Wise Thai investors learn just to follow their leader

Wise Thai investors learn just to follow their leader - Financial Times, September 5, 2003
Thai stockbrokers have even identified a "Thaksin premium" to describe the fact that companies connected with the country's powerful prime minister tend to trade on higher multiples than their peers - as much as 10 per cent in price/ earnings terms... "You can't judge Thaksin by ordinary standards. Like Malaysia's Mahathir Mohamad, he will do whatever he thinks is required to get to where he wants to go," argues Andy Yates who follows Thailand for Hong Kong-based fund manager ADM Capital. "The trick is to go with the flow. His cabinet is stuffed with people who made money on the stock market and know how it works." Conversely, long established pillars of the Thai business community are losing power. The influence of the surviving commercial banks has waned since the 1997 currency crash, amidst a feeling that the premier feels little empathy for mere loan providers compared with "real" businesses.


[2015 note: Like many Thai newspaper articles from the earlier days of internet, this article is no longer online. Below is the complete text of the original article.]

Wise Thai investors learn just to follow their leader
By William Barnes
Published: September 5 2003 5:00

Top of Thailand's bestseller lists is a business book entitled Think Like Thaksin Shinawatra. Good advice, it appears, for anyone seeking likely corporate winners in one of Asia's fastest growing economies.

Thai stockbrokers have even identified a "Thaksin premium" to describe the fact that companies connected with the country's powerful prime minister tend to trade on higher multiples than their peers - as much as 10 per cent in price/ earnings terms.

This applies most immediately to his family's key listed interests - the Shinawatra holding company and its cash cow, the mobile operator Advanced Information Services.

Mr Thaksin turned himself into reputedly the country's richest man in scarcely more than a decade, acquiring pager and then mobile phone franchises and, although he has officially retired from business, investors are convinced that his horses are still worth backing.

Analysts expect the Shinawatra companies to do well in the upcoming renegotiation of Thailand's mobile phone licences.

Meanwhile, the holding group's property arm - originally the manager of its own office space - is benefiting from a government-engineered consumer boom and will soon be spun off as a listed company, SC Asset Corporation, to expand into rapidly growing areas such as home sales, consumer finance and entertainment, according to its executives.

"Whatever that guy wants, tends to happen. So you bet with him," says Andrew Stotz, head of research at ING Barings in Bangkok.

Armed with that sentiment, investors are now looking for other stocks that might benefit from a Thaksin premium. As a populist politician and a friend of local business, the premier has already said that high profile privatisation targets, like airline Thai International, the Krung Thai bank and the two telephone giants, will be shielded from predatory foreigners.

The new Bt200bn ($4.9bn) Vayupak fund, a state sponsored mutual fund, is poised to participate in those sell-offs. There appears to be a risk of newly privatised companies being shielded from genuine competition by the government, say analysts.

Similarly Mr Thaksin's desire to keep "landmark" industries in Thai hands was displayed recently when he risked upsetting powerful foreign investors by providing government support for Prachai Leophairatana, the controversial debtor-owner of bankrupt Thai Petrochemical Industry, in his long drawn-out tussle with creditor banks.

"You can't judge Thaksin by ordinary standards. Like Malaysia's Mahathir Mohamad, he will do whatever he thinks is required to get to where he wants to go," argues Andy Yates who follows Thailand for Hong Kong-based fund manager ADM Capital. "The trick is to go with the flow. His cabinet is stuffed with people who made money on the stock market and know how it works." Conversely, long established pillars of the Thai business community are losing power. The influence of the surviving commercial banks has waned since the 1997 currency crash, amidst a feeling that the premier feels little empathy for mere loan providers compared with "real" businesses.

"This is the first time we've had a government in power without deep bank connections," noted Mr Stotz, though the picture is somewhat complicated by the fact that Mr Thaksin's family has invested in the struggling, state controlled Thai Military Bank.

In the longer term, there are also questions over the sustainability of "Thaksinomics" - a combination of easy money and state largesse, according to critics. The premier's populist instincts will ensure that the boom is drawn out as long as possible by deploying a growing current account surplus, worth $7bn, or 5 per cent of gross domestic product, last year.

"Normally you would get rid of extra spending power by an appreciation of the baht," warns Supavud Saicheua, chief economist at Merrill Lynch Phatra Securities. "That probably won't be allowed to happen, instead the market will be allowed to bid up asset prices to potentially much higher levels."

This will spur consumer spending and investment as people see incomes and house prices rising, but is likely to lead to inflation in the end. Mr Yates agrees: "You can argue about the long term, but right now Thaksin is popular, energetic and right."

With Thai stocks up more than 70 per cent since he took office in January 2001, most investors will no doubt continue to play the game of trying - as the book puts it - to think like that shrewd, although retired, businessman, Thaksin Shinawatra.
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