Impact of Japan Earthquake on Thai Stocks

What would happen if there is an earthquake in Tokyo?

An earthquake destroys Tokyo, including the stock exchange and all records of transactions. Abroad, Japanese shares and the yen nose dive. Foreign exchanges collapse as Western insurance companies begin dumping stocks and bonds to cover Japanese claims. Japan starts to liquidate its overseas holding in order to finance the rebuilding of Tokyo. Withdrawal of Japanese money means the bond market collapse and US interest rates to soar. High rates raise US consumer and housing prices while depressing real estate development. Another global liquidity crisis happens….

BUT this is not the case!

What really will happen?

In a sentence, Japan will need to rebuild. There will be an increase in demand for steel and cement will increase (positive for SCC, SCCC, TSTH, MCS); Japan will temporarily have to adjust its source of energy and buy finished petroleum products and import thermal coal (positive for PTTCH, PTTAR, TOP, BANPU, IRPC); Japanese banks will have to concentrate on funding the recovery and not overseas expansion of Japanese corporations (positive for BBL, SCB).

From our point of view there is no real negative impact upon the Thai Equity market from the Tsunami, and while it is callous to say this, our holdings and portfolio will benefit from it.

Company Visit: Demco Plc

Published in Bangkok Post on 1st April 2010

Demco Plc operates five core businesses: design, construction and contracting for all kinds of electrical engineering work such as transmission lines and substations; mechanical and electrical systems; energy conservation and renewable energy; telecommunications; fabrication and distribution of steel structure for transmission lines; and billboards. The company was established on June 1, 1992 and listed on the MAI on Dec 14, 2006. moving to the SET this past Feb 4 with registered capital of 635 million baht, of which 443 million is paid up. The company is managed by senior-level engineers with more than 20 years’ experience. Director Phongsak Siricupta discusses the company’s strategy and outlook.

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Small And Mid Cap Investments In Thailand

Every large company used to be a small or medium size one. Investing in small and mid capitalisation equities has always been considered to be risky because of the “unknown” factors when compared to large capitalisation investments. Large cap companies refer to some of the largest, most well-known companies in the country, and small-cap and mid-cap companies often represent little known firms with revenues between THB 2 billion to THB 10 billion. There is an obvious risk-return paradigm between small, mid and large cap companies, generally small companies exhibit more volatility and are less liquid when compared to large cap companies yet have tremendous growth potential. Mid cap are a moderate alternative between large-caps that may find it difficult to increase shareholder value and the riskier small-caps.

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