US Economy Improving : Random Thoughts From San Diego Vacation

I spent last week in San Diego getting together with family.  Random notes below. 

• Deflation?  Many economists are worried about deflation.  However I did not see any signs of this.  It has been 7+ years since I was last in California (albeit San Francisco). Gas prices are now higher.  Quoted prices are US$3.50 to US$4.50 range per gallon when it was US$2.++ range before.  Most things seemed to be more expensive than when I lived there before including.  A trip to the outlet mall was particularly depressing, as I did not see as much value as I was expecting. Air tickets are also more expensive (see last bullet point).

• Economy seems to be recovering.  Hotel salesperson at San Diego's Sheraton hotel said that bookings and reservations are up compared to last year.  He thought that things had finally turned the corner after several bad years since 2008. 

• However parking lots at tourist attractions were not crowded.  Legoland and USS Midway parking lots and theme park/battleship were not as crowded as expected.  It was the height of the tourist season and I thought things would be totally full.  I gauged that parking lots were at best half-full.  Waits for rides were short.

• Chinese tourists.  My Shanghai-via-Beijing-native-and-15-year-San Diego-resident-friend said that he's never heard so much Mandarin spoken at San Diego tourists spots.  He also noted that Mainland Chinese were buying lots of real estate in San Diego.  I also noticed a lot of Mandarin.

•  Homeland security myth.  My software engineer brother-in-law had a particularly depressing story.  Not for himself, but for the country.  He found it difficult to get a job in the Washington DC area as he does not have security clearance to work in the still expanding intelligence service and consulting business.  Getting this seems to be an expensive endeavor.  Instead, companies vastly prefer to only hire those that already have clearance. This clearance system does not seem to have stopped leakages (i.e. Snowden).  It does likely produce a good stream of income for the numerous ‘consulting’ firms living off government largeness.  This is a shame as my brother-in-law is a US military buff and would have made a great asset to a homeland security or intelligence firm.  Restricting hiring to already cleared candidates decreases potential candidates and will lower available talent and quality.  It is also depressing to know that the US government continues to expand its eavesdropping service and spying service.  Americans should not feel secure by this practise.  Instead my brother-in-law is now doing something much more productive.  He has moved to Iowa and is developing systems to improve agricultural yields.

• Dreadful airlines.  Had an awful experience on United Airlines.  In addition to the surly air crew, crap food and odd boarding practice; I spent 8 hours in the San Francisco airport due to a missed connection.  My first plane was 2 hours late taking off.  It was a very old plane and it sounded like maintenance was the reason for the delay.  Thus I spent 1 out of my 7 days wandering around the San Francisco airport in a jetlagged daze. This is despite paying an extra hundred or more for the short connection time.  This is the second time I've missed planes due to missing a connection on United.  I suspect United purposefully puts in short connection times for marketing purposes.  Their is a very high chance that the connection will be missed, but the low connection time lures buyers.  A fellow delayed traveler said the other US airlines are pretty much the same. 

• I suspect bad service from US airlines is likely to continue. This is because that, according to Morgan Creek's Second Quarter 2013 Market Outlook, the US airline industry is an effective oligopoly with the top three carriers accounting for 84% of US volume.   As per textbook oligopoly economics, prices are noticeably higher and quality lower.  What's that about deflation? 

More Positve On China. Guo Shuqing Back in the News. Shandong as Financial Canary in a Coal Mine?

When researching and writing my 'group reports' I come across individuals that I like tracking as a general gauge of how an economy is doing.  Business and government are ultimately made up of people and I figure that if good people are moving up the ladder then things are likely going in the right direction.

These are people that appear to be doing-the-right-thing instinctively, rather than doing it for a particular gain.  They lead the curve rather than follow it.  

Sheila Blair in the US is one such person.  She seemed to be a lone voice of reason and common sense in US financial service regulation during the George Bush-era.

Pak Sugiharto, ex- Minister of SOEs in Indonesia is also someone I have a lot of respect for. His appointment to that ministry was shortened because his reforms were too effective and too many powerful people complained.  He is now President-Commission of Indonesian oil giant Pertamina and seems to have done a good job in reforming what had been an extremely corrupt organization.  He recently speculated that some of Pertamina's subsidiaries may be floated. 

