Oct 19, 2014

Market News 19 Oct 2014

Thailand

  1. BTS, Sansiri to develop large scale residential projects worth more than 3 billion baht each located within 500 metres of mass-transit lines. This is positive for BTS and probably explains why it has still been going up against the general market trend (Bangkok Post, 17/10/14)
  2. 3Q earnings of 8 SET-listed banks, excluding KTB, rose 8% y-o-y, while net profits were up 5.73% for the first nine months of the year. (Bangkok Post, 8/10/14)
    Source: SETTRADE

Oct 10, 2014

Market News 10 Oct 2014


Thailand


  1. SET, BOAML, Phatra Securities completed a roadshow in New York, selling Thailand to an audience of global funds with a combined AUM of USD 4.5 trillion. BoT Governer predicted economic growth of 4.8% in 2015, while pledging the government's commitment to maintaining economic stability, stimulus measures, and reforms. (SET, 9/10/14)
  2. MRT Authority of Thailand will spend the rest of October assessing the qualifications of five consortia bidding to operate the Green Line subway. The Green Line (Mochit-Saphan Mai-Kukot), spans 18.4 km and requires an infrastructure investment of 26 billion baht. The contract is expected to be signed in June 2015, and construction to be completed 3 to 4 years after. (Bangkok Post, 8/10/14)
  3. Thailand's largest pension fund provider, GPF, estimates 200,000 members will opt out, translating to about 40 billion baht in redemptions out of its combined assets of 600 billion baht. GPF year-to-date return is 5%. (Bangkok Post, 10/10/14)
  4. GPF is considering getting Cabinet approval to raise its investment ceiling for foreign equities to 35% from 25%. (Nation, 10/10/14)
  5. DTAC, with the highest frequency bandwidth compared to rivals AIS and TRUE Move, is offering full-speed access for mobile data services with more than a 50% price cut. (Bangkok Post, 10/10/14)
  6. PTT E&P is developing an underwater robot with Kasetsart University, scheduled to be launched in 2017. It is a move to cut operating costs as more than 1 billion baht is spent yearly on service providers are outsourced to check its underwater E&P facilities. (Bangkok Post, 10/10/14)
Singapore
  1. Yongnam announced sale-and-leaseback of its Malaysian plant in Johor to Axis REIT for RM153.5 million. Market value of the property was RM167.5 million as of 19 March 2014, Yongnam Malaysia will lease for 15 years and pay RM969,313 monthly for the 1st to 3rd year of the lease with subsequent rental increase every 3 years. NTA per share after the sale is 27.66 S cents assuming transaction was effected in end of FY2013. (Yongnam, 7/10/14)
  2. Yongnam secures 3 subcontracts worth S$76.6 million for Thomson-East Coast MRT Line and a project in Hong Kong. They are expected to have a favorable impact on the financial performance for FY14. (Yongnam, 9/10/14)
  3. 80 property developers and REITS listed on the SGX reported a combined S$23.5 billion in borrowings due to be repaid in a year. This comes amid the highest vacancy rate for condominiums since 2006, driving down prices every quarter. Savills expects refinancing to be challenging for developers and REITS as Singapore's economy slows, with expansion cooling to 2.4% in the 2nd quarter from 4.8% in the 1st. (SBR, 10/10/14)
  4. O&M stocks are down about 7.2% in the past month due to fears from cutbacks in offshore O&G spending as oil prices decline. (SBR, 9/10/14)
  5. Around 17000 local firms ceased operations, while 37000 were formed, in 2013, according to the MTI. (SBR, 8/10/14)
  6. Singapore exports are contracting at an alarming pace, according to DBS, as higher inflation and a strengthening SGD reduces Singapore's export competitiveness.  (SBR, 8/10/14)
  7. Singapore's casinos are struggling as VIP volumes declined 10% y-o-y and 1H14 earnings from VIP gamblers were down to S$57 billion from S$63 billion in 1H13. High probability of losing the VIP segment to new casinos in Asia, even as regional HNWI increase. (SBR, 7/10/14)

Oct 3, 2014

Cash for farmers Round Two; how do you manage 58 million of them?

P Mak


Yesterday while writing about the past developments in the Kingdom, in this article, one of them was about 40 billion baht of stimulus that will be put into the hands of rice farmers, at a rate depending on how much farmland they own. The market did not take too well to the news and the SET was in the red yesterday and today (lunch intermission).

While most sensible folk in their right mind agree that cash handouts are not the best solution, today we have a classic Pheu Thai remark;

''Former energy minister Pichai Naripthaphan, who sits on the Pheu Thai Party's economics team, said 1,000 baht per rai for each farmer is not enough.
He said the government should instead help farmers by buying rice for at least 10,000 baht per tonne, because production costs in rice farming are currently very high.
"The government is using populism and is afraid of criticism so is not giving full assistance to farmers, who still have to shoulder the high production costs," Mr Pichai said. ''
''The chairman of the Thai Farmers Association, Wichian Puanglamjiak, also said the 1,000-baht aid is not enough.
He said current production costs for farming are around 5,000 baht per tonne, but farmers sell rice for less than 4,000 baht per tonne, leaving them at a significant loss.''  - Source: Bangkok Post

Riiight! Perhaps Pichai was born yesterday but I really marvel at the way these politicians talk.
Lets say you decide to keep a few mistresses at one go. Lets call them Rice, Rubber, and Fruit.
One day, Rice threatens to blow the lid on the affair and in return, you pacify her by increasing her monthly allowance. 
This puts you in debt, but you think its okay. Now what happens if Rubber and Fruit play the same card on you?

