Thailand's boom is sustainable, unlike the one in 1997

Thai equities are a juggernaut. The MSCI Thai Index has been on an inexorable multi-year rise. Four of the top five performing equities funds sold in Hong Kong are invested in Thai stocks, according to the information company Lipper.

The strong rally in Thai equity markets over the past year has left many battle-scarred investment veterans scratching their heads.

There is a sense of déjà vu about the strong capital inflows, rising financial leverage, and red-hot property markets that Thailand is witnessing. In 1997, it was precisely these trends that precipitated the massive devaluation of the baht, which then triggered the Asian financial crisis and left Thailand virtually bankrupt.

So the question investors might ask is, is Thailand's rally sustainable, or it is just undergoing another bubble that will eventually burst?

I would argue the former. To get to that view, you need to appreciate the strength of investment trends under way in Thailand, and the powerfully positive effect of the recent stabilisation of the country's political situation.

Thailand is at the start of a new investment cycle that is expected to last at least until 2020. The most important driver is a government infrastructure spending programme to the tune of 1.9 trillion baht (HK$498 billion), with the peak of the spending outlays occurring in 2016-17.

The spending is focused on building Bangkok's mass transit system, developing four new high-speed rail routes, and extending capacity at Bangkok's busy Suvarnabhumi airport, among other road and rail projects. The remapping of Bangkok and drastic cuts in commuting times have triggered a housing boom in the capital.