An article at Business Insider — generously drawing on the insights of veteran market analyst Andrew Stotz — suggests that “its time to buy” in Thailand. I tend to be open to contrarian logics, and appreciate the explicit crassness of the headline (above). It got my attention and no doubt yours aswell.
Yesterday Stotz released a two-page analysis (available here) that offers many other details. But his snapshot appears, even accepting the need for brevity, to miss a bunch of the issues that will inevitably determine political stability, and the potential for market volatility, over the next two years. Surely the chance that the king will pass away during this period is worth at least a sentence? Not everything — as most academic analysts of Thai politics would agree — revolves around political parties and their leaders.
Others may want to quibble with the rest of the Stotz two-pager. (Note, in the wider context, this unrelated comment from Thitinan Pongsudhirak.)
But perhaps Andrew Stotz is on to something. I note that the Thai stock market is, in the midst of the Red protests, surging ahead, and the baht is at a 21-month high.
So I am, in fact, more intrigued by how much the advice of analysts like Andrew Stotz impacts on those impressive gains. Is “the market” merely looking for any advice that justifies a surge and the (short-term) profits that such rises will bring? Of course, if the protests in Bangkok turn violent, or some other calamity scares investors, then one must expect that the market will fall. Predicting such a fall is, I’d assume, where the even more serious money could be made.
Which all leads me to ask: are New Mandala readers buying? And whatever your read on the situation, how much stock do you put in the analysis offered by professional market watchers?
I’m on hold now, we never know when things will turn south, it might happen tomorrow, tonight, or even 1 hour from now, but like this week rally, it can go down as fast.
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Probably depends significantly on the time horizon of your trade. On a stand-alone basis there are certainly many stocks whose multiples appear inexpensive relative to regional comparables.
However I am not inclined to view current unrest as being equivalent to periodic unrest that has led to changes of government for the past 50++ years, for a few reasons:
+ poorly planned and poorly articulated succession issues within with the royal family
+ widening income disparity between rich and poor, and greater awareness and organizational power among the poor
+ gradual weakening of monopolies and reduction of non-tendered concessions to tycoons that have provided political funding (would be quite keen to have readers thoughts on this)
Will this result in a prolonged and messy adjustment period (that could potentially have little effect on businesses, particularly exporters) or will it result in something closer to the 1998 styled Indonesian mayhem? In my (relatively uninformed – so please comment) opinion, the likelihood of the latter happening would be pretty low as Thailand has some significant problems, but it is not anywhere near to systemic dysfunction (economically or in terms of government services).
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To time the market top it is imperative to speak to the king’s doctor.
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Every (Thai based) financial professional I’ve spoken to says that Thailand is undervalued because its politics overshadow its assets: agricultural and food export, heavy industry with developing value-added manufacturing, and an extremely healthy banking sector with little or no exposure to the global real estate bubbles and derivatives markets.
That said, the SET is a basket case with no control over inside trading, and land reform is needed before the real estate market matures into a liberalized one. Their advice: buy only blue-chip stocks (PTT, SCC, banks) and only property if you can use it right away (reside, business, or rental). Avoid gold because Thai gold isn’t free-market, and sit on baht or safe baht-monetized funds that have diverse blue-chip bases.
As for the king’s passage, I am told that every pro in finance has already priced it into their estimates. They’ll buy on the funeral dip but it won’t be as big a dip as you think, because everyone is playing the same game.
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The moment when very poor villagers have to donate their blood to help a billionaire (who had fallen on hard times) get back up on his feet must be market bottom.
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I agree with WLH@#4 that “Thailand is undervalued because its politics overshadow its assets”.
On Macondo’s point @#2 re. Indonesian-style mayhem, the two huge moderate, liberal Muslim organisations – Nahdlatul Ulama and Muhammadiyah – which had a major stabilising influence in the transistion from Suharto, seem to have no Thai equivalent.
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AIS for me. Loaded up on the shares last week when the ridiculous stories were going around that they would be fined billions of baht and prevented from paying the huge dividend that goes XD on 12 April. It is much more likely that any further damages suits will be leveled at Thaksin personally not the company and the total dividend pay-out for last year will be 14% which beats leaving the money on baht deposit at 0.25% like WLH.
Investment is all about risk and reward. Of course, WLH is welcome to his 0.25%, if his risk tolerance is that low and he doesn’t care if his assets are eventually eroded by inflation, but avoiding all asset classes in Thailand on such superficial analysis as “The SET is a basket case with no control over insider trading” and “Thai gold isn’t a free market” is like avoiding going outdoors because you might get run over. There is of course some truth to those statements in the same way as it is true that people get run over and killed every day in Bangkok.
BTW Nic. The title of the article was not intended to be that shocking. It was simply a humorous allusion to Sir John Templeton’s famous investment adage, “Buy when there is blood on the streets.”
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Excellent post Portman@7 – but personally I’ve had more than enough of the Thai markets : simply too much uncertainty, too much discrimination against farang. Too little level playing field.
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Chris Beale. I agree there is discrimination against foreigners (not just farang) if they are direct investors who need to own land and/or own controlling stakes in their business. However, at the level of portfolio investors on the SET who only want fractional stakes there is not really much significant discrimination that affects how they trade or the returns they can make. Even the foreign ownership limit problems have been radically improved by NVDRs (non-voting depositary receipts). These have reduced the demand for foreign registered stock and brought foreign premiums down to reasonable levels for those (mainly pension managers who are legally required to excerise proxy votes). However, it does require time and patience to learn the Thai market and watch for opportunities which is difficult if you are working full time in another field.
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Portman – thank you very much. I’ll try to take a closer look at those NVDR’s.
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1,000 Reds protesters stormed Thai parliament today (w/ a few MPs scaling walls to escape) and Thailand’s SET Index jumps past the 800 mark! On Mar-11-2010 on the eve the Red protests that index was at 725. Impressive! More than 10% increase since the voodoo bloodletting rites by the Reds.
Clearly the foreigners and the investors don’t think too highly of the Reds capabilities for mischief . . . and that is meant as a compliment to the Reds .Or perhaps because their declared 1.0 million marchers-target were woefully short by a whopping 900,000 and kept on dwindling by the day.
Whatever the reason, Thaksin’s voodoo has again failed him.
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Vichai N@11 – I would n’t get too excited about Thailand’s stock market being up, for three reasons :
1) stock markets all over East Asia are being driven up as Asian investors, especially Chinese and Japanese, try to reduce their entanglement with American debt.
2) this may well be leading to a speculative bubble in Asian stocks.
3) this bubble may easily burst due to political difficulties in Thailand, Malaysia, and even China.
and on top of all this is the fact :
we do not yet know whether the global economy is going to slip back into a double-dip recession.
You’re a fool if you’re popping your pink-bubble champaign over the Red Shirts being defeated just yet.
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I personally don’t like champagnes but it looks to me that the Red Shirts are defeating themselves silly by sticking to their silly leaders . But certainly not silly to continue to root for Beloved Leader( now a citizen at Montenegro) if only because He is the cause and He funds the cause.
Does the financially savvy Chris Beale still thinks the emerging Asian markets’ are too bubbly and about to burst?
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