BRICs, PITs, and PIGS: Go Ugly

In my research and investing I stress three things: people, structure and value.  I look for companies that are controlled and managed by quality people, have corporate structures that align minority and majority shareholder interests and trade at valuations that are below fair value if not outright cheap. 

This blog is mostly about valuation and yet another example of how investing in beaten down, unpopular and ugly markets can lead to better returns. 

Usually valuations are low in markets that are not very attractive.   But who knows when the news can get even worse? Uncertainty and negative news flow keep most of us out of markets just when we should be buying. 

And it can take even greater will power to stay invested when nobody around you sees your point of view, friends and peers are calling you crazy, and well-educated, respected and slick investment bank analysts and traders are negative.    

It is psychologically easier to invest in markets when there is a lot of good news and the future looks very bright.  The problem is that these markets tend to be expensive and future returns tend not to be as good.

To contrast these two points let’s look at two acronyms that surfaced about the same time.

BRIC stands for Brazil, Russia, India and China. The acronym is attributed to Jim O’Neill in a paper he wrote for Goldman Sachs in November 2001 (found here).  In it he argued that these four countries should be included in high-level government groupings such as the “G7” because their size and growth would make them increasingly influential.

The acronym came out not long after the tech crash. Wall Street was ripe for a new story and over the next few years the term became more popular.  Goldman Sachs and many others launched BRIC funds and ETFs.  There are now over 200 of them according to a very expensive database.

The term took on a life of its own.  Leaders of the four appear to like the grouping.  Just a few months ago they and South Africa formally launched the BRICS Development Bank (link here).

About the same time BRICs was coined, traders and analysts who survived the late 1990s Asian financial crisis were referring to the ASEAN countries as PITs.  The term stood for Philippines, Indonesia and Thailand.  These were three of the hardest hit economies and markets.  Unlike BRICs I don’t think anybody has come forward to claim responsibility for it.  Calling your home market a degrading term soon after clients lost money would not likely make one popular.

Investing in the four BRIC countries when the phrase was coined until now would have generated decent returns.  The four countries' headline indexes are up an average of 302% since late 2001 for a CAGR of 10.5% (this and other return figures in this article are based on the average return of each country's headline index, in USD, dividends not included). 

In contrast, and despite the acronym’s negative connotation, one would have done considerably better by investing in the three PITs markets.  An equally weighted investment in the three grew by 675% over the same time period, which means the PITs investor would have made more than double the money of the BRIC investor.  Even the worst PIT outperformed the best BRIC.  Thailand, the worst performing PITs country, rose by 629%, a bit more than India, the best performing BRIC country, which increased by 611% from November 2001 to November 2015. 

In addition to being weary of investment fads, investors should also be skeptical of what the big banks are pushing. In July 2006 Goldman Sachs launched its BRIC fund.  From launch to close, the fund’s performance was just under 20%.  Over the same time period the three PITs indexes increased on average by 157%, meaning that one would have made almost eight times more money by investing in the markets that were unloved rather than the ones that the big banks were marketing.

Are PIGS Today’s PITs?

PIGS stands for Portugal, Italy, Greece, and Spain.  These are some the world’s worst performing economies and equity markets since the 2008 global financial crisis.  Like PITs it is not a flattering grouping and member countries have reportedly renounced the term (link here).

I suspect PIGS could be an up-to-date version of PITs.  The origins of both are the same and they describe markets that are having problems and are out of favor.  

Also like PITs the countries in the grouping are geographically close and have a lot in common in terms of economic integration, language, and culture. This is a stronger grouping than the BRICs. Except for the large country size, I don’t really see much that binds them like the PITs and PIGS.

Back to BRICs

Ironically now may be a good time to consider investing in BRIC equities. 

Russia has some of the world’s least expensive large companies and very impressive management.  Brazil is starting to look interesting with its currency down some 40% in the last two years.  There are some exciting and inexpensive companies in China and at 7x PE the Hang Seng China Enterprise Index does not seem very expensive. Weren’t US equities trading at the same level in the early 1980s just before that market’s long bull run?