Guo Shuqing is another such individual. I came to know him when I was researching my 2011 book, Inside China's Corporations.  At that time, he was the chairman and executive director of China Construction Bank (CCB), one of China big-four state-owned banks. He is a reformer and is a behind a number of China’s large financial institutions including the State Administration for Foreign Exchange (SAFE - one of the biggest pools of capital in the world.  It manages China’s vast foreign exchange reserves).  He later helped create and lead Central Huijin Investment Limited, which holds the government's equity stakes in its SOE banks and financial institutions. He became governor of Shandong province in March 2013 after a short stint at China Securities Regulatory Commission (CSRC) China’s version of the US SEC.

Guo Shuqing was back in the news today.  An article in today’s SCMP noted that Shandong has released financial sector reform plans.  These include "setting up private banks and leasing firms, carrying out trials for issuing local government debt, and developing asset securitization".  The article also speculated that Qingdao could be come a regional financial centre to promote free trade between China, Korea and Japan.

An academic quoted in the article goes on to say that Shandong may be used as a testing ground for financial reforms.  This would be in line with past government efforts to try things on a local level before making a change at the national level.  The most notable example of this is the mid-1980’s special economic zones.   

As governor of Shandong, Guo Shuqing reportedly amended the guidelines to make them more market oriented.  His background and connection to the central government likely give more credence and strength to these reforms. This could also be a sign that this Fall's CCP Third Party Plenum will be reform oriented.

These all sound good, but is to be taken with a large grain of salt. The best laid plans anywhere go awry and there are likely large vested interests in Shandong that are against any change.  Politics is impossible to predict.

What I like about this is that somebody who appears to be doing the right thing is moving up.  This is good and makes me feel more positive on China, its economy, and its markets.  

More on Guo Shuqing

Guo Shuging studied law at the prestigious Chinese Academy of Social Sciences, worked in two economic-reform government bodies and was a visiting scholar at Oxford. He helped establish, and was one of the first directors, of SAFE.  He later became the Chairman of the newly created Huijin.  He has political leadership experience having been the vice-governor of Guizhou province between 1998 and 2001.

He was brought into as CCB's Chairman in 2005 following the former chairman's resignation amid bribery charges.  He was unique amongst the big-four bank managers as he was the only one to sincerely make use of its foreign joint-venture partner.

While others paid lip service to using their foreign partners' technology, experience and people, my research pointed to Guo Shuqing personally engaging and integrating Bank of America's more advanced card and other products’ processes and technology.   CCB's share price did well, and I regularly see it recommended as a favorite among foreign sell-side research banking analysts.  Between November 2006 (when ICBC became the third large SOE bank listed) and November 2011 (about the time Guo Shuqing left CCB), CCB’s share price increased by 23ppt to 52ppt more than the other two listed banks.

After CCB he was moved to head the CSRC, which is analogous to the US SEC or HK's SFC.  In line with his reformist background, he rolled up his sleeves and started to institute long-term reforms at the agency.  He did not see many of these through as he was only there for 17 months.  Feedback from my Hong Kong buy-side friends said that he was set on reforming the organization even more, but met too much resistance from vested interests.  

He was appointed to the governor of Shandong province in March 2013 (article here).

Shandong

For those who don't know, Shandong is one of the largest and richer provinces in China.  It has 94m residents and accounts for almost a tenth of China's GDP.  It is famous as the birthplace of Confucius.

Situated halfway between Shanghai and Beijing it tends to get overlooked by the other two regions.  

I used to go there often in the mid-1990s when I was looking at a possible private-equity investment. At the time, Shandong reminded me of Ohio, a very important US state that gets overshadowed by more famous American cities and places.  If one thought of a 'heartland' in China, I would put Shandong at or near the top of the list. 

Walter White is Chump Change. William Jardine is the Real Deal.

Breaking Bad's first episode hooked me, and I've been a fan since. Great script, acting, story-line, cinematography, etc.  I never thought I'd be so enamored by such a depressing subject.  The series last episodes are currently airing in the US and I'm looking forward to them.

