The perfect storm -likely to hit its peak this week.
Not giving up and stating here so.
For now, it remains a “perfect storm here” where on top of EU’s horror we have serious floods not just in the Agri sector but in the industrial sector where hundreds of factories are now flooded. Many industrial zones have been shut down until the water clears. Most of these factories are owned by non-Thai listed and unlisted companies (mostly Japanese) and we do not own any share in these industrial estate developments in my model portfolios.
The Thai government has stated it will offer a new credit lines with a special interest rates, tax incentives and various other investment privileges to industrial operators whose factories have been flooded. The business rehabilitation packages will be proposed for cabinet approval this Tuesday, and are aimed at restoring investor confidence. Public investments worth more than 420 billion baht are being tentatively planned to help guard against a repeat of this year's disastrous floods. They seem to be moving fast and unlike most developed countries Thailand has huge fiscal (besides monetary) reserves on hand to address this natural disaster.
However, if the floods penetrated to the heart of Bangkok, economic growth this year could fall to only 1-2%. But as of today this has been prevented with major roads and the Airport open. Hotels in the centre of Bangkok are also open for business as usual even while they all realize there is a risk the floods will hit the core of Bangkok. But as of this time it has not and the thinking is it will be prevented. Obviously none of us has a good handle on how unlikely this is. Lets just say the Thai people get into high gear like few other cultures do, when such a crisis hits. After some hesistation and mismanagement, there seems to be a master flood plan now in the works.
MAJOR (11.1) just now stated this morning saying that very few of its movie theatres have been affected and the situation for the company is not serious. They still believe the 4th quarter will be a record so if there is just one stock I would like to invest in more on this crisis, it would be MAJOR. Of course many other choices are now trading below their book value which will look as a superb price once the water levels retreat.
Imagine you own land or property under floods. Surely, just then, nobody would bid anywhere near its market price. Yet its silly to think its only going lower and then will take along, long term to recover, because the rainy season is now just about over and the water will run off and so people and markets will recover. They always have. But only with stock pric
es we see its price daily -as property prices do not show this. We are all in this together -so lets just take a brake & enjoy some of life as we can, as I am now entrenched on doing. I here will keep writing about bigger issues in the meantime -as I know the recovery will happen here as soon as water/flooding levels have peaked. There is nothing else to do as selling out and walking away will be the worse mistake in time. Some of us, me included, are now hopeful the authorities have gotten the wake-up call to new serious preventative measures in the future.
Of course listed companies here have full insurance and even work stop clauses -and have stated so in public announcements. Still the stock market sentiment is and remains very bad at this moment and will be so until the floods start receding. The bottom of the SET, by definition, will be at the height of this flooding crisis when the water levels are at its worst.
We got to be very close to that point so I don’t see it making any sense in selling out any shares. And if you do, you better get back in at the right/perfect time or one day you will be sorry. That is if EU does not drop off its own cliff. I just do not subscribe to either worse case scenario and just keep holding on to everything as the longer term value investor in overall solid companies.
To repeat, water here will retreat in weeks and Thailand will rebuild, but some bond holders in the EU and their overall huge ineptness and in-deptness will ravage on there for years. It’s their entitlement overstretch self inflicted hangover there which will not just recede like water always does.
Best Regards,
Paul A. Renaud.