There’s also a good contrarian signal.  Goldman Sachs recently closed the above mentioned BRIC fund.  Big banks have a habit of closing operations and products just when things start turning around. HSBC closed its South East Asian equity research offices in 2001 – just before those markets went on a multi-year bull run. Goldman’s closing of its BRIC’s fund may be a similar signal (more here). 

Go Ugly

This short piece is meant to show that going against the grain and doing what is uncomfortable and unconventional many times leads to higher returns.  The best place to find value is typically in ugly geographies and sectors.   

Are there other places that appear to be ugly and warrant catchy phrases such as PIGS?

How about “RUKs”, for Russia, Ukraine and Kazakhstan, three ex-Soviet countries whose currencies have fallen and have some of the highest interest rates in the world.   Or “PCB”, for Peru, Columbia and Brazil, three of the worst performing equity markets this year for US-dollar investors  Or “JOBQES”, for Jordan, Oman, Bahrain, Qatar, Egypt and Saudi Arabia which are among the world’s least expensive equity markets likely due Middle East uncertainty.  Or "GETOUt" for gold, energy, telcos, oil and utilities, five out-of-favor sectors that dominate my global value screens.

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Making Ugly Fun

"Average investors are fortunate if they can avoid pitfalls, whereas superior investors look to take advantage of them", wrote Howard Marks in his very good book, The Most Important Thing.

Psychologically it is hard to put one's hard-earned money into unattractive and out-of-favor stocks and markets.   It's not easy or very enjoyable to try and catch a falling knife.  But buying quality companies at knock-down prices is likely a good way to limit downside and hopefully generate superior long-term returns. 

To help ease the way, I silently sing the chorus of a song from my youth.  Perhaps it will help you also.  It's sexist, corny and elementary, but with a catchy pop-hook its also very memorable, so make sure to click on the link below.  I've changed some lyrics in the second version to make it a little more investment specific.  

If you want to be happy for the rest of your life,

Never make a pretty woman your wife,

So from my personal point of view,

Get an ugly girl to marry you.

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If you want to be happy for the rest of your time,

Never make a pretty stock your life,

So from my personal point of view,
Get an ugly market to carry you.

"If You Want to Be Happy", by Jimmy Soul (link here), 

(Based on "Ugly Woman", by Roaring Lion (link here)  

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.

CAIA - Smart Moves Submission

Smart Moves – Dec 2011

Michael McGaughy, CAIA, has had his new book published.  Called Inside China’s Corporations, it maps and explains the corporate structure and control of China and Hong Kong’s conglomerates - both family and government-owned.  It highlights their key people, structure, and business lines at both the parent and listco levels.   The role of China’s communist party in corporate control is explained through both bottom-up and top-down charts and examples. All HK, Shanghai and Shenzhen listed entities over US$2bn in market capitalization are mapped to their parent group. (Sample pages can be seen at (http://www.asianom.com/samples/index.html). It can be purchased direct form the publisher Amazon, or IND-X Securities where it can be paid for through brokerage commissions. 

The book follows several other similar reports he has written on ASEAN, Indonesian and Malaysian conglomerates and prominent business families.

Said Michael, “The CAIA program rounded out my fundamental buy- and sell-side analysis and manager selection background.  Having been based in Asia for most of my career it was particularly useful to understand new products and investment styles that are new to the region and many times not here yet.  The designation and networking opportunities at local chapter events has expanded my network and has altered my way of looking at investments and investing. “

Michael McGaughy, CAIA, consults to asset allocators, funds and research organizations on manager and product selection, marketing and fundamental equity, ETF and index analysis, through his company Kairo, Ltd.  An award winning analyst, Michael has a diverse financial background spanning buy- and sell-side equity research, private-equity fund management, fund- of-hedge funds management, business development and investor relations. He first came to Asia as an exchange student in 1985 and has been involved with the region ever since, having lived and worked in Beijing, Hong Kong, and Singapore, for different companies including HSBC, the old Crosby Group and StoneWater Capital.  He earned a bachelor’s degree in economics from the University of Vermont.  He has been a CAIA member since November 2010 and currently sits on the Hong Kong chapter’s executive committee.