Breaking Bad is a US cable television series of a mild-mannered high school chemistry teacher's transformation into a regional drug kingpin.  The protagonists Walter White has a teenage son with cerebral palsy, a daughter on the way, and is diagnosed with cancer.  He starts 'cooking meth' to pay for his cancer treatments. Many twists and turns later, Walter White by luck and skill eventually becomes the largest crystal meth producer and dealer in the South Western USA.

But Walter White is chump change, a small fry, and a petty thief compared to the real-life William Jardine.

As far as I can tell William Jardine, and the company he co-founded, Jardine Matheson, was the largest and most organized drug dealer the world has ever seen.  His drive to expand the opium trade up the China coast and his active lobbying for what is now called the Opium Wars, eventually led to an estimated 70% of adult males in China becoming users or addicts.

At least this is the conclusion I came to when researching the origins and history of the Jardine Group for an investment bank report.  Called Inside Corporate ASEAN, the report looked at the largest conglomerates and controlling shareholder groupings in South-East Asia.  Much of the salacious stuff about Jardine's early history was edited of rough drafts I submitted to the bank. But the stories remain with me.

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The two men had similar upbringings.  Like Breaking Bad's main character Walter White, William Jardine came from a humble, yet educated background.  A graduate of University of Edinburgh's medical school, he learned about the opium trade as a ship's doctor in the East India Company.

Like Walter White, William Jardine was a hard working and 'honest' man.  William Jardine had a Calvinist upbringing, was described as hating idleness, and not fond of rest or recreation. Both men did not use their own products, and looked down on those who take narcotics.

However, unlike the Breaking Bad protagonist, William Jardine was not a devoted family man.  He met his eventual business partner, James Matheson at a Macao brothel and never married.  The two were in the drug trade not to provide for their families or to pay for medical bills, but simply to make money.  "Both men were committed to making a fortune as quickly as possible, the future credo of the opium trade generally", wrote Thomoas Dormandy in his fantastic book, Opium.

In fact, William Jardine was more akin to Walter White's nemesis, Gustavo Fring.  Both innovated product distribution and thought big.   Instead of only selling in Southern China, which was already fairly saturated when he arrived in the 1820s, William sailed up the China coast opening new markets as far North as Tianjin.  His innovation and hard work paid off and by the mid-1830's Jardine Matheson was largest opium trader in China, and likely the world.

But this was not enough. Toward his retirement, William Jardine returned to England and helped persuade the British government to send troops to  southern China to defend free trade there.  He advised the British naval forces on the best strategies to use along the coast and Yangtze River.

His prewar efforts partially led to the Opium Wars and the 1842 China Treaty of Nanking. The treaty ceded Hong Kong Island to the British, opened several ports to foreign trade, and had the Chinese government pay for the war.  A key reason for England's quick and easy victories during the first and subsequent was that many Chinese soldiers were opium users and not prepared or disciplined to fight the more mechanized British troops. 

William Jardine died in 1843 in England.  His company Jardine Matheson soon left the opium trade having diversified into other businesses.  

However opium use kept expanding. "In 1888 The London Times estimated that 70% of the adult males in China were habituated or addicted.  Two years later, exhausted by futile protests, the fifteen-year-old emperor, under the thumb of his great-aunt, the Dowager Empress Cixi, former prostitute, imperial concubine, serial murderess and lifelong (opium) addict, revoked all laws against cultivation, trading and consumption.  The laws had been so widely ignored that their revocation barely made a ripple."(also from Opium, by Thomas Dormandy).

Let's see Walter White top that in the remaining episodes...

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Jardine is now one of the largest non-government controlled conglomerates in SE Asia by market value.  In Fall 2011, when the report was published, it accounted for 11% of large company market capitalization of the six ASEAN markets.  It is the second largest  business group in Singapore as well as Indonesia, and by far the largest non-government owned one in the entire region. Jardine controlled companies accounted for 16% the Straits Times Index, Singapore's most quoted and benched marked equity index.

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Astra and Sinar Mas - 22-Year Performance Comparison

In the early 1990’s I wrote two reports on Indonesian business groups. They were updated in 1997 and 2007.

The reports are deep-dives into Indonesia’s largest conglomerates.   In Asia and most of world outside of the US and the UK, conglomerates are many times referred to as business groups; and designate a grouping of companies controlled by a family or other entity.

