Random Thoughts

The wonderful thing with flying is that brain farts/dumps occur more often. So, my punjabi MC’s, here we go…

New Cities

For the past few years, and mainly due to the listening to Scott Adam’s who has commented that the development of new cities (see the Saudi idea) is going to be the future driver, 2) Seeing the news about Indonesia planning to build a brand new capital city and 3) seeing Vietnam grow rather quickly and perhaps due to it having 2 metropolises, the idea of new city development has been on mind.

Questions…

• Does the development of new cities drive economic growth?  Yes, capital flows in the form of both human and financial, land value’s increase, businesses develop, infrastructure – energy, water, roads, trains etc are developed. Value is created when new cities are created.
• How important is the development of new cities to a country such as Thailand?
• Bangkok has limitations to how much it can grow, land is expensive combined with the infrastructure being what it is, helps to explain why all new development is on the outskirts of the city. Side note – I wouldn’t be surprised to see BKK emulate Paris/London in the sense that the center is mainly for tourists, politicians, and a few major businesses and the rest of us peasants have to live outside the city – oh wait, it already is like that…
• Is Rayong considered a new city? Or just an expansion of the existing one, and how can we quantify this? Are there going to be other new city developments in Thailand? I’ve tried my best over the past 5-7 years whenever I meet someone that may have the ear of the government or powers that be, that the country should fund the provinces to create multiple new metropolises that would then reduce the reliance and necessity of the population needing to rush to Bangkok to earn a living. Arguably this is one of the strengths of Germany.
• Since I’ve been looking at Vietnam for the past 8 years, the simple fact that the North and South are continually fighting each other economically to see which one grows faster/better arguably is on paper a great development for the country economically.  Side note – Just like Beijing/Shanghai, I expect and we’ve seen, that every once in a while the North will smack the South’s head to stop them from growing to quickly and wildly.
• Indonesia – Joko has been trying to push through the new capital creation since 2019, this could be fantastic for the country. Just imagine this really does take off. 
• Laos, Vientiane – a friend commented to the government officials there that the cost of fixing up the mess that is Vientiane today is ridiculously high and that it would make more sense to either 1) Just develop a new city or 2) Flatten Vientiane today and start again from scratch.
• Philippines – well the major family groups are the ones buying up land and developing mini-cities everywhere.
• Myanmar – Their capital – is a perfect example of how not to do it.
• Perhaps when we are looking around the world for ideas, we need to focus on the countries that are developing new cities.

Telegram – A Thaicapitalist.com chat group?

• I’ve been asked several times over the years to set up some form of a group chat. Well here it is
• https://t.me/thaicapitalist
• It’s on telegram – one of the thousands of messaging apps available.
• What are the rules? Simple I’m the dictator, if something becomes offensive, I will virtually hulk smash you.
• What should you expect? Nothing, join the chat with low an expectation as possible, I do hope that people actually contribute ideas and thoughts that are thought-out, researched, and not just a “hey my friend thinks this name is good, what do you think?”
• Given that there are some 2-3k email subs…of which perhaps 99% are probably Russian bots, I will be elated if this chat has 5 people…

Sarath is the richest man in the country

https://www.bangkokpost.com/business/2455920/sarath-again-richest-shareholder-worth-over-b200bn

• Well voila, crony capitalism just works, and watch for the impact on our electricity prices in Thailand. GULF is making a fortune on their ability to price energy higher. And as a result of this watch them try to make a larger play in the regional countries, specifically Vietnam. They’ll try their best to jump on BGRIM’s bandwagon.
• Now – if someone could figure out what their play is going to be with THCOM – whilst a small part of the INTUCH holdco, but regardless of the size, should they put the pieces together in terms of the satellite play/licenses, well….why couldn’t it 1-2x from here?

• Now who the f is the #2 richest person? What’s PSG? How on earth is this company worth this much?

