An Open letter to the Nation Newspaper about our advocated investment strategy.
An Open letter to the Nation Newspaper about our advocated investment strategy.
"I am sure that many of your readers often must be in same situation as we are..." Here is a critical letter and our short answer.
The Sunday Nation April2, 2000,
Thomas Hansson - Asia Small Cap Investment Corp.
In Response
Dear Paul Renaud,
We often hear from advisors and investors when in Thailand that shares in small caps can be picked up at very low prices. You have in The Sunday Nation very strongly and cleverly argued for this option.
But being a retail investor in Hong Kong investing not only in Thailand, I would like to explain why investing in Thailand in these "cheap’small cap is not so attractive.
I shall give you some examples why and would be very interested in having comments from you as an advisor of small cap investment in the Thai market. I am sure that many of your readers often must be in same situation as we are.
CMBT is owned 75 per cent by one group with a 25 per cent of shares owned by private investors. It is a very strong financial company with good earnings and no debts. In 1999; its EPS was Bt 22.38 and dividend Bt 1. In 1998, its EPS was Bt 7.46 and dividend Bt1. Its shares book value price was approximately Bt60. Here the private investor is just a free financial source for the group.
GFPT presented fourth quarter results completely against forecasts. GFPT is in the chicken industry and prices for chickens went up in the fourth quarter of 1999, which should have had positive effects on earnings. Our broker in Bangkok told us that the bad results may come from buying raw material at too high a price which could be a way of transferring money to a major stock owner. But no information came from the company.
In January 2000, Reuters in Bangkok reported STA's managing director as saying the company would record Bt 8 billion in revenues for 1999. But the yearly results for 1999 shows revenue of Bt 6 billion.
These up to date examples- and I could come with many more going back a little - that show minority shareholders in Thailand are completely lost. The lack of information explaining odd results, the lack of dividend policy in nearly all listed companies, and knowing that rules and regulations of the SET are poorly followed and implemented by the regulators.
I cannot see the SET as a forum to attract foreign capital for healthy long term investments. Foreigners will only be in this market for short term when a profit can be made. Buying when prices are very low and profit taking as soon as possible.
Lack of transparency and fear of being "cheated" is holding back a lot of investors in Thailand. Even markets like Malaysia and India offer a more reliable and trustworthy stock markets than what we find in Thailand.
Yours sincerely
Thomas Hansson
Asia Small Cap Investment Corp
Our Answer:Dear Mr Hansson, We do not have much to say except look at our documented performance record. Maybe it's time you subscribed? The point is, many large capitalized companies do not have a much better record at all...and despite your accurate observations, smaller shares -as thaistocks.com picks them- have by far outperformed the SET index. Hence, we stand to our strategy. We looked up your fund on the internet and your name in the Hong Kong Yellow and White pages, but could not find anything.
Best Regards to all our viewers!
Paul A. Renaud
