Jan 6, 2007

Tough Times For Thailand

The Thai stock market crashed on 19 December, and the next day I promptly moved in to buy, buy, buy. In the past, this kind of strategy has made me quite a bit of money. Basically, you swoop in to grab cheap stocks immediately after some disaster has sent prices plunging.

This time, things are not looking so pretty. The New Year's Eve bomb attacks in Bangkok have put a dampener on Mr Wang's money-making plans.

If this was a plain hit-&-run terrorist attack, it wouldn't be so bad. Since September 11, 2001 the financial world has actually become quite used to those kinds of attacks. Thailand, however, is now swimming with rumours of another coup, more bomb attacks and assorted political conspiracy theories.
    ST Jan 6, 2007
    Anxious times for Bangkok
    Coup fears add to uncertainty over political and security situation

    BANGKOK - MANY here welcomed the Sept 19 coup as having broken a tedious and divisive political impasse, but events here this week have made it clear that it may have only created more uncertainty.

    Continuing jitters over a possible coup or new bomb attacks were being seen as the culmination of weeks of uncertainty laced with panic when the stock market crashed on Dec 19, denting the credibility of the military-appointed government.

    Last year, speculation over power politics became a full-time preoccupation of many of the capital's chattering classes.

    The New Year's Eve bomb blasts, which killed three people and injured 42, were a watershed event.

    Although it is no stranger to political violence, Bangkok has been relatively free of terrorist incidents since the 1980s.

    The bombs and the military's inability to swiftly find who had set them further dented the credibility of a government that many analysts saw as indecisive - and some hawks saw as too moderate.

    The bombs also worried pro-democracy activists who see instability as a good reason for the military to justify staying in power longer than the promised one year, or facilitate the takeover of more hardline generals.

    Another conspiracy theory fuelled by comments from the ageing former premier Chavalit Yongchaiyudh - who has emerged as an adviser to the Thai Rak Thai party - held that factions in the army had planted the bombs to justify the military clinging to power.
Well, those are the risks of emerging markets. Returns can be spectacular, very spectacular. But you have to accept and live with the uncertainties too.

Looking back now on the
Shin Corp fiasco, I almost feel sympathetic towards Ho Ching. Almost.


Anonymous said...

In 1997, during the riots in Jakarta during the overthrown of Suhartho's government, I went into Indonesia Shares. I went in Big Time.

At that time, the shares already plunged by 90%.

After I went in, the shares plunged further by another 90%.

Right now, I'm celebrating 10th year anniversary of holding INdo Shares. And I'm sitting at 60% loss.

Anonymous said...

However, if I went in sometime early this century, I will be looking at about 100 to 200% increase.

Philip said...

I stay away from markets that i dont understand.

Thailand and Indonesia might give cheap valuations, but then the problem with these countries is that there is no real "rule of the law". Same goes with China too. The govts are not elected democratically and the military can take over the country as they wish. Even if they give me 100% returns, i will still stick with the Indian stock market where i invest directly.

Last year i had a cool 38% return on my whole portfolio which are pure Indian equities and funds and iam quite happy with it. Agree the P/E ratio is a bit on the higher side at approx 22 but then which companies in the region are showing 20-40% increase in profits year over year?

Gilbert Koh aka Mr Wang said...

I also have a sizeable chunk of Indian equities. In fact, in 2006, my equities portfolio was mostly China, India, Europe, Singapore and Malaysia (I've dumped Malaysia now, for good profit).

It was because I felt over-exposed to these markets that I felt I had to look for something else, and turned to Thailand.

I don't like India anymore. I've sold some to take profit, but of course one must never sell India off completely. Nothing else is better to hold for the long run, but I think Indian equities look like they've overshot themselves for 2007.

Philip, in my opinion, 100% exposure to India is, ummm, unsound investing strategy even in the best of times.

hugewhaleshark said...

That's a sobering lesson, moomooman, and one we should keep in mind.

I find it hard to take country bets. Maybe it is my upbringing as a stock analyst (now companies, I can understand).

This is not an uncommon view. The firm I work for, a household name in fund management, also avoids big country bets.

My own investing is broadly Asian in exposure, to mirror my Asian cost/liability base. Probably a less conventional strategy.

Plus a little stock-specific portfolio for the most compelling ideas I find in my work.

Philip said...

