Thursday, April 06, 2006

Weekly Snippets, Snipes & Snides
April 1 - April 6, 2006

Asian Bourses Flying - KLCI rose to its highest level in nearly eight months with trading volume hitting a new record at over two billion shares, as optimism over further gains by Asian currencies. Asian markets, which climbed to 16-year highs, were aided by continued gains in their currencies that were led by the Chinese yuan, which hit a new post-revaluation high. The Thai stock market and baht were the spectacular performers in Asia, as the Bangkok SET Index jumped more than 3% after the three-month political stalemate ended with Prime Minister Thaksin Shinawatra pledging to step down. The baht rose to its highest level since the middle of March last year. Foreign players were buying blue-chip counters to primarily take advantage of the ringgit, which hit a new eight-year high at RM3.67 to the US dollar.
Now, it is easy to get carried away with the rising sentiment. Let's get a handle on why the markets surge - its basically a rerating of currencies, not of corporate fundamentals. Thaksin ending his political tussle would automatically increase the chances of Arroyo being booted out of office within the near term. A savvy investment pro would already know the Premier Hu Jin Tao will be visiting the USA end of April. Many pros would be betting for a gradually stronger yuan the weeks leading up to the visit - betting on the right cross currency would be difficult. Betting on US dollar at a time when the Fed seems intent on raising rates would neutralise the edge. Undervalued Asian currencies looks the best beta bet. However the Thai "crisis" and Philippine "debacle" kind of put a dampner on things. Though for the last couple of weeks, savvy managers have been buying ringgit (being probably the most undervalued Asian currency) and Japanese yen. The dam did not start to crack till "new developments" came in, the Thaksin event allowed more investment managers to be more gung-ho. Hence the sweeping across the board rerating of assets via a currency shift.

Temasek's Immediate Accounting Loss - Well, buying Shin Corp and then watching the seller end his political career within a few weeks should really inculcate new insights for Temasek. The US$3.8 billion acquisition now has a paper loss of 20%, all within one month of transacting the deal. Shin Corp has fallen gradually but surely since the deal was struck. Shin Corp's share price for the last few weeks was almost the perfect indicator of Thaksin's political career. Now Temasek will have to carry out impairment tests to determine if they need to take a charge for the diminished sum. In hindsight, with Thaksin out of the political spectrum, Shin Corp under Temasek could reinvent itself and consumers could prefer the "Thaksin-less company" if "PR /advertising / product innovation" are handled well. The product innovation should be a no-brainer with SingTel's contribution. Now, its just the soft skills PR and advertising, and Shin Corp could really go places. A name change might be worth considering.

Arroyo, Pack Your Bags - The people power movement's success in Thailand will inject enormous pride and ambition to the people power movement in the Philippines. The downfall of Thaksin was that the movement needed a "poster boy issue" to hold onto. For Thaksin its the grandiose transaction of Shin Corp. In Arroyo's case its the case of "vote rigging" allegations. The writing is more than just on the wall already, Arroyo.... man, even Peter, Paul & Mary are singing the song for you. What will be pissing the Filipinos is the fact that they have been campaigning since 2004 against Arroyo, while their "friends" in Thailand took just a few months to get Thaksin to step down. The February state of emergency declared by Arroyo did not go down well with the public, and seems to be indicative of a person clutching at her handbag... I mean straws. Now, to be fair, Arroyo is more formidable than Bill Clinton, she has survived not one, but three impeachment bids. Will Gloria follow Thaksin's example of stepping down and winning some brownie points? Unlikely, because there is a good chance that she might be jailed if she is no longer President as the accussations surrounding her are criminal allegations. She has to resign and then leave on a jet plane, till a proper pardon/amnesty is granted. The tide is turning again in the Philippines.

2 comments:

Rohan_888 said...

"The combination of excessive paternalism and a reluctance to accept foreign help has left Malaysia sticking out as the new poor man of ASEAN. Its listed companies are generally inward-looking with limited ambition."

Opinion of a foreign fundmanager, not exactly positive. But when will the coin drop with the powers-that-be?

Salvatore_Dali said...

The opinion is justified, do the powers to be realise that? Maybe some of them do, but are not politically brave enough to implement the changes or are bound by certain powerful people.If we are still talking about the same thing 5 years down the road, the Thais will be the ones coming down to Malaysia and spend their strong Thai baht trying the local ladies of leisure.... and we may try to visit the new dazzling Singapore casinos but will not be able to gamble cause to gte one SingDollar you need RM3.50.

Malaysia as a whole has the ability, you and I know it, but whether we are allowed to do so... that is another thing.