Jun 20, 2014

BoI sets investment projects in motion

The Board of Investment, headed by junta chief Gen. Prayuth has approved major projects worth 120 billion baht yesterday! I have been waiting on some of these to materialise months ago when the whole protest ruckus took me by surprise. 

Of the 18 projects approved yesterday, automobile-related projects made up the bulk, including Toyota's 51.5 billion baht project to produce 570,000 pickup trucks and 4.8 million auto parts a year. The junta has pledged to clear all 700 pending applications worth 800 billion baht within two months. Projects given priority are those with advanced technology, R&D, local products, green and renewable energy industries. The NCPO has also vowed not to help farmers by providing subsidies or money but will help in other indirect ways. Source: Nation



Everything came to a standstill and so far the Kingdom has been buzzing with activity since the junta took over. Barring any unforeseen future developments, the events that transpired since the moment Gen. Prayuth gave the order to take control is a good case study in decisive leadership and strategy execution for foreign governments. 



I was stirred into a frenzy as I followed the news minute-by-minute when the first announcement on the coup came out on Bangkok Post. To summarise, it was something like this;


Series of events


1. Gen. Prayuth gathers politicians and influential people to talk, talk fails, Gen. Prayuth exits the compound first, then orders to detain all of the politicians. If I remember correctly, signals were intentionally jammed when the orders were carried out.


2. Bus all the protesters home to the North, dismantle any other protest camps in the city. Dissolve Senate. Ensures rice farmers will be paid ASAP. Several banks were very willing to extend loans to this cause this time.


3. Temporary hierachy was Gen. Prayuth leading and the heads of other armed forces and the police as assistants to him. Obtains mandate from the King.


4. Transfers police chief and head of DSI to inactive posts. These 2 hadn't been in Gen. Prayuth's good books and the time has come to send them away for good. More leadership replacements ensue, orders a variety of people to report to him.


5. Politicians released after several days of in-camp, reforms ordered at SOEs.


The sequence was roughly as described and it looks well-planned to me. 




Since then, several boards of State-owned Enterprises (SOEs) have seen directors resigning and in the case of Thai Airways; free air travel for top executives have been cut. This is one of several moves ordered by the NCPO  to trim unnecessary expenses at SOEs. Source: ThaiPBS

The military has also assisted the police on several raids as part of a nationwide crackdown on transport extortion rackets. These extortion gangs collect protection fees to leave public transport operators alone, and the operators pass on the higher fees to the passengers. Gen. Prayuth wants to see results within a month. Wow! I wish him success in his bid to reform the country and tackle these deep-seated problems.


Although I'm sure he has more influence to wield now as the Chief so such actions are easier to carry out. I would not expect a full-on Army and Police combined force swarming in to crush mafias had it not been for the coup taking place. Source: Bangkok Post 


To those screaming that democracy is dead, I would say that most actions taken by Gen. Prayuth have been positive for the country and some of them would not have been possible under the previous government, or any political party for that matter. Give him a chance. I believe in the chinese saying;斬草除根 It means that to remove the grass, you need to make sure the roots are also gone. 



What does the market think?


The SET has been rising since the beginning of the year as I had written in a previous post about 2 months ago; Thai stock market and Economy, where I felt the SET did not offer a political-risk discount. Stocks are not cheap although they are not expensive either. It is a matter of whether you believe 2H14 will be business as usual and earnings to continue their momentum from 1H14. 


In this article ''Biggest Thai Investors say stocks are too expensive", two of Thailand's largest money managers; the Social Security Office and Kasikorn AM believe the rally has occurred too fast and are waiting for a correction to buy at a cheaper level. 


It appears to me that these big boys are still sitting on a lot of cash, and probably would be the demand forming the support in the event of a dip. So this should make me slightly relieved, no?


So far it has been a mixed reaction for several stocks. The PTT trio has been falling due to concerns about reduced profitability due to energy reforms and several board moves. CPF has pulled back by about 8% around the time the slave labour news came out. This does not impact their earnings as much as the foreign media like to think, to be honest, if you take a look at the numbers. In contrast, the banks and construction or infrastructure plays have done well. 


I try not to time the market but this is the time for me to exit some companies that have run way above their valuations without any change in fundamentals, and then sit on some cash together with the big boys.