In the past 2 weeks I’ve done 3 different countries for various reasons and I’m basically done with the international traveling for the year I think, although Vietnam does tempt me, what have I learnt, in a nutshell, Singapore is suffering basically from a decade of fantastic growth, rental rates have killed the retail market, I see far too many empty spaces (outside the major malls) and that can’t be a good sign for the broader economy, the Philippines is an oligopoly and it will continue to be for the longest time until the government figures out a way to actually gain ownership in some of these larger projects, HK all the buy-side participants are complaining about the increased use of passive investing and how its taking away opportunities.
First car buyer scheme
There’s been a lot of brokers finally writing about the end of the first car buyer scheme and the potential impact here are some things to think about:
  • The scheme was started on September 2011, average loan period was 5-6 years, participation was ~1.1 mn cars
  • The majority of these car buyers may not be purchasing a new car for another 2-3 years
  • It is reported that consumers may prefer to spend on (1) travel (2) daily expenditure (3) home decorating/repairs
  • Those that earned below 30k per month may look to purchase a new property
  • Some funky maths – if the average person spent 10k per month, or 120k per year on their car from this scheme, and assume that none of them will buy a car for the next 3 years,  then 120k x 3 years x 1.1 mn cars = 396 bn baht that could be spent on other items over the next 3 years, boggles the mind doesn’t it? Assume this is all spent on VAT taxable items, then the government will make another 27.7 bn baht of revenues. Of course this may rather exaggerated but still it’s a lot of new spending power that will hit Thailand, lets just hope its not all on iphones…
Byron Wein Monthly Letter
A lot of wonderful nuggets here as usual and here are some snippets and a link to the rest of the letter
You could also argue that historical multiples that indicate the market is expensive don’t apply because interest rates were much higher in earlier cycles.  At these yields, equities should sell at somewhere between 25 and 30 times earnings.  The public has been selling equity mutual funds and buying bond funds for several years.  Hedge funds also have a low equity exposure compared to historical levels.  Even long only investors are cautious.  This kind of negative market mood generally creates opportunity.  Another positive is the fact that no recession seems to be in sight even though the present expansion is 88 months old.  Excesses like an inverted yield curve, investor euphoria, a hostile Federal Reserve and bloated inventories do not appear to be present.  Even so, some prominent economists think there is a 70% chance of a recession in 2017.  I would estimate the probability of the bull market continuing into 2017 at something like 35%.
Source: Blackstone
7-11 and AIS
Effectively the argument here is that 7-11 wants to charge AIS the same rate as it does to DTAC and TrueMove. The details are:
  • AIS currently pays 4%
  • DTAC pays 6-7%
  • TrueMove pays 7-8%
  • CPALL wants AIS to pay 6%
The AIS argument:
  • We pay are the largest in the market and therefore give CPALL the most revenues from pre-paid cards, how dare they do this! If they don’t like it we’ll go use the boonterm machines! Note: FSMART will be a huge winner if this is the case and they charge 12% comms
The CPALL argument:
  • Well its fair dealing, why should AIS get the discount? And if they don’t want it screw ’em, it’ll help TrueMove
In the end I do see AIS bending over to CPALL’s requirements, it would be a rather ridiculous move to lose the distribution channel that is 7-11
Deutsche Bank Downfall
This is a fantastic article from Spiegel on the downfall of Deutsche Bank, its a 15 minute read (long by today’s younger generation standard) but I highly recommend it.
For most of its 146 years, Deutsche Bank was the embodiment of German values: reliable and safe. Now, the once-proud institution is facing the abyss. SPIEGEL tells the story of how Deutsche’s 1990s rush to join the world banking elite paved the way for its own downfall.
Source: Spiegel
  1. As Peter Lynch, a market observer particularly suited to this market, pointed out years ago–there’s no substitute for walking the streets. (…)

    Assuming all that old-car cash goes into smartphones after all, who is the most innovative retailer of the new cheapos that are ruining the market for APPL?

    • My guess would be the Chinese models like Oppo for example. Cheap, fairly wide distribution channels, and can target the low end Thai consumer segment that can’t shell out 6 months savings for a New IPhone.

      • hmmm, you’d have to choose between JMART, com7, spvi as the only retail players in thailand for this. Or an indirect play could be via MBK if you want to brave.

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