Coup Is A Good Thing...

[tangoll]

Bear Stearns Asia issued this commentary on the coup. Make sense or not?

Quote:

Thailand: A Net Reduction in Uncertainty

>

> While any descent from constitutional democracy (however imperfect) is

> regrettable, we think overnight developments in Thailand probably set up

> a net reduction in political uncertainty and could enable a speedier

> resumption of decisive governance.

> Asia is characterized by a variety of governmental forms already, from

> single-party authoritarianism to fully fleshed-out democracies, and we

> see no automatic correlation between the region's forms of government

> and local stock-market performance – what has mattered more for

> investors have been growth, stability (of a kind), and transparency.

> Moreover, we expect the Thai coup to be an isolated event, given the

> specific factors that fomented it, with little permanent impairment of

> Thailand's economic/commercial continuum beyond that already caused by

> the electoral ructions to-date, and almost zero risk of spillover to

> other regional political economies.

>

> What strike us as most noteworthy from an investment standpoint are: 1)

> King Bhumibol seems to have given his tacit assent to the action ,

> having met overnight with Army Chief Sondhi Boonyarataklin and the

> military leaders, who pledged loyalty to the monarchy -- a fact that

> greatly reduces risks that the new leadership would be publicly resisted

> or viewed as illegitimate; 2) the takeover has occurred without

> significant violence or loss of life; 3) the switch is unlikely to

> entail any confiscation of foreign property or broad confiscation of

> domestic property beyond, presumably, the family interests of (ex-)

> Prime Minister Thaksin; and 4) the temporary military leadership

> (calling itself the Thai Political Reform Council) has indicated they do

> not "want power for themselves," that they took power to address

> "government corruption" and intend to "return power to the people."

>

> In a best-case scenario, we would not rule out the possibility of new

> elections still being held according to the late-November timetable

> recently laid out, which would enable a new government to constitute

> itself and begin administration in early 2007. More likely, though, we

> expect elections some time in the first half of next year (the entire

> month of December is typically reserved for celebrations related to the

> King's birthday). But either way, we expect a competent

> military-appointed technocratic civilian administration to take over in

> the meantime.

>

> The latter, incidentally, was the course taken by General Suchinda

> Kraprayoon after the February 23, 1991 coup, who ten days later

> appointed a civilian prime minister, Anand Panyarachun, former

> ambassador to the U.S ., Germany and Canada. Many observers later rated

> Anand's premiership and cabinet as among Thailand's best ever. And

> although the Stock Exchange of Thailand fell 8% in U.S. dollar terms the

> first market day after the February 1991 takeover, it then gained 19.5%

> in the subsequent three weeks . Thailand's stock exchange reports that

> it plans to hold normal trading hours tomorrow.

>

> Regardless of the precise course of events ahead, markets now have

> effectively been spared the weeks of hand-wringing over the judicial

> fate of Thaksin and his Thai Rak Thai (TRT) party , which await Supreme

> Court decisions over charges of election-law violations related to

> April's abortive polls -- and potentially months of uncertainty over

> whether subsequently, Thaksin and the TRT may have performed well enough

> in November's polls to sustain the nation's paralyzing public divisions

> over his fitness to actually exercise any mandate.

>

> Local asset values may well be enhanced by this reduction in

> uncertainty, and we take an increasing interest in Thai stocks in light

> of: 1) relatively low valuations (35% below long-term avg. EV/EBITDA at

> 6.8x, and 10% below long-term avg. P/BV at 2.3x -- both discounts being

> much larger than the regional average) ; 2) high average dividend yield

> (Asia's highest at 4.6%), and recent important improvements in

> fundamentals (stronger current account, recent pickup in capital

> spending, lower inflation) and consensus earnings that lead us to

> believe a near-term re-rating may be in order.

>

>

> Michael Kurtz

> Non-Japan Asian Economics & Strategy

> Bear Stearns Asia Ltd.

End Quote

[OldAsiaHand]

All of the brokerage houses are sending out something similar to this. I've received three versions so far today.

Brokers want to sell stock so they are professionally upbeat and will put a positive spin on any news, no matter what it is. If there were a thousand dead bodies in the streets of Bangkok, I promise you some idiot brokerage house would issue a report telling you that it is a 'positive sign for the market' since it reduces overpopulation and its exesssive drain on resources. Jing jing khrap.

[Meerkat]

All of the brokerage houses are sending out something similar to this. I've received three versions so far today.

Brokers want to sell stock so they are professionally upbeat and will put a positive spin on any news, no matter what it is. If there were a thousand dead bodies in the streets of Bangkok, I promise you some idiot brokerage house would issue a report telling you that it is a 'positive sign for the market' since it reduces overpopulation and its exesssive drain on resources. Jing jing khrap.

Haha...whilst I agree with you in principle about the value of any brokerage's analysis, Kurtz plays with a straight bat; indeed anyone who is as prominent as he is in the Hong Kong jazz scene simply can't be a bad egg!

Merrill's internal analysis today is banking on a near-term 20% rise in the SET too. Their previous analysis pointed to three factors holding back the Thai economy compared to its neighbours; rising fuel, rising interest rates, and political uncertainty. Their view today is that those factors are now on their way out. It is a view I tend to agree with (and yes, I'm talking my own book too as I'm long the SET myself, and going longer).

[OldAsiaHand]

I'm squarely with the other school here.

While I accept that certainty would be a good thing for the market here (and an end to uncertainty an even better one, if you catch my drift), the plain fact is that the destruction of civil government and an effective end to even the illusion of civil authority in Thailand is not the kind of certainty that the market ought to want unless it is blinded by greed.

Nuclear holocaust, for example, would be certainty in the extreme. Just not very positive certainty.

[Meerkat]

I'm squarely with the other school here.

While I accept that certainty would be a good thing for the market here (and an end to uncertainty an even better one, if you catch my drift), the plain fact is that the destruction of civil government and an effective end to even the illusion of civil authority in Thailand is not the kind of certainty that the market ought to want unless it is blinded by greed.

Nuclear holocaust, for example, would be certainty in the extreme. Just not very positive certainty.

Whoa there! A coup to nuclear holocaust is a big jump!

I understand where you're coming from, but I believe it is not the "certainty" of a military dictatorship that the markets like, but the promise of a fresh civilian government. I have no doubt whatsoever that investors would have preferred a peaceful election instead, whether such elections were an affirmation of TRT, or its ousting. I abhor the idea of a military coup, but I do think that a line has probably now been written under Thaksin's rule and the listless way the country has operated since the farce in April. I should say as well that I (almost) equally abhor the behaviour of the opposition in not partaking in the prior elections.

[petecooper]

That's a really interesting article; thanks for the post.

[Plus]

There will be no certainty in ANY civilian government from now on.

[ovenman]

There will be no certainty in ANY civilian government from now on.

Was there really any prior to today?

[OldAsiaHand]

....I should say as well that I (almost) equally abhor the behaviour of the opposition in not partaking in the prior elections.

Three cheers for you there. That's something that not enough people are willing to say since it has become so socially correct to applaud their so-called courage instead.

The plain truth is that the beginning off the end for something that was at least close to democracy in Thailand was the Deomcrat's refusal to participate in an election properly called under the constituion. Since they knew they would lose, they opted instead to try and blow up the system.

Good strategy. They really succeeded, huh? Now good luck to everyone.

[britmaveric]

It's called worrying about panic selling tomorrow.

[OldAsiaHand]

The way the Thai casino...uh, market usually functions, or doesn't function, I'd say 'panic buying' is almost equally likely.