Thailand Investors’ Confidence Report – Part Two

By Keith Hilden and Georgi Ivanov

In part one of our series, we laid out the macroeconomic situation in Thailand, and offered our viewers expert investment insight from CNBC Squawk Box Asia Guest Host Paul Gambles on where Thailand is going as a country, and what that means for you, dear reader, regarding equity gains. In Part Two of our Investors’ Confidence Report, we’re covering the protests themselves, and the effects they are having on the market in Thailand.

First off, size and cost. The protests previously cost US$300,000 a day to run the 8 protest sites that were since relocated to one central site, Lumpini Park. For context, the previous US$300,000 price tag is double that of what it cost to run the Democracy Monument in Thailand.

Funding has also been under fire, as the Thai equivalent of the FBI, the DSI, are cooperating with the Anti Money Laundering Office on behalf of the Centre for Maintaining Peace and Order and has been scrutinizing financial statements and generally attempting to make life financially difficult for those corporations who are supporting and funding the PDRC protests.

Other signs of financial strain on supporting the protest movement include protest leader Suthep Thaugsuban selling off his land in the South to fund the protest expenses. The consolidation move to Lumpini Park indicates a conservative shift on protest expenses, and a further hint that the political standoff in Thailand could be at the beginning of its end if additional protest funds are not secured.

These are the known companies by sector supporting the PDRC protests financially, with as much as 61 companies on the list:

  • Consumer products: Saha Pathanapibul Plc.
  • Retail: Gaysorn Department Store, Siam Paragon Department Store, King Power Group
  • Hotels: Dusit Thani Hotel, Siam Intercontinental Hotel, Riverside Hotel
  • Sugar industries: Mitr Phol Group, Wangkanai Corp., Ltd.
  • Beverages: Singha Corporation Co.,Ltd., Thai Beverage Plc., Yakult Co.,Ltd., Khaoshong Industry 1979 Co., Ltd., Neptune Food & Beverage Co.,Ltd. (Ra-Yong), Thainamthip Co.,Ltd., Boon Rawd Brewery Co
  • Insurance: Muang Thai Insurance Plc.
  • Advertising Media: Asian Phytoceuticals Plc., Hello Bangkok Trivision Co.,Ltd.
  • Machinery industry: Metro Machinery Co., Ltd

This list of corporations funding the PDRC is not only relevant to gauge the length of the protests, but also because these corporations are being targeted for a hit on their bottom lines via consumer boycotts and organized mass cancellation of patronage to these companies. It is worth noting that this list is due to change and expand as the protests evolve, and so companies will be targeted with different pressure at different times.

Compounding this risk is that both Thaugsuban’s followers as well as Shinawatra supporters are playing tit for tat with boycotts and actions designed to hurt these companies bottom lines. Taken holistically, these are actions that result in the big picture of Thailand’s bottom line itself being negatively impacted, reducing GDP and other macroeconomic measures of a country’s performance.

For example, Thaksin Shinawatra’s line of businesses have also been strategically disrupted to affect stock price and company earnings. SC Asset Corp, a property developer perceived to be controlled by the Shinawatra family, has been ambushed by protesters and has seen a 10 percent drop in its stock price from February 17 to February 28.

M Link Corp, a telecom company perceived to be linked to the Shinawatra family, dropped 17 percent between February 17 and February 24 , and settled at an 11 percent loss for the market closing time on February 28.

Shin Corp, a corporation Thaksin Shinawatra founded before getting into politics, dropped 8 percent during the February 17-February 24 period. Same pattern for Shin Corp affiliate Advanced Info Service, which dropped 7 percent during the February 17-February 24 period.

In order to counter the financial hits on Shinawatra-linked businesses, Yingluck’s party as of March 1 stated they were going to start a campaign of boycotts, aggressive lawfare, and other tactics to financially hurt PDRC-linked companies. Indeed, as the protest battlegrounds recede physically, they appear to be maintaining its size and punch in the form of disruption via the courts and boycotts and organized movements designed to hurt rival company’s bottom lines.

Beyond political infighting and targeted hits on stock prices of companies domestically by the PDRC and the Red Shirts alike, on the macro outlook there is waning investor confidence in Thailand, as the political turmoil seems unclear when it will end.

Bank of America Merrill Lynch echoes this view, as it sees EM Southeast Asia markets such as Indonesia and Phillippines are reaping the benefits of being lower in personal household debt and having a more stable political system at the moment.

Thailand has its bright spots that make an attractive silver lining in the gathered clouds of protest.

There remain opportunities in the tourism and banking sectors, relatively low equity prices, and growing export markets to Southeast Asian neighbor countries, yet we see clear risks for investors in Thailand getting caught in tit-for-tat stock price hits of the adversary principal companies of the Shinawatra and PDRC camp.

In our view, this is the most concerning  risk development in Thailand because it is difficult for the investor to mitigate the risks of politically motivated falls in the stock price, and it is difficult to predict what company will be targeted next, to the woe of investors caught between the tit for tat. Once the collusion between parties to manipulate stock prices is cleared up, there will be a significant amount of investor risk removed from the market, and markets will be able to function more normally.

Investors in Thailand currently need to weigh these risks against the sectors and regions of Thailand that they are investing into and determine whether these risks apply to their individual investments, while exploiting the opportunities of a cheap SET, a developed and well regulated banking and financial sector, and depressed equity prices as an entry point for mid and long-term gains.

Squawkonomics is focused on delivering multi-dimensional media and business intelligence products on emerging and frontier markets, to assist companies with their market entry strategy and market research needs. Employing a team of capable analysts, Squawkonomics provides first-hand business insights from the best sources and synthesizes them into perspectives that understand markets like never before. Currently based out of Taipei, Taiwan, and with operations in Thailand, China and Canada, Squawkonomics offers an unparalleled glimpse into a whole new economy. Contact us on Twitter, Facebook, or info@squawkonomics.com.

Keith Hilden is a financial interviewer and forensic accounting analyst, specialized in fraud prevention, financial trends analysis and dynamic developments in emerging markets. He is the founder of Squawkonomics, and is also affiliated with Wikistrat and Market Oracle. His specific expertise and research focuses on China, Taiwan and Southeast Asia. To reach Keith: kehilden@gmx.com

Georgi Ivanov is a political scientist with competencies in geopolitical analysis and international security, political economy and a specific specialization in polar governance. As a market entry strategist with Squawkonomics, he evaluates the political, security and economic risks that affect the fundamentals of emerging and frontier markets and develops recommendations for their mitigation. To reach Georgi: g.ivanov@gmx.com

The opinions expressed in this article are those of the authors, and do not necessarily reflect the views of Asia Briefing Ltd. Furthermore, the above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should always first consult with their personal financial advisors.

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