BJC – BigC IPO

Links: https://ir.listedcompany.com/tracker.pl?type=2&id=553418&redirect=http%3A%2F%2Fbjc.listedcompany.com%2Fnews.html%2Fid%2F2412321

https://www.bloomberg.com/news/articles/2022-11-08/grocery-retailer-big-c-is-said-to-weigh-500-million-thai-ipo

So whilst sitting in VN a month ago, I received a flurry of messages asking about the BIGC IPO to which I could only comment, well I heard the rumours a few months back and who knows if it is going ahead within the next 6 months, but there’s no smoke without fire and it would be prudent for BJC to finally re-IPO this entity before the cost of capital goes up and them having to refinance at far a higher cost of capital. Might as well get the $ from the insti investors whilst the Thai market is still hot.

Property

“Yesterday (Oct 31), the Bank of Thailand (BOT) announced that it would not be extending the loan-to-value (LTV) ratio (see Note below) regulations that will end on Dec 31, 2022. The BOT will in 2023 resume the LTV regulation used before the relaxation was allowed. The regulation details are in Figure 1. (1) For first homes valued less than THB10mn, borrowers must make a minimum 0-10% down payment and buyers can obtain up to 10% of the property value. (2) For second homes, buyers must make minimum 10% of down payment if the first contract is signed more than two years or a minimum 20% of down payment if the first contract is signed less than two years before. For third homes, a minimum 30% of down payment is required. (3) For homes valued greater than THB10mn, the first contract requires a minimum 10% of down payment, the second contract requires a minimum 20% of down payment, and the third contract requires a minimum 30% of down payment.”

So what?

• The BOT and the government have been rather active in the past few weeks regarding rates and real estate.
• And they usual story will be that there is no impact on Single Detached Housing players but that the condo players will be impacted. And the private, 1-2 project developers are going to be hurt….now a rant….If the Thai government really cares about bringing in investments. They should decentralise the current BOI approval process, it’s all reliant upon the Office of the PM at the moment who doesn’t know the difference between being a maid of the royal family and how to be a PM. They could turn one part of Bangkok (hello makkasan land) into a special economic zone and turn Bangkok into the second financial hub, especially given the decline of HK (hattip to L/D for mentioning this to me several times). The western world needs a second financial hub in the region and Thailand SHOULD be the choice, but no, the Thai Bankers Association are run by muppets, that don’t want competition, the Government doesn’t care to allow new wealth creation, and … ok I’m done.

Fifa World Cup 2022, it’s timeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee.

Mapped: The 32 Teams Playing in the 2022 FIFA World Cup

I haven’t seen a single match live on TV, and had completely forgotten that the World Cup was on…

The emotional side of me was cheering for Belgium – but Martinez is a charlatan….and Argentina, Messi needs a good farewell after dealing with a rubbish management of the country’s national team for the past 2 decades. Argentina vs Holland was a fantastic match to rewatch, not a surprise to see a match get heated vs the Dutch…as for the finals…well…the French are the better team, but c’mon Argentina!

US and and the Mekong

https://www.bangkokpost.com/thailand/general/2441995/us-vp-harris-announces-20m-clean-energy-funding-for-mekong-region

Such bs….Biden went to Bali, and who did the US send to Thailand for APEC? Kamala harris, the laughing hyena that can’t do anything…alamak! (h/t to the my american buddy up in North Asia for pointing out to spell kamala’s name backwards – given my Singapore roots I couldn’t stop laughing…)

And just look at this pathetic USD 20 mn for a clean energy funding project, the Mekong region has been given to China, the US and friends aren’t going to even try…

Thai Banks are continuing to go regional

BAY is the bank this time, they’re now in Vietnam, Indonesia and the Philippines after the below news.

Acquisition of two consumer finance operators in Indonesia and Philippines. Yesterday, BAY reported to the SET that the bank’s board resolved 1) that it will acquire a 75% stake of PT. Home Credit Indonesia from Home Credit Indonesia B.V. and Ms. Wanda Ariestiani Evans for Bt6.6bn (EUR176.4mn); and 2)  it will acquire a 75% stake of HC Consumer Finance Philippines, Inc. and a 100%  stake of HCPH Financing 1, Inc., and HCPH Insurance brokerage from HC Philippines  Holdings B.V. and Filcommerce Holdings, Inc. for Bt11.1bn (EUR297.6mn). The total  value of the transaction will be Bt17.7bn, or EUR473.9mn. BAY also entered into a  put and call option agreement with I Dewa Made Susila, giving BAY the right to  purchase 15% of the share capital of Homer Credit Indonesia from I Dewa Made Susila.

