Business as usual for wealthy Thais after ‘inevitable’ coup

Updated: Saturday May 24, 2014 MYT 6:57:27 AM

Business as usual for wealthy Thais after ‘inevitable’ coup

SINGAPORE/BANGKOK: Many of the wealthy Thais who come to investment manager Charles Blocker have a question for the generals who seized control of the country in a military coup this week: What took you so long?
After months of turmoil and government paralysis, the rich individuals and companies that Blocker works with welcome anything that might get the machinery of state turning again.
“It’s business as usual”, said Blocker, head of boutique investment firm Invision Capital Partners in Thailand, where the company manages some $140 million of cash in from individual investors and family offices.
“They are continuing to re-invest in their businesses within Thailand, whether that is in real estate, the food business, semiconductors, or tier 1 or tier 2 auto-parts supplies,” he added.
“This coup was inevitable and a lot of people are saying I wish they could have done it in February. Why drag it on for four more months?”
That sense of relief was fairly widespread on Friday, when Thailand’s stock market fell less than 1 percent – more a mild sell-off than a scramble for the exits.
Thailand’s army chief, General Prayuth Chan-ocha, said he was taking over to restore order and push through reforms to end a six-month a struggle for power between supporters of ousted former premier Thaksin Shinawatra and opponents backed by the royalist establishment.
“Thailand is now approaching the end game of the political crisis…”, analysts at ANZ wrote in a note to clients.
Thai investors have been here before. The country has seen 18 previous successful or attempted coups since it became a constitutional monarchy in 1932, most recently when the populist Thaksin was deposed in 2006.
“Military rule could paradoxically offer a limited stability, allowing civilian leaders time to find peaceful reconciliation and reducing the threat of violent disruptions to economic activity,” wrote Citi strategist Siddharth Mathur.
Rich Thais appeared to share that confidence. “It’s business as usual. We were selling yesterday and we are selling today,” said Deepa Chatrath, general manager for Southeast Asia at Swiss luxury brand watch maker Patek Philippe.
“Sentiment in the market is not affected at all,” she said. A Patek Philippe watch can cost between $25,000 and half a million dollars in Thailand.
THE SAFE COUP
Not everyone is quite so sanguine as Blocker and his clients, partly because of memories of policy mis-steps by the lackluster junta that ran the country after the 2006 coup.
Boon Vanasin, a doctor and founder of the mid-size Thonburi private hospital in Bangkok, isn’t betting on a quick resolution of a crisis that has festered off and on since Thaksin’s ouster.
Yet, Vanasin says he is making no changes to his investments. “I’m not a risk taker and so my investment portfolio is defensive, mostly in the healthcare sector, and so I will make no change to the holding,” he said.
“But in the crisis time and in panic selling, prices will fall and that’s an opportunity to buy for me.”
Data from the stock and bond markets shows both local and foreign investors are drawn to the bond market in the expectation that the stagnating economy will drive down policy rates, thereby pushing up prices.
Foreign investment money tends to be more flighty in times of political upheaval.
But much of the heavy foreign portfolio flows that went into Thai stocks as a result of aggressive monetary easing in developed markets since the global financial crisis have already left the country, leaving less scope for market turmoil.
So far since November, nearly $3 billion of foreign money has left the Thai stock market, according to BNP Paribas. The index is up 6 percent this year.
After the September 2006 coup, it took the military government more than a year to conclude constitutional reforms, conduct a referendum on them and then hold elections.
Investors were spooked when the authorities began to more strictly enforce a bar on foreign firms using proxy Thai shareholders to set up companies, and tightened disclosure rules after Thaksin’s family was probed for avoiding capital gains tax on its sale of a stake in communications firm Shin Corporation.
The central bank imposed draconian capital controls in December 2006 to rein in an appreciating currency, only to backtrack after the stock market collapsed.
This time will be different, seems to be the view of most onshore investors, based on optimism that the military will help break the logjam that had seen much of the business of government grind to halt since protests against a pro-Thaksin administration began in November.
“It’s a soft coup, a coup with a condom,” said Blocker. “It’s a coup that’s trying to help the young adults to install a prime minister.”- Reuters

 

PUBLISHED MAY 24, 2014

Markets shrug off Thailand’s coup

Analysts optimistic that military takeover could steer country back on the right track

KENNETH LIM

KENLIM@SPH.COM.SG   @KennethLimBT

INVESTORS greeted Thailand’s latest military takeover with shrugs and a shake of the head yesterday.

That’s what one coup every seven years will do for you.

Observers mostly expect the coup to bring near-term stability to Thailand, although concerns are more acute about the future of the country.

Thailand’s main equity benchmark, the SET Index, touched a two-week low at yesterday’s opening, but climbed steadily over the day to head out at 1,396.84, down 0.6 per cent or 8.37 points on the day.

The Thai baht lost ground as well, to 32.6070 baht per US dollar, about 0.1 per cent weaker on the day but still not the worst performance of the month.

Singapore’s key Thailand exposed stocks were mostly untouched.

Drinks maker Thai Beverage Public Co gained 1.7 per cent, or one cent, to close at 60.5 cents. Readymade drinks supplier Super Group was flat at $2.86, while United Overseas Bank was 0.09 per cent, or two cents, lower at $22.35.

“So far, the recent developments in Thailand have minimal impact on the Singapore market or stocks,” said OCBC head of research Carmen Lee.

UOB Kay Hian research head Andrew Chow thought there could be marginal benefits for Singapore.

“Indirectly, it might be that people pull money out of Thailand, and they want to park some money in Singapore, but that would mostly go to the more defensive blue chips,” he said.

The coup, Thailand’s 12th since 1932, has ushered in a sense of annoyance but also relief that the political impasse that has kept the country at a standstill for the past six months could finally end.

“One of my colleagues is there,” Mr Chow said. “It’s more a feeling of inconvenience rather than fear or violence.”

In a note, ANZ wrote: “The imposition of military coup is certainly not the type of development typically associated with an improving economic outlook. However, in the case of Thailand, it could well prove to be the circuit breaker that allows a return to political normalisation and ultimately allows fiscal policy to become operational again.”

But the very factors that have led some to welcome military intervention also make it critical that the army makes the right moves in the months ahead.

Amid the past political fighting, the Thai economy contracted 0.6 per cent year-on-year in the first three months of 2014, with investment and tourism showing significant declines, Moody’s Analytics highlighted in a note.

“Given recent events, we now think the economy will record a second negative quarter in the three months to June, putting it in recession,” Moody’s wrote.

RHB reckoned that private sector confidence will be muted while the military is in power, based on weak private spending during the 2006 coup.

Nevertheless, some analysts conveyed optimism that this coup could actually steer Thailand back on the right track.

“Unlike previous military crackdowns in 2006 and 2010, the current peaceful coup may well create a stable social environment – a key ingredient in supporting market sentiment and ensuring a successful democratic election in Q3 2014,” OCBC economist Barnabas Gan wrote.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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