Thailand Future Fund
Thailand’s future fund is still ongoing developments have been slow in the past 12 months but the government seems to be picking up steam as we have the potential IPO of the Thailand Future Fund coming in April ’17

What projects could it initially injected?

• Apparently the MoF is targeting to have 2 projects worth THB 30-40 bn injected into the Fund at the initial stage, thus names such as Burapavithee Expressway, Chalongrat Expressway, and Kanchanapisek Expressway are being mentioned.

Who are the shareholders going to be of this Thailand Future Fund

• The MoF will put in THB 1 bn
• Vayupak Fund THB 9 bn
• And the rest? Well hence the IPO, from the capital markets so institutions, HNW, retail etc..they are estimating that the Fund will give a yield of 5-6%

Who wins from this?

• Simple, the construction sector and the construction materials sector so expect for names such as CK, UNIQ, STEC, ITD, SCC, BEM and a whole raft of other names to remain buoyant

Index investing

I do think index investing makes a lot of sense in developed markets where information/technology and the number of investor participants are knowledgeable and effectively it’s pro’s against pro’s thereby generating that alpha becomes incredible difficult. I wonder at what point will index investing in markets such as Thailand become far more prominent and when will the industry here see a huge decrease in fees charged. Mutual Funds and thus any of the local asset management firms linked to the banks have been making a fortune from the base fee’s charged to investors. Right now local institutional investors are about ~10-15% of daily value traded and its roughly stayed at this level for the past decade or so. What would push it further to the levels we see in Europe and the US or even Singapore for that matter? The only reason I’m arrogant/confident enough to do well here is because the competition is less informed (for now) on company fundamentals but the moment that advantage disappears as competition increases, my team and I have we’ll have to change and perhaps become indexers or find other ways to add value. It’ll be an interesting problem/challenge whenever it arises.

Who knew corruption existed in Thailand?

We saw this article that first came from the WSJ citing PTT and Thai Airways as recipients of bribes from Rolls-Royce and just laughed.

“US finds Rolls-Royce bribed PTT and PTTEP officials The United States Department of Justice (DOJ) found out that Rolls-Royce made payments totaling USD11m (THB385m) to PTT and PTTEP official in in return for contract awards for equipment and aftermarket products and services. These consists of 6 contracts during 2003-2013 which are GSP-5 (USD2.4m), GSP-6 (USD2.3m), OCS-3 (USD1.4m), Arthit (USD1m), PSC (USD2m), ESP 2006 and ESP 2012 projects (USD1.9m). This is following the investigation of Britain’s Serious Fraud Office (SFO) found that Rolls-Royce made payments totaling USD36.3m (THBt1.3b) in three separate instances between 1991 and 2005 to agents working with Thai Airways, a substantial portion of which was destined for airline representatives and local officials to secure lucrative orders for RollsRoyce engines. “

Sources: WSJ, The Nation

Is anyone genuinely surprised? Nope.

What will happen in Thailand to those that took the bribes? Nothing.

What will it mean for these huge infrastructure projects that are coming? Most likely nothing…

Just going off on a tangent for the moment. If all the THB 1 trn worth of projects are approved this year, can you imagine the amount of liquidity that will be flowing through the country’s system? Just imagine that 10% of is corruption money, so THB 100 bn, that gets spent into property, travels, stocks, cars, and then filters down through the system and people leverage 5-10x so an additional THB 500 bn – THB 1 trn of capital goes through the system, there’s going to be a huge amount of spending here in the coming years.

Random things learnt last year

• Back to basics and KISS (keep things simple stupid)
• Make sure the investment idea and the investment duration match up.
• Cash is a great investment for optionality
• Remove biases i.e. relook at the former winners/dogs, things can change within a company with management, the industry, the strategy.
• Ignore those who comment on performance, just focus on what we do best, it’s our process and clients that matter after all.
• We had 2 names that doubled, 3 names that went up ~50%, several trades that did well yet, 2 names down 20%, 1 down 35% but still only made net 11%, either the allocation process was wrong or maybe they are right and the long term names just need time to perform (as is usually the case).
• Things just take time with small mid caps and investing in general.
• I always buy too early and sell too early. But learnt with BIG Camera to just let the animal spirits take names to silly levels.
• When speaking with those older than oneself in Asian cultures in the local language i.e. Thai, there’s an immediate senior/junior relationship that takes place. The moment I switch to English, it automatically disappears and it becomes easier to question the mistakes that people have made.
• 2017 is going to be a great year!