The reports examined not only companies that were listed on the stock exchange, but also looked at unlisted companies.  It looked at the key people making decisions at the group rather than company level. The reports dug into the controlling shareholder and his/her extended family, their reputation, and relationships with the government and other business groups. 

While writing and editing the report I and my colleagues would discuss who was good and bad and try to rank the groups by whom we would trust with our own money and which we would recommend to our clients. 

It was a pure subjective process.  The report was qualitative and had no valuations data, projections, or other numbers except for market cap and company ownership.  The reports themselves were more a collection of facts. Some comments were put into the text, but it was mostly factual information.  

My [1] conclusion was that there was a big divergence in the quality of controlling shareholders and that there was a wide variety of corporate structures.

Specifically we thought that the Astra International group stood out as likely being the best or one of the best, corporate citizens in Indonesia    In contrast was the Sinar Mas group came out on the other side of the spectrum.  We did not like them very much at all.  

Astra

Astra was the second largest business group in Indonesia by turnover in 1991.  In August 1991 its three listed companies accounted for 11.8% of the JSE’s market capitalization, the second largest after the Salim Group.  It had five major business lines automobiles, heavy equipment, electronics, wood based industry, and agribusiness.  A family related group called Summa, had interests in financial services, real estate and construction.   We included Summa in the report on Astra as we defined a group as companies controlled by the same family. 

Astra was founded by William Soeryadjaya in 1957. It started as a trading company working with the Sukarno government, where it imported asphalt, construction and road materials.  It is believed that Astra’s early success was due to its close connection with Ibnu Sutowo, the ex-chief of Pertamina, Indonesia’s national oil company; and perhaps IR. Suhartoyo who headed the country’s Department of Industry in the 1970s. Astra survived the downfall of both and by the mid-1970s was able to survive on its own. 

The group later expanded into property and construction, automobile assembly, heavy engineering and plantations. Several of its largest and most lucrative businesses were partnerships with Japanese companies.  The two biggest and most successful were its relationship with Toyota and Komatsu. 

At the time Astra stood out as the only Indonesian conglomerate that had established a professional management structure.  In the 1991 report I wrote, “We consider Astra to be the most ‘corporate’ group amongst all Indonesian conglomerates.  While many Indonesian conglomerates are beginning to professionalize operations, Astra has already done so.”

It was not totally professional as there were family members in leadership positions.  The founder’s brother Benyamin was a commissioner in several more important Astra subsidiaries.  Second son Edwin handled the daily activities of the group, played a role in taking Astra public, and was seen as the group’s next leader. 

Astra went a step further in hiring and giving managerial and decision-making responsibilities to both non- Chinese Indonesians as well as ethnic Chinese-Indonesians.  This was very rare at the time.  Virtually all big businesses in Indonesia at the time were controlled by Indonesian Chinese and non-family employees were typically in the same Chinese dialect group.  They were usually hired more for loyalty than competency.

Astra’s founding family also had a good reputation in Jakarta business circle.  They were considered ‘peranakan’ Indonesian Chinese.  Peranakan refers to South-East Asian ethnic-Chinese that had largely adapted the language and customs of their adapted countries.  

The group also had a good reputation amongst other investors as well as solid minority shareholder.   I wrote, “It is well respected in Indonesia and abroad.  As an example of this, the International Finance Corporation (IFC) has taken a 5.38% equity stake in the listed company and an IFC official sits on the board of PT Astra Inernational”. 

 Like many successful business groups in emerging markets, one of Astra’s key strengths was its being seen as a reliable joint venture partner.   In 1991 I wrote: “Astra has been known by foreigners as a reliable and efficient joint venture partner.  The reputation proved appealing to Toyota, which formed a joint venture, which continues to this day.  The relationship with foreigners, especially Japanese, has given Astra access to more capital than it could raise in Indonesia.” 

The group also had a fairly clean structure with a good alignment between minority and controlling shareholders.   Most of the family’s businesses were under the listed holding company, PT Astra International.    

The listcos however were not in complete alignment with the Soeryadjayas’ family interests.   Founder William Soeryadjaya financed his eldest son Edward’s Summa Group. But at the time they seemed to be operated separately. Summa was Edward’s vehicle and Astra would become younger brother’s vehicle.  I wrote in 1991 that ‘…we believe the two groups are acting independently.  William is believed to be more of a risk-taker than his father or brother Edwin.”[2][3]   

I also wrote in 1991 that the Soeryadjayas’ agribusiness interests were both within and outside of the listed holding company.  This was another potential conflict between family and corporate resources and attention.  

