
    payouts, especially relative to declining interest rates at commercial
    banks. For this reason, we believe that the Thai stock market will be
    supported even with generally negative news expected ahead. We currently
    estimate that Thai shares offer a dividend yield of 6.84% based on our
    current 2008 forecasts. Shares will go ex-dividend in March and April, and
    we could see further downside then. With that said, we hold to our long-
    standing recommendation for long-term investors to hold for dividends and
    wait for the recovery in share prices later this year.
    
--  Another major positive is that the Thai stock market is
    predominately domestic-oriented and, based on market capitalization
    weighting, stands to benefit from a direct boost from the government
    stimulus package, even if it eventually proves insufficient to lift the
    overall economy. By our estimate, foreign sales account for probably less
    than 20% of total listed company sales.
    
--  A third positive factor is that the Thai baht should strengthen
    over time against the U.S. dollar, as should regional currencies. This
    point is based on the assumption that there will be an eventual realignment
    of trade and savings in the global economy and that realignment should
    favor Asian currencies. If this proves true, it should attract new foreign
    investment to the Thai stock market.
    

The ten largest equity classifications of the Fund held at December 31, 2008 were:

                                                              Percentage
 Industry                                                    of Net Assets
                                                             -------------

1.  Energy                                                           21.96%
2.  Banks                                                            20.20
3.  Property Development                                             12.14
4.  Media & Publishing                                                9.11
5.  Communication                                                     7.99
6.  Commerce                                                          7.53
7.  Health Care Services                                              5.49
8.  Food & Beverage                                                   2.29
9.  Construction                                                      1.84
10. Transportation                                                    1.33

The ten largest equity positions held by the Fund at December 31, 2008 were:

                                                              Percentage
 Issue                                                       of Net Assets
                                                             -------------

1. Bangkok Bank Public Co., Ltd                                      10.15%
2. PTT Exploration and Production Public Co., Ltd                     9.85
3. Kasikornbank Public Co., Ltd                                       9.13
4. PTT Public Co., Ltd                                                6.83
5. Advanced Info Service Public Co., Ltd                              6.41
6. Bangkok Chain Hospital Public Co., Ltd                             5.45
7. Amarin Printing & Publishing Public Co., Ltd                       4.69
8. BEC World Public Co., Ltd                                          3.63
9. CP ALL Public Co., Ltd                                             3.04
10. Banpu Public Co., Ltd                                             2.76



QUARTERLY RESULTS OF OPERATIONS*

                                      Net Realized And
                                      Unrealized Gains
                                        (Losses) on
                                        Investments        Net Increase
                          Net           and Foreign     (Decrease) in Net
For the Quarter       Investment          Currency       Assets Resulting
 Ended               Income (Loss)*     Transactions*     From Operations
                    ----------------  -----------------  -----------------

                     Total     Per     Total      Per     Total      Per
                    (000's)   Share   (000's)    Share   (000's)    Share
                    -------  -------  --------  -------  --------  -------

March 31, 2008      $     0  $     0  $  2,016  $  0.64  $  2,016  $  0.64
June 30, 2008           451     0.14    (5,772)   (1.82)   (5,321)   (1.68)
September 30, 2008      178     0.06    (7,935)   (2.51)   (7,757)   (2.45)
December 31, 2008      (197)   (0.06)   (7,300)   (2.32)   (7,497)   (2.38)
                    -------  -------  --------  -------  --------  -------

For the Year Ended
 December 31, 2008  $   432  $  0.14  $(18,991) $ (6.01) $(18,559) $ (5.87)
                    =======  =======  ========  =======  ========  =======


March 31, 2007      $   107  $  0.03  $    427  $  0.14  $    534  $  0.17
June 30, 2007           409     0.13     4,844     1.53     5,253     1.66
September 30, 2007      160     0.05     3,476     1.10     3,636     1.15
December 31, 2007      (136)   (0.04)    1,334     0.42     1,198     0.38
                    -------  -------  --------  -------  --------  -------

For the Year Ended
 December 31, 2007  $   540  $  0.17  $ 10,081  $  3.19  $ 10,621  $  3.36
                    =======  =======  ========  =======  ========  =======


PER SHARE SELECTED QUARTERLY FINANCIAL DATA

                              Net Asset            Market         Share
For the Quarter Ended           Value              Price**        Volume**
                         ------------------- ------------------- ---------

                            High      Low       High      Low     (000's)
                         --------- --------- --------- --------- ---------

March 31, 2008           $   13.97 $   11.75 $   13.55 $    9.45       392
June 30, 2008                14.50     11.89     13.60     10.86       300
September 30, 2008           11.77      9.78     11.00      7.78       323
December 31, 2008             9.84      6.47      8.20      5.03       181

March 31, 2007           $   10.33 $    9.38 $   11.88 $    9.15       610
June 30, 2007                11.94     10.63     13.20     10.65       597
September 30, 2007           13.73     11.74     15.85     10.35       608
December 31, 2007            14.09     12.35     15.48     12.05       402


*  Net of Thai withholding tax.
** As reported on the NYSE Alternext, formerly the American Stock Exchange,
   LLC.

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