Of course, to play the politics game, the largest voter base is the most crucial one. Rural residents are almost 87% of the population, although agriculture is only about 8% of Thailand's GDP (figures from Bloomberg). 
Thailand's farming industry is facing a labour shortage as the young are choosing industrial factory jobs over farming, according to Narong, a Chula University economist. Production costs remain high in farming and somewhere along the supply chain, the pie is mostly taken up by middle-men and others at the end-product stage. There are also 800000 farming households who do not own land.
If I am a small-timer with only 1 rai (1600 sq. m), I get 1000 baht one-off, what can I do with this? Pay the loan shark? Buy a bottle of liquor? Interestingly, a few quarters ago analysts were relating the poor performance of Thai Beverage to lower rural incomes. 
The government has to get it right this time as the house of cards has barely started to be built. Targeted measures to boost efficiency in growing and production or subsidies on pesticide, fertilizer and seed should be more effective in helping the farmers instead of creating an environment of dependency on the government to support weak selling prices. 
Also perhaps this time, you should go and flirt with Organic Vegetable or Sugar cane for example lah! 
Everyone is planting rice because of the previous scheme and in 2011, skyrocketing rubber prices resulted in everyone rushing to plant rubber
We had the Luohan craze where fish shops selling nothing but Luohan sprouted all over the country, and after the quick fad died off, many of the shops disappeared as well. 
We are lucky here in Singapore, that we did not see Luohan sellers demanding our gahmen to buy from them!

Oct 2, 2014

Riding the post-coup wave and my favorite issue of tax

There have been lots of developments in the Kingdom ever since my last post on infrastructure stimulus. Prime Minister Gen. Prayuth has retired (still in power!), the hunt for the Koh Tao killer is still on, and a trio of drunk Aussie farangs have fallen off a hotel balcony, the latest in a long line of falling farangs!

Anyway, my faith in the general and the coup had been repaid as the rising tide lifted all (almost) boats since the first quarter this year. Previously, my strategy was to focus my attention on the direct beneficiaries of government stimulus. That did not exactly work out due to the ill-timed street violence that shut down the Bangkok. Since then, I have taken positions in the direct beneficiaries of stimulus and domestic recovery.  



1) 
Yesterday, the Cabinet approved economic stimulus measures worth 364.5 billion baht, that also included the already approved budget, and was aimed to boost the economy in the final quarter. Inflation rose 2.15% year-on-year, for the first nine months of 2014.
40 billion baht is going straight into the hands of rice farmers, without the need to do anything! Farmers owning less than 15 rai of farmland will get 1000 baht/rai, and those who own more will get 15000 baht/household.
Although the government insists this is not a populist scheme, it had better do well to inform the farmers that this is one-off, and not to expect something reminiscent of the previous government's rice subsidy.

2) 
Exports shrank 1.4% year-on-year in the first eight months of 2014. Automotive exports are down 8.9% while farm exports are up 2.7% year-on-year. The automotive sector, responsible for 12.8% of Thai exports, is losing out as the motor industry expands in Indonesia and many car makers are opening plants. This sounds like a red flag, but the reliance on automotives largely came about due to the previous government's policies. Weak businesses will be shaken out and will just be replaced with newer businesses linked to the flavour of the day (or year).

3) 
Bangkok Bank was the only local bank among 9 foreign banks to be awarded licences for limited operations in Myanmar. Singapore (OCBC and UOB) was able to snag 2 slots!

4) 
A survey done by BCG around the second quarter this year of 200 senior government officials and business executives of ASEAN-based companies (domestic and MNCs), found that 80% of respondents feel SMEs will lose out when ASEAN integration takes place. The winners are likely ASEAN-based companies that have expanded out of country within ASEAN, and MNCs.

5) 
Taxes are coming in all forms now, with land and buildings, inheritance and gift, and excise taxes coming up for deliberation and reform. Already there has been a surge in registrations for land transfers within families. Taxes may also be coming for ready-to-drink green tea and fruit juice with less than 50% of natural ingredients, which almost certainly covers all the tea beverages.

(Sources: Bangkok Post)



Of course, I have learnt my lesson not to solely rely on government spending. While I would not describe the Kingdom to be in boom time now, it is back to business across all sectors. Opportunities can be found in areas where investment and demand had been affected due to the political impasse, as well as changing themes such as energy.

It is anyone's guess on where we are now in relation to the prices being offered now on the market. We have already come a long way (about 4 months?) since the coup, and very possibly, the best seats in the cinema have already been taken. There had been a surge in IPO activity, with quite a number opening several times the IPO price. Both the SET and mai indices are up, 22.23% and 97.59% respectively, and of course there are plenty of concern about whether the market has gotten too frothy. As I write this, the market has just opened not too long ago (less than 10 minutes), and SMART has just begun trading with a pop to 200% (ceiling for IPOs on opening is set at 200%), and there are also about 15 companies in line to list in the final quarter of 2014.