Mr Wang, i fully agree with your observation that putting all my eggs in one basket is foolish. But, as i mentioned, i invest only in markets which i understand. And, since i dont have much idea/exposure to the outside markets, i tend to be more cautious. Probably over time, i will learn and will diversify. I should in fact.

Meanwhile, an interesting article. Thought of sharing


Jimmy Mun said...

Enron shares didnt collapse to nothingness for nearly a year after accounting irregularities emerged. Click here for a massive graph by New York Times marking Enron share price movements against the news flow.

Throwing money at a company because it just had a crash is like catching a falling knife, no matter how big, how blue chip the company, or how good the corporate governance of the company is, there is always a chance that it is just the beginning of a long trek to oblivion.

Buying a whole market is a little better since the possibility of all companies in that country going bust is remote, but then you are simultaneously making a big bet in one currency, which can go bust against your home currency. SGD in particular, has a nasty habit of gaining value, which makes all attempts at diversification, painful. (Although divide by 5 makes shopping in Hong Kong and China so much easier than divide by 4.something)

I dont think Philip thinks India is the best market is the world; he is merely pointing out that it is his home market. And even if the rupee goes bust, at least all his expenditure will still be in rupees.

Put all your eggs in your best basket, and WATCH THAT BASKET!

Gilbert Koh aka Mr Wang said...

Eh, Hugewhaleshark, I know where you work lah, and I got my Thai exposure through your firm. :P

Anonymous said...

It's a lesson learnt surely.

Not only the share price drop, rupiah was battered badly.

I had thought that I invested with prudence buying into Indonesia Banks. I spreaded my funds across a few banks. But these banks went bust.

And let's not even talk about margin trading.

Anonymous said...

Jimmy mum,

great link on the enron's graph.

So guys,

Where to invest now? If you were to choose between Japan and Thailand, which would you invest in?

Gilbert Koh aka Mr Wang said...

Now for fresh monies, I would do this:

US - definitely underweight

India - neutral or underweight

China - neutral

Thailand - confused lah

Singapore - slightly overweight

Korea - overweight, if this latest thing about North Korea clears up

Europe - overweight

Japan: do not understand, therefore will not buy

Anonymous said...

maybe we should play some investment game, like the one played in ST by students. Given dummy money and put into stocks. and see who did better..

that would be fun especially since all of us are working in different industries, some with good knowledge of the market, some with really bad luck, this would be interesting.

I'm in if anyone is game for this.

hugewhaleshark said...

Thanks for the business, Mr Wang! Nothing a bit of digging will not reveal about anyone on the net : )

BTW, off topic, but I'm thinking about this thing called the Landmark Forum. If you've heard something about it, pl hop over to my blog and leave a comments. Mucho thanks in advance.

Unknown said...

I was there at Bangkok during the time of the bombings and hardly sensed any difference in the people's behaviour there. Most seemed rather nonchalant and indifferent to it, as in inured after years of exposure to one crisis after another.


Investment wise, I would play it cautiously as the jury is still out on the political future of Thailand. The new regime also doesn't seem to have the economic clout of Thaksin and gang, and the situation seems wavering.

Anonymous said...

I believed Thailand is now worse-off economically without Thaksin though I disagree with the way he runs the country freehand. Lets not forget Thailand was the first to recover from the currency-crisis under his leadership, Toyotas and other makes went into car-production in Bkk, creating confidence and much-needed jobs in the country. (under his leadership) Whether he is guilty or not, the facts showed he perform admirably, without doubt. Is Thailand now better-off than before??

Gilbert Koh aka Mr Wang said...

Now see what the latest thing that the stupid Thai government has done. The new foreign business ownership matter, I mean.

I am concerned that what is going to happen next is that foreign owners of Thai businesses are going to have to dump their shares in a hurry - local investors won't have the appetite or liquidity, and share prices are just going to plunge.

I sold off my Thai exposure. Think I lose about $800, ahh, that's life. Good thing that my China funds are doing well.

Anonymous said...

Mr Wang,

Good that you cut yr losses and ran. Whatever you do, don't go into Indian's equities, plenty of talks about the country being the next China - hear it with a pinch of salt. My frank opinion, it will take another decade, if not more. The country will not take off like China. Reasons,

- The red tapes are messy, frustrating, the cast system discourage communication between the top and the bottom.

- They may be very good high end, very bad mid/low end.

Park yr $$$ in China's stocks, you get better returns, can have sound sleep at night. Cheers.