Thai Bullish for Year 2001

While there are many reasons and unresolved concerned about next year, we on balance remain convinced the SET is in a bottoming process and that patient investors will be rewarded. Hence, we would keep a fully invested position.

As this year is coming to a close we reflect on the local market's disappointment. We shared our thoughts with you thinking a year ago, that calendar 2000 should see a further SET recovery. As it turned out, the much hyped "Y2K’scare was the joke of the decade. The new centennial year railed in and few if any problems were reported. Some skeptic on this told me "many US Gasoline refineries have been closed due to 2YK, as this is what created the seemingly temporary energy crisis", but I do not believe this and energy prices seem ready to slowly fall back to reasonable levels.

Yet, the domestic Thai economy remains relatively weak as the pending Thai election is holding much back. In retrospect we should have foreseen this.

Still our main message all along has been to mostly own deep SET values. Meaning, a group of shares in export focussed smaller companies. Yes, even some of the least liquid SET value shares; this with highest current dividends. Get paid while you wait, has long been our advocated overall investment theme.

As larger more liquid SET shares we chose Thai Airways (32), Banpu (17) and PDI (10.25), KCE (80), HANA (100), as some of our few, more liquid big cap. stock selections. While not as bad as the SET benchmark, still they have overall disappointed.

In our "subscribers lounge" we mentioned at key moments, "ATON" and "NUAN" as our own NASDAQ wild choices. Both moved much higher in market price, shortly after. We also believe that post "US election fiasco", things will start getting slowly better, not worse in the oversold US technology sector. While by no means wildly bullish, we are clearly not ,"US bears" -like so many others. The focus here most only is on Thai stocks but on occasion, have made (in retrospect) some good US market comments since inception.

Stock markets and their inevitable trends show how wrong most people can be, us included. This is one reason why owning values and high dividends, as the only prudent way to long term capital growth. But keep your conviction, as individual private investors we have many (rarely explored by the press), advantages over institutions.

Here are our main reasons why we remain bullish on Thailand (and Asia in general), for year 2001:

1. Allot of "risk" money has been taken out of the US technology sector. Some of this will slowly come back to emerging markets. Short of a crash, any capitulation on Wall Street will be good for Asian markets here. Mr. Wood, global emerging markets strategist, from ABN-AMRO makes a good case for re-emerging, emerging markets, post the US bull market.
2. The prospect of lower US interest rates is positive for SE Asia in general. Year 2000 has seen continued higher US rates and Asia's stock markets almost always, follow the direction of US interest rates. This is one reason why year 2000 was an "equity flop" here. Long live the dividends!
3. Interest among US and global institutions in foreign (but in the US listed) shares is much stronger then generally believed. Consider that in '00, more new ADR's (foreign shares but trading in the US) have been issued in the US then any year before. Records have been broken.
4. Savers in Thailand are fed up with low local savings interest rates. Banks are awash in liquidity. Millions are desperately seeking new and prudent ways to save. Currently only 1% of total savings here, is channeled into the SET. There is much room to grow, once newly invented brokers and expanded services like ours, explain ever more the benefits to long term "value’share ownership.
5. New favorable laws slowly grinding through, like so called "Treasury stock" i.e. allowing companies to buy back their own shares. Or the ending of the country's biggest unpaid debtor, the ex-big boss of TPI. New bolder government initiatives, exploding tourism numbers and good exports in food, auto parts and basic electronics…these are some of the local themes which will propel the market higher. This even while the SET benchmark may under represent the progress at first.
6. USA's new president George Bush is generally good for Asia. Some of his key advisors (notably a certain Mr. Lindsey), are among the most knowledgeable on this important region. Also, the Mr. Bush's planned tax cut next year is also a new real positive. In my view, it will keep the US from a hard landing which is an increasing concern -as US economic numbers have shown to be increasingly weakening, just lately.
7. The curtain is being brought down on Prachai's, TPI. Here is Thailand's biggest debtor, which has pulled every trick in the book over the past two years so to delay his day of reckoning. But just today, the Thai courts refused his latest delay tactic and Thailand's Bankruptcy Court handed Thai Petrochemical Industry Pcl to its creditors in a move that may end its founder's three-year battle to keep control of the nation's biggest debtor. As was reported by Reuters on December 15th: "The ruling, though long delayed, is the strongest message yet to the nation's debt-laden companies that they can't indefinitely put off their creditors through protracted negotiations.." This surely has send the right message, as too many have given up here.
8. Better disclosure and corporate Governance. As example, on the SET web page, every Thursday or Friday, under the "today's news" headline, you can under the symbol "SET", see news on any topics like new Broker fine violations and/or company insider buying and selling. Also watch for the new site welcomed web site called "SETTRADE.COM".  We soon plan to write more about this.

All in all things are moving in the right direction -even while ever so slowly- this just at a time were some new sobering jolted the US markets. All the bad Thai business and political news is all too well known but is the coming political silver lining rightfully understood?

Some of the SET shares we have writing to you about are clearly among the least valued anywhere, in the rational world. This remains our primary reason for "pounding" the table, as on the SET it selectively remains, a "values galore" market. By the time it is clear things are getting better here, as we believe is the case, many of our "jewels" will move higher in market price.

Most of all we have avoided and argued all along in year 2000 and before against owning the largest cap SET "performance dogs", since the bear market started in 1997!

Best Wishes for the upcoming Holidays (if you celebrate these), and Happy New Year 2001!

Best Regards to all valued Subscribers,

Paul A. Renaud & Team.