Despite these two items, Astra had very clean and minority friendly structure compared to the other groups we looked.


Sinar Mas

Sinar Mas was the third largest business group in Indonesia by turnover in 1991.  In August 1991 its four listed companies accounted for 9.6% of the JSE’s market capitalization, the third largest after the Astra and Salim Groups. 

Like Astra, it was controlled by one family; the Widjajas, whose head Eka Tjipta Widjaja was believed to have close relations to the Indonesian military.  I worte, “During the Indonesian revolution, Eka developed a relationship with the Indonesian military by supplying tea, syrup, dried meat and other necessities to the Indonesian forces.  Eka used empty army boats to transport copra around the archipelago and later to Europe.  By the end of the revolution, Eka had plantations producing coffee and rubber.”

Sinar Mas’ more formal origins were typically traced to its 1969 founding of Bimoli.  By the mid-1990s Bimoli was Indonesia’s largest cooking oil brand with an estimated 50% market share. 

Sinar Mas had eight major business lines: banking, finance and insurance; pulp and paper; real estate and property; plantations; food and consumer products; hotels and resorts; and chemicals. 

Unlike Astra, Sinar Mas did not group its varied businesses into one listed holding company.  The group’s structure and vertical integration strategy left open the possibility of transfer pricing between public and privately controlled entities.

Two Sinar Mas listed companies - Indah Kiat and Tjiwi Kimia - were both in the pulp and paper business. “Together they formed the largest fully-integrated pulp and paper manufacturing operations in Asia outside Japan”.   These two were primarily manufacturing companies.  Other companies in the group supplied raw materials and sold finished products. This left open the possibility of buying and selling products to-and-from listed companies also controlled by the Widjaja family. “The group has its own distribution companies to support its paper manufacturers and a 200,000 hectare forest concession in North Sumatra.  Other companies produce finished paper products such as notebooks and other office supplies.”

Further, the family-controlled bank meant that the group could obtain easy funding.  This likely led to poor capital allocation.  In the early 1990s, Indonesian banks were allowed to lend up to 20% of their loan book to related companies.  After BII’s downfall in the Asian Financial Crisis it was revealed that 50% of its loans were to Sinar Mas group companies. 

I did not include it in the 1991 report, but it was an open secret that In addition to his many diverse businesses, Sinar Mas’ founder, Eka Tjipta Widjaja, had a very busy family life.  He reportedly had seven wives and some 30 children. 

I did however write that many of his children from his first marriage were working and leading group companies.   In 1991 one of his daughters, Sukmawati Widjaja, was group CEO and Vice Chairman.  Not much was known about her except that her late husband, Ruby Maeloa was responsible for much of Sinar Mas’ growth in the 1970 and 1980s.   

Eka was considered ‘totok’ Chinese.  This refers to Indonesian Chinese born in China (or their Indonesian born children) who use a Chinese dialect as their primary language and do not identify themselves as Indonesians.  In 1991 I wrote, “He is a totok Chinese and seems quite traditional in his life-style.  His Indonesian has a heavy Ujung Pandang accent and he conducts meetings in Chinese when possible.  It is believed that he prefers to conduct meetings in Chinese or the Ujung Padang dialect”.

We were also told, but did not write, that outside the Widjaja family and a few trusted lieutenants, very few managers in the group had any significant decision making responsibility.   This fit the custom as previously described.

At the time there were also several rumors that Sinar Mas’ pulp, paper, plantation and /or forestry operations were breaking environmental laws.   


Quality Pays

Performance Since 1991

So how would minority investors have done by investing in Astra and Sinar Mas group companies since the September 1991 report?

I always suspected that Astra-listed companies outperformed Sinar Mas ones, but I was surprised by the extent.  In fact the divergence in performance is stunning. 

From the time of publication to now, all three Astra listed companies had positive total returns (i.e. price appreciation and dividend yield).   Astra International’s total return has been 9.5x in USD.  This includes the 1997/98 massive Rupiah depreciation.[4]   United Tractors has done better.  Inventors have been rewarded with 12.4x their money in the same 22 years.

