Mixed reactions to the military
coup in Thailand from Asia-based distressed debt investors.
Rumours of a coup have been circulating in Bangkok for
months, and so when it finally happened on Tuesday, few were
taken by surprise. Ousted Prime Minister Thaksin Shinawatra
was absent in New York when the Swat team entered his empty
bedroom. Pricing in political uncertainty and mindful of
the power vacuum, the SET last week was trading at the lowest
price/earnings multiple and highest dividend yield in the
region.
“This was not totally unexpected as there has been talk
of a potential coup for some months. Everything appears to
be peaceful and quiet,” says Giovanni Di Prospo, executive
at independent merchant bank Devonshire Capital, in Bangkok. “In
view of past political wrangling and the delay in forming a
new government this year, this could actually prove to be good
for Thailand. This is of course providing that the military
lets everyone know when they’re likely to step down and
if a new government is formed within the next six months or
so.”
A senior credit officer at an international
bank in Hong Kong forecasts little disruption to business
in Thailand, observing that certain aspects of commerce
were carrying on uninterrupted in Bangkok at the same
time as the midnight coup was taking place. “A coup in Thailand is like
corruption in China," he adds. “It just comes with
the territory, like the air you breathe.”
But what of the direct investors?
Lehman Brothers has bought a comprehensive Thai property
portfolio including high-end condominium, hotel and tourism
interests, for which they have paid hundreds of millions
of dollars. With Thailand’s tourism high season approaching
the situation must be a concern. However, Lehman declined
to comment on the ramifications of the coup.
We phoned one of Lehman’s new
hotels, the Westin Grande in Bangkok, which confirmed that
it remains open and has no shortage of room vacancies in
upcoming months, assuming you fancy a holiday amid the
tanks.
Distressed debt funds like Moe Ibrahim’s Asian Debt
Fund are positioned in hotels elsewhere in Southeast Asia
and see the uncertainty in Thailand as offering opportunities
to expand its operations by attracting tourists who otherwise
would have gone to the Land of Smiles. “This may be
good for our hotel in Bintan, the Bintan Lagoon hotel,” comments
Ibrahim from Singapore.
It is unclear yet when or whether Thaksin will re-enter Thailand.
But the Thai baht stabilised over the course of Wednesday
as Bangkok workers enjoyed an unanticipated day’s vacation,
and the customary diet of soap operas and ladyboy game shows
returned to Thailand’s televisions after a night of
royally-authored music recitations. Meanwhile the commandoes
man the barricades.
Robert Appleby, director of distressed debt fund ADM Capital
in Hong Kong, says, “We are optimistic that things
will get worse.”
When the Thai stock market reopens there may be selling as
shares held in nominee names that are beneficially owned
by personae non grata get dumped. Keep fingers crossed, but
don’t yet bank on this becoming a distressed buying
opportunity for illiquid assets, such as that dream beachfront
villa in Phuket.
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