Random Thoughts: ASEAN, Europe, Panama, a whole lot more…

  • The last 3 weeks have been rather busy with traveling for both personal and work related activities, and yet really nothing happened much in the world, central banks were quiet, perhaps there was some temporary noise out of doha re oil prices but things have been relatively calm so to speak. First quarter numbers have started approaching, with Thai banks showing rather iffy #’s, the smaller ones i.e. tisco and kkp surprised to the upside with lower than expected provisions, but when I hear “Oh yes our NPLs are increasing but it’s ok we have provisioned against it” doesn’t quite inspire the confidence in me that I suppose it’s meant to, anyways to some random thoughts
  • Europe – Flying to brussels was the aim at the end of March but because of the bombing, the flight had to be re-directed to frankfurt and to depart from Paris instead. The mood throughout the country was one of, well, despondence may be the best way to describe. Interestingly the majority of people seemed to be more upset with the Government. If you look at it from their viewpoint taxes are incredibly high, economic growth is tepid at best, the government is finding more ways to tax the citizens and then more immigrants that aren’t able to assimilate are given handouts by the government. Not quite the recipe for a happy populous.
  • ASEAN – During songkran, my analysts and I flew to Malaysia and Singapore to attend broker conferences to meet multiple firms from throughout the region. Dr. Surin – finally got to meet the man and have a quick discussion 1 on 1, its a shame he can’t drive things in Thailand. Malaysia’s SWF Khazanah Nasional impressed me tremendously at a  breakfast meeting, despite the country being home to what I suspect is the dirtiest politics in SE Asia, these guys know what they’re doing and I think they invest quite well. Firm’s in KL? Well if you thought that Thailand had a lot of property companies then you haven’t been to KL, household debt to gdp is far worse than Thailand and yet when you drive from KL center to the airport you see nothing but new condominiums being built. Are there good companies in M’asia? Absolutely I still take the viewpoint that it doesn’t matter where you are in the world you can always find a great idea, names that impressed me (doesn’t mean one should buy) include Time dotcom – I believe the largest ASEAN sub-marine cable co, Karex – the world’s largest oem condom manufacturer, and Inari Amerton – a semi conductor manufacturing co where 50% of it’s business comes from iphones. What about the other countries? Well again there’s a lot, perhaps the 2 name’s I had the most fun learning about was Naga City (hk listed) which runs the largest casino in Cambodia and Double Dragon – a retail/property company in the Philippines that proves retail investors are still incredibly dominant over there. As a quick aside – I love markets where retail investors are the dominant market participants it allows for stocks to reach their fair values (and more!) far faster and it also drives prices down far further than fair value – this volatility provides the best recipe for making a return. Institution dominated markets are boring.
  • Panama Papers & Nepotism- I don’t see anything wrong with people or companies having an offshore company, of course when a politician has one and did NOT declare as required by their tax jurisdiction well then its a different story altogether. What drew my attention recently was this article in the Bangkok Post  where this paragraph “One example could be the 600-million-baht land sale by Gen Prayut Chan-o-cha, who was then army chief, in 2013, disclosed under his asset declaration when he took office as prime minister, after the May 2014 coup. The transaction was connected to an offshore company in the BVI, linked to Charoen Sirivadhanabhakdi, the patriarch of the Thai Beverage business group and Thailand’s second richest man, according to Forbes’ 2015 list. In many other circumstances, this story would have scrutinised for unscrupulous gains and juicy details that may have violated the law. But this story has faded into oblivion for the time being. “ caught my eye. I do wonder if the author will be invited for a attitude adjustment (btw military people if you’re reading this, I love you, don’t arrest me). And then there were more articles in the local papers about nepotism (Bangkok Post). I’m not sure why people are surprised, this is rather normal in virtually any society, should it be? Well that’s a discussion for another time.
  • Taxes – The government has decided to lower the tax for the majority of people, then again how many people in Thailand actually pay tax? They state there are some 10 mn tax payers, the last time i saw statistics I clearly remembered that only ~2 mn filed their taxes and ~1 mn actually had salaries high enough to pay. Anyways here are some figures. In theory who benefits? Consumer co’s, 7-11?
  • taxTelco’s – Article 44 came out and spanked the NBTC into setting the next spectrum launch on the 27th May. So DTAC doesn’t look like they’ll participate (even though they could comfortably raise equity and join the party but telenor seems to be far more focused on Myanmar and India for now) AIS should take it unless TRUE decides to raise more capital and dominate the industry, also DTAC announced their earnings on Friday evening (SET) and they look awful but a clever man told me “look at their ARPU for post paid customers it’s the highest in the industry, how much would you pay to take those customers away from DTAC?” Perhaps THB 75 bn isn’t a too much to pay to take 50% of DTAC’s customer base.
  • Larry Fink Chairman’s Letter to Shareholders (Blackrock) Most Chairman letters are rather good for falling asleep to, but at least here theres a decent section “Changes in the Investing Landscape” Not nearly enough attention has been paid to the toll these low rates — and now negative rates — are taking on the ability of investors to save and plan for the future. People need to invest more today to achieve their desired annual retirement income in the future. For example, a 35-year-old looking to generate $48,000 per year in retirement income beginning at age 65 would need to invest $178,000 today in a 5% interest rate environment. In a 2% interest rate environment, however, that individual would need to invest $563,000 (or 3.2 times as much) to achieve the same outcome in retirement. 
  • Now to show the other side to this argument would be the from the wonderful J. Stiglitz (Project Syndicate) where he writes ” Simply put, most firms – and especially SMEs – can’t borrow easily at the T-bill rate. They don’t borrow on capital markets. They borrow from banks. And there is a large difference (spread) between the interest rates the banks set and the T-bill rate. Moreover, banks ration. They may refuse to lend to some firms. In other cases, they demand collateral (often real estate).”
  • This blog – Running a regional fund is taking up a lot of my time, thinking about other countries, currencies, industries and companies (which is incredibly fun), compared to before when all I dreamt about was Thailand hence the lower amount of posts on a daily basis. Thus for now it looks like I’ll just do a stocks in the news post and on Friday/Saturdays a long random thought post versus the past when I would just put some of these thoughts up when they popped in my head. Have a great Sunday.
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