During the same time period all three listed Sinar Mas companies have lost money for anybody that has kept shares for that long.  After 22 years a USD investor in the group’s largest listed company, Indah Kiat, has lost 56% of their investment. 

Performance Since 1998 (height of Asian financial crisis)

The performance since  August 1991 does not take into account market conditions.  It just happened to be when the report was published.  

What about a lucky investor who bought Astra International at the depths of the Asian Financial Crisis and had the fortitude to hold until now?

Astra International hit an all time low during the week of 9 October 1998.  Since then a USD investor would have been rewarded with a return of 207x (or 20,714.5%).  An investment in United Tractors would have done even better returning 1,172x (117,160.0%) over those same 15 years.

The return from the Sinar Mas listed companies was much lower since 1998.  The best was from Tjiwi Kimia.  It returned 72%. A holder of Indah Kiat shares would have lost money.

2002 to Now

I cheated a bit in the above analysis.  I selected a time period when Indonesian domestic oriented stocks were facing a very bleak future, and Astra’s share price was at an all-time low.   

In contrast exporters – such as Indah Kiat and Tjiwi Kimia - stood to benefit from the declining Rupiah. 

Both companies share price performed well during the Asian financial crisis.  For instance, between its December 1997 through and its May 1999 peak Indah Kiat shares price rose by 3.2x.[5] hitting a peak price of rp4,425.  It is now trading at Rp1,230 down 72% in 14 years.

But how would have investor done if we used the same criteria to select the date as we did for Astra?   How would an investor have done if they got into Sinar Mas’ largest listed company at its historic low, and would this have been better than buying shares of the quality group companies? 

Even here Astra vastly outperformed.  Between May 2002 and August 2013 Indah Kiat’s total return was 79.1%.  Astra International’s was more than 12x.   In fact, Astra group companies outperformed by a factor of 6x to 34x, depending on how one pairs the group’s six listed.

Moving On

There are more items to explore.  The comparison is hardly apples-to-apples as the industries that the listed Astra companies are involved in are very different than from the listed Sinar Mas ones.  Besides there are likely additional time periods when Sinar Mas group company shares outperformed Astra company shares.

There is also the sleep-at-night factor.  This is basically how much one worries about their investments.  Since 1991 investors would have lost a lot of sleep with any Indonesian investment, especially during the Asian financial crisis.

But I suspected one would have lost much more sleep if they had held any of the three listed Sinar Mas companies:

• Both Indah Kiat and Tjiwi Kimia’s shares appear to have been suspended in 1991. 
• Their parent company, Asia Pulp and Paper (APP) was behind the largest corporate default in history before Worldcom.  It defaulted on some US$12-14bn. 
• APP’s NYSE shares fell some 98% from its IPO price and were later delisted. 
• APP and other Sinar Mas companies have been the subject of numerous environmental group criticism.  

Last Thoughts

I’ve been researching business groups off and on since my first Indonesian group report was published 1990.  In the past it has always been a labor of love.  After finishing each one I’ve felt very powerful.  I know who controls what; understand how minority investor interests may be compromised; and have fact-based opinions on which controlling shareholders are good and bad for outside investors. 

What I particularly like about this research is that I look at data points, ask questions and root-out information that others bypass.  This helps me to generate non-consensus investment ideas.  It gives me the courage to buy companies when others are selling and valuations are attractive.

To try to explain this I wrote a short piece where I dubbed my research methodology Research Alpha.  My "Research Alpha" focuses on people, structure and valuation. This is in contrast to bank research that tries to forecast earnings and take a myopic view of a company.   I call this Research Beta (write-up on this is here). 

I used this "Research Alpha" methodology during a personal trip to Greece (write-up is here), in several investments in Asia, and when interviewing hedge fund managers when I was a fund-of-funds professional. 

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[1] Much of this blog refers to “A Guide to Indonesian Business Groups”, published in September 1991 by Crosby Research.   Michael McGaughy researched and wrote most of the materials. John Niepold and Alex Wreksoremboko, who were also working at Crosby Research in Indonesia, contributed to the report.   Richard Borsuk, then Asian Wall Street Journal’s chief Indonesian reporter edited and provided feedback on the report. As per company policy at the time, none were credited for their work and no author name(s) appear on the report. 

