This has been the busiest start to a year (or lets say 6 months) that I’ve ever experienced despite the fact that I’m supposed to be on a sabbatical, and I haven’t had a moment to sit down and write my usual monthly rant on the markets, economy and politics on Thailand yet this year.

So as usual be forewarned, I will waffle, it won’t be The Economist quality writing, I’ll write some nonsense, perhaps a few facts will be used, but hopefully in the end it’ll all make sense.

Let’s start off with currency wars

  • The Japanese are still on a mission to devalue their currency to the point where … actually I don’t know where, to boost exports? To attract investment? To attract tourism? I suppose their aim is to somehow achieve all 3 and thus for inflation to return to Japan, but I do remember one economics professor telling me, one of the few times I paid attention, that when an exporting country expressly tries to devalue it’s currency to increase whatever target, that they are essentially exporting deflation to their customer markets, so how does bringing deflation to other economies allow ones economy to experience inflation? Short term yes, long term? I have my doubts. What’s the impact been for Thailand and the region, well Japanese firms have been on a spending spree, increased investments in Vietnam, Indonesia, the Philippines and yes even some in Thailand still, so far so good.
  • The USD has been on a tear in the past 6 months which has led to several market commentators saying that the death of emerging markets is nigh, similar to that of the ’97 currency crisis. And they’ll point out that the Malaysian ringitt has been hammered etc etc, a few points to counter this, one Malaysia has the highest amount of foreign investors in its government bonds out all of SE Asian countries (ex Singapore), 2) Malaysia is linked to oil, a 50% drop in oil and well the answer is obvious. Now for Thailand debt-to-gdp for the country is still at … ~0.5x or thereabouts, there is an issue of course with several corporations across the region/country that have issue dollar-denominated bonds (hint hint wink wink nudge nudge CP Group) but otherwise if you look around the region each country is structurally stronger, many of the economies have risen from low-income to middle-income, some to higher-income since 1997, most exchanges aren’t pegged to the USD, current-account balances are far stronger, several countries have stockpiled substantial currency reserves and as much as I like to make fun of central bankers they have generally improved throughout the region, look @ Thailand’s BOT they are doing a magnificent job given shit that the Thai economy is in and the currency fluctuations around the globe. But without a doubt should (or shall we say when) interest rates in the US begin to climb, there will be inevitable capital flow out of the region and hopefully both the central banks & government policy makers will have emergency fiscal-stimulus packages ready and will invest in things that raise productivity, competitiveness so that in the long run each countries economies are less dependent on credit and foreign capital.

The Fed.

  • This will be short, since when does it matter what word the Fed uses? Every economist, PhD, analyst, fund manager are going on and on about whether or not the fed is “patient”, is this now economics, finance or English literature? Seriously I’ve been reading reports that are analysing the Fed’s use of the word “patient” and “impatient”. Nuts. Lets keep this simple, should the US economy continue to grow well and should the world economy continue to grow well, then US interest rates will increase. Impact on equity markets? Sure there’ll be some volatility but in the end interest rates are still incredibly low so no, it won’t lead to a crash.

The 4G Debacle

  • The government and respective agencies involved in 4G have been flip flopping on whether or not the 4G auction will go ahead in 3Q15. I thought was under the impression that being in a military dictatorship meant that things would go through faster, it obviously hasn’t been the case and could very well explain why Prayuth looks like a man that is getting fed up at his minions that aren’t paying attention to what he’s saying or telling them to do.

Ok from my understanding this is how things are going to go ahead

  • The NBTC would have to provide to the ad hoc National Digital Economy Committee all the details of potential spectrum auction and any problems they were facing. Then the NBTC could go ahead and tender the spectrum bands that have no such problems.
  • For the spectra that the state holders do not want to relinquish early, the government will step in to mediate a solution.
  • Some frequencies, such as TOT’s 900-megahertz spectrum, by law have to be transferred to the NBTC after a concession ends. However, if the government finds that TOT needs to keep the band to provide public service in remote areas, it might let TOT keep part of it and relinquish the rest for auction.
  • Then the government will make up the difference for the NBTC by asking other state enterprises to give up their spectra early, such as the 2.6-gigahertz bands, to the commission for auction in return for compensation.
  • The ad hoc committee on Wednesday instructed the NBTC to resume planning for the auction of spectrum licences and to complete the process in August.
  • The NBTC can auction any frequencies ranging from 900MHz-1,800MHz and 2.6GHz. It also has to submit the progress of the auction plan for the committee’s consideration every month.