The Thai Government decides to kill the equity market

Ok, a slightly over the top title. Here’s the background

Link: https://www.bloomberg.com/news/articles/2022-12-03/thailand-says-most-institutional-investors-must-pay-stock-tax

From a broker, don’t remember whom…pls let me know we’ll credit you…

The Thai cabinet approved in principle a financial transaction tax, ending a four-decade waiver.

The collection comes under the revenue department’s regulations which required of a 0.1% specific business tax on securities trades and a related local tax of 10% of the specific business tac, bringing the total financial transaction tax to 0.11% per shares sold. However, the exact rate for the levy must wait for the council of state’s vetting. If the council of state agrees the regulation would be sent back for the cabinet’s approval , then published in the Royal gazette. The tax comes into force three months after publication or 90 days.

Securities trades by market makers, provident funds, the government pension fund or social securities fund, will be exempted from the tax as they are large-scale funds that play a key role in shoring up the stock market’s liquidity. The financial transaction tax will charge securities trades from the first baht of precedes available from stock sales. If levied at 0.11%, would generate THB15-16b in revenue per year for the gov’t.

The 2023 will be the first year for collection of the tax, the charge will be levied at 0.055% ( include local tax) and then increase to 0.11% in subsequent years.

“Comment:

For the stock market overall, liquidity would be decreased, partly because buying and selling stocks ( day trader, short term trade) would be harder and investors might shift their focus to other investment class or other equity markets as investing in overseas market is not difficult these days. I believe volume drop by investors type would come from retail investor and foreign investors (esp on High frequency trading) while some institutional investors, the impact might not be dramatic because they do not focus on volume trade but longer term.

Still difficult to say what should be an actual impact. There is a study by InnovestX research that the implementation of sales tax 0.1% in some markets such as India (on Oct 2004) and Malaysia (on March 2018), impact to value and volume a year before and a year after to their equity market was -38.3% and -43.8% for India and -9.2% and -3.6% for Malaysia. In Hong Kong ,they increased sales tax from 0.1% to 0.13% on Feb 2018, impact to value and volume was -29.4% and -34.2% respectively.

“

My thoughts evolved from:

• Annoyed but a none-event, don’t think we’ll see a massive decline in liquidity given that this fee exists in multiple markets already.
• Not surprised, the governments of the world locked us down, pumped a bunch of money into the economy and now need to tax us to somehow pay back all the money that they spent.
• Then after seeing the above comment and comp versus other markets…it became Governments are causing friction in the creation and realisation of value, smaller companies that initially rely upon retail investors to find them and realise their fair value may be less willing to do so knowing that there is a higher cost to trading, and we’ll be stuck with a boring equity market like Singapore where only the large caps have liquidity and the rest of the market is nothing better than an OTC exchange Which is the stupidest decision possible given that the Thai equity market is 3x more liquid than the #2 in the region and provides companies access to capital to continue growing and expanding well throughout the region.

Some good news

Howard Marks, legend, states what we all think in the clearest way possible, his latest memos are great reads…

Sea Change – https://www.oaktreecapital.com/insights/memo/sea-change

What Really Matters – https://www.oaktreecapital.com/insights/memo/what-really-matters

Here’s my forecasts for 2023:

1. I don’t know
2. I don’t know
3. Anyone that does is a liar
4. Pheu Thai and the military will join hands and form the next government
5. Chadchart will be asked to become PM
6. The SET will race to 1,800.
7. Indian travelers > Chinese travelers.
8. CP Group will sell off a valuable private asset.
9. #10 will pull off a feat that makes him loved by the masses
10. Prayuth will go down in history as one of Thailand’s greatest Prime Ministers.

And I’m done for the year. Lets make 2023 a year that’s great again! Enjoy the holidays!