[2]  A year after the 1991 edition of “A Guide to Indonesian Business Groups” was published, William Soerydjaya lost control of Astra.  He sold the family’s controlling stake in order to rescue his eldest son’s Summa Bank, which had suffered from a credit crisis and finally collapsed.  William Soerydjaya personally guaranteed all Summa Bank deposits using his stake in Astra.  All depositors received their money back with interest, without using any government or outside support. 

[3] After Astra, Edwin Soeryadjaya founded Saratoga Inestama Sedaya, which has sizeable stakes in JSE listed Adaro Energy and Tower Bersama Infrastructure.   Edwin regularly appears on the Indonesian Forbes rich list.

[4] The 1991 report listed the Rupiah at Rp1,951 to US$1. When this was blog was written in mid-August 2013, the exchange rate was Rp10,309 to US$1. 

Cambodia's Stock Market - Low Volume

I met with a few brokers in Phnom Phen in early February. Several very kindly put me on their mailing list.  It is nice to get their daily emails as they have very positive stories about new restaurant chains opening in the capital, the country's first ever shopping mall, and the continued expansion of textile and garment manufacturing.  It sounds like the country is rapidly progressing. 

The stock market only has one listed company however.  And even that is not very liquid.  Today's SBI email noted that total traded value today on the entire market was a mere USD15.  Both buying and selling broker can proudly claim 100% of the trading volume. 

Below is a cut-and-paste from today's SBI daily email (15 August 2013). 

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"PPWSA’s stock closed higher at KHR6,100 (USD1.50) per share, up 1.7% from yesterday’s closing price. Market volume was only 10 shares in turnover of KHR61,000 (USD15). There were 83,245 shares unmatched in the sell side with best offer of 440 shares at price of KHR6,100 and only 5,295 shares unmatched in the buy side with best bid of 677 shares at price of KHR6,040.

"RHB Indochina securities was the sole seller today amounted to 100% of total shares traded while Acleda securities was the sole buyer amounted the same 100%. Local individual investors sold 100% and bought back 100% of the volume whereas foreign investors did not trade for today."

Bangkok - Changing and Staying the Same

Thailand is, and is not, changing.

That is my impression after a three-day trip to Bangkok to celebrate a friends 50th.  My first trip to Thailand was in 1986 and I've been going back every one-to-three years since.  This was my first time to Thailand in almost exactly two years when I was doing on-the-ground research for Inside Corporate ASEAN. My list of publications can be found here: http://michaelmcgaughy.blogspot.hk/2012/02/publication-list.html

Changing.  Bangkok for the first time feels like a real, first-world cosmopolitan city.  In the past it has always stuck me as a sprawling city in a developing country.  This time the night drive into the city from the airport yielded an urbane skyline, fast expressways and drivers that (mostly) stayed in their lanes. Later in the weekend a crowded BTS and fashionable shopping mall added to this feeling. Dinner, drinks and a terrace view of a concrete jungle reinforced it.

Staying the Same.  However in some ways Bangkok has not changed.

1. Traffic is still dreadful. It took 1.25 hours to go a few kilometers on a rainy Friday night.   
2. Politics remains rumour-driven.  My host informed me a few hours after I arrived that he received an SMS/Text stating that there will be a military coup in a few days. (another friend said this is not a rare message to receive)
3. Thais continue to start interesting consumer products. This is the country that gave us Red Bull.  

The last point is actually the purpose of this post.

The product is called G&G Body Deodorant.  It is for both underarms and feet. Basically a combination of Sure and Odor Eaters.

From a chemist's standpoint this combination may be very logical.  However from my consumer mindset it seems odd. Something that is meant to be spread on my feet does not seem like something that is also meant to spread on my armpits.

It was the only option at the supermarket so I gave it a try.  After a few days in a not-so-hot-Bangkok I found that it worked well.

At least for my upper body.  I still have not tried it on my feet.

The second picture is also from the trip.  It shows the King of Thailand getting haircut from his mother.  In Thailand virtually every retail business and office has a picture of the the king or other members of the royal family centrally displayed.  This was hanging at the Nonglingchee barber shop I tried. Very appropriate.