Now here’s what I don’t understand:

  • MCOT somehow has the 2.6GHz frequency and the government will have to somehow reclaim spectra from them as well as some other state enterprises, or the auction could be derailed.
  • And it is unclear whether the NBTC would still have the power to hold the auction if the laws promoting the digital economy, including the new NBTC Act, take effect before August.

So it’s all still up in the air in my mind, but at the right price ADVANC and DTAC are always worth a look, TRUE? meh.

Politics – Let’s do this in a Q&A Format:

  • Are we really going to have elections this year? Nope doesn’t look like it, the “new” constitution has yet to be decided upon.
  • Prayuth doesn’t look like a happy man, does he? Would you if you had to deal with the bumbling idiots in government? Prayuth does appear to have the right ideas for the country and does have a strong team behind him but he still has to deal with bumbling idiots that want to fill their pockets with corruption $.
  • Freedoms are continuing to be repressed, isn’t this a bad thing for Thailand? Well, I have received some flak for this viewpoint, but in my opinion, short time no, I don’t think there’s anything too wrong with freedoms being repressed for the time being,as long as the military does get out of power and allow things to return to the way they were then again how free is it in Thailand to express ones opinions?Finally if your daughter was taking selfie shots of her boobs, as a parent you should’ve smacked some sense into them and not wait for a government to outlaw it.

Infrastructure & Energy:

  • Firstly ignore all the political rhetoric, Thailand’s long term infrastructure build out has already been planned for decades the issue has and will only be how to fund this?

A few interesting points:

  • 80% of cargo is transported by road (trucks) less than 3% by rail – hence the inefficient cost of logistics
  • A move from road to rail, should in theory, reduce logistic costs
  • So the government still plans to build the dual track train (Which is only 10% of the entire rail network) and that of the 786km of dual tracks, some should begin this year, the remaining in 2016, and it is all to be finished by 2019.

On the energy side, here are some fun tidbits

  • Energy consumption as a % of GDP rose from 9% to 18% as of 2014.
    The government has increased LPG and NGV prices and increased excise taxes on diesel so that prices are almost at market levels and should be reached within this year.
  • The government says they’ll likely push for more clean coal fired power plants (Who better than a military government to make the NGOs be quiet?)
  • Exploration concessions – ahhhh this can an essay in its own form, Thailand may have a ton of oil in the gulf, but who will receive the benefits of this is still up in the air, lets hope it does end up in the government coffers and not someone’s pocket.
  • Alternative energy is still a go! And a major one at that, I wouldn’t be surprised to see some solar power plant maintenance firms being listed on the SET in the future. Thailand is and will be the largest solar powered country in the region.

The Thai Market

  • I comment briefly on it weekly and my thinking hasn’t really changed.
    There are only a few things going right for Thailand at the moment, the Digital TV industry, anything related to the infrastructure sector (construction co’s, construction materials) and alternative energy, the rest is rather average at best, consumer debt is high so retail should still be meh, banks have already made the strong shift into non-interest income so not much more profit growth there, telco’s – well waiting for 4g, energy – oil prices down 50% has hurt them all (note how quiet bcp has been about its recent acquisition pre oil price drop), tourism has recovered nicely – as expected, there’s nothing new to be squeezed out here.
  • Thus we have a slightly expensive market, with tepid growth for most of the industries, the potential of a lot of windfall coming from infrastructure, and a currency that’s been rather stable despite everything.

Anything else?

  • Lets analyse Thailand as company, earnings(GDP) is normally around 4-5% and could bump higher in a few years, it’s balance sheet is quite clean but may worsen because of government spending, management – well we’ve seen far worst, competition? Vietnam is coming but still 10 years behind Thailand.
  • Growth opps? Laos and Cambodia are there for the taking, Myanmar – Thailand will get a piece of the pie, but not as much as they should, Southern Vietnam – Thailand should benefit as well.
  • So all in all, we have the usual scenario for Thailand, a lot of maybe up’s a lot of maybe down’s but in the end it’ll still somehow muddle through.

That’s enough of a rant, enjoy your Sunday!

  1. You couldn’t be more wrong, Khun Pon. It beats the living shit out of The Economist. I know this because I understand what you’re saying.

  2. this is no rant – but a penetrating analysis . Why do you not seek to publish I the Post or the Nation? Do you provide portfolio management? Why is there not a larger forum, since you provide such valuable info. And there has got to be more than 2 faring investing in the SET. Thanks, Don.

    • I do the Exec Q&A’s in the bkk post business section every 2 weeks, and those are posted here as well.

      We did have a forum on this blog but I removed it b/c it was more of people asking for ideas vs contributing thus the comment sections are more than enough.

      Next month I’m launching an offshore fund with a partner for ASEAN Equities, rather exciting times 🙂

      Thanks for the comment!

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