Top rice exporters push ASEAN Rice Confederation

Thailand and other major rice exporters in Southeast Asia are speeding up establishment of an ASEAN Rice Confederation in an attempt to stabilize rice prices and enhance their collective bargaining power.
Deputy Commerce Minister Yanyong Puangrach on Thursday, Nov. 7, convened a meeting of representatives of ASEAN’s rice producing nations - Cambodia, Laos, Myanmar, Vietnam and Thailand - in Bangkok. The meeting discussed launching an ASEAN Rice Confederation as well as mapping out a joint rice management system.
According to the minister, Southeast Asia is now capable of producing 20 million tonnes of rice annually, which is about two thirds of rice produced globally - about 30 million tonnes a year. ASEAN is now facing many problems associated with rice production, whether in marketing, pricing, management, logistics and stock systems.
Regional countries need to join together to increase negotiating power, while stepping back from competing against each other.
At the meeting, Yanyong stressed Thailand’s readiness to become the trading hub for rice in ASEAN due to the country’s advanced rice technology, logistics and finance.
He said Chachoengsao and Sa Kaeo provinces have initially been chosen as Special Rice Trade Zones, though both positive and negative impacts need to be studied thoroughly before an official designation is made. (MCOT)

October Consumer Confidence Index drops to lowest level in 19 months

Thailand’s Consumer Confidence Index (CCI) last month dropped to its lowest point in every sector in the past 19 months from 77.9 to 77.6.
Thai Chamber of Commerce University’s Economic and Business Forecasting Center director Thanawat Polvichai said the index decrease was due to concerns over political instability, the country’s economic slowdown and uncertainty about the world economy.
The confidence index on the economy overall last month stood at 66.6 and 67.9 in September.
Dr Thanawat said if the current political situation leads to a House dissolution, the government’s ongoing projects such as the Bt2 trillion infrastructure development will be suspended, resulting in the country’s opportunity loss on investments. However, he believed the country’s economy next year will grow at least 3 percent within the range of 4.5-4.7 percent.
Meanwhile, Wallop Witanakorn, vice president of the Federation of Thai Industries (FTI), said the ongoing protests will not affect the Thai economy, based on the matters considered and their short-term duration.
However, if the demonstrations are prolonged, despite the government’s latest move to withdraw the controversial Amnesty Bill, confidence on the overall economy will be impacted, particularly on the tourism industry.
He said if political tensions ease, the country’s economy this year can grow a maximum of 3.5 percent.
Wallop noted that continued political protests could result in Thailand’s economic growth being less than 3.5 percent. (MCOT)

What the future holds

(Seated, L to R) Prinn Panitchpakdi, Dr. Steve Keen, Richard Duncan and Paul Gambles discuss in depth what the future might hold for investors.

Professor Steve Keen is often quoted as saying that the only people who believe that they can see the future are fortune tellers, economists and God and that, while he’s sceptical about fortune tellers, he knows for a fact that economists are deluding themselves, often with appalling consequences.
In many ways this view also informs the approach to risk management of MBMG Asset Management (MBMG AM). Managing clients’ hard-earned assets shouldn’t be based on an individual assumption of what the future might hold because, unless God decides to set up an asset management company, no single view is able to predict the future with certainty.
Therefore investment management starts with risk management - how much volatility is an investor willing to stomach? To how great a loss, from the top of a market to the very bottom, are clients prepared to expose themselves? Once we know that, we can start the process of building bespoke portfolios tailored to each client to reflect the optimum blend of assets - the ones that in the very worst imaginable scenarios will perform within that client’s own tolerances but which in the reasonably expected outcomes will deliver the highest returns that the risk constraints allow.
There are no good stocks or bad stocks, or good asset classes or bad asset classes, merely an optimal blend of assets for each client that won’t exceed that investor’s worry threshold. The returns that are generated are an output that reflects that blend within the capital market conditions that then prevail - they can’t be controlled but risk can and should. This approach has driven our success over the years, helping our clients to achieve positive returns in difficult years like 2008 and outperform over the cycle.
When asked at the “What The Future Holds” event in Bangkok this week about how to invest in the current economic climate, Steve Keen advised that academics don’t have huge pots of money to manage; best-selling author Richard Duncan favoured agricultural land (such as in his native Kentucky) along with US residential property. MBMG AM CIO, Paul Gambles recommended a highly diversified portfolio, constructed around individual risk appetite and at most risk levels holding a significant proportion of cash, managed to squeeze every ounce of yield out of it, poised and ready for what could be the greatest opportunities of a lifetime, along with cautious allocations to non-US listed global stocks and to judicious property exposure. Although valuations are high, he favoured Southeast Asia over developed markets but cautioned that a much stronger US Dollar is “almost inevitable” at some stage, although it’s hard to be certain as to when, making patience one of the key components to any portfolio right now.
The event focused significantly on the US economy and US capital markets simply because America is home to the world’s largest economy, main capital markets and greatest financial experiment in history - namely the stimulus policies aggressively pursued by the Federal Reserve and Treasury Department, which have driven US consumer debts to levels much higher than in the 1930s. However, portfolio allocation and economic analysis require a global focus as what the future holds may well be different for each asset class and in different regions despite the close linkages between them. In fact such linkages are often responsible for the inverse relationship between assets that is so important to the diversification and risk management processes.
At the event, Gambles, Keen and Duncan all expressed concerns about levels of global debt and the high risks that such debt holds for the future. Gambles foresaw a range of possible outcomes, mainly comprising the following:
i) QE will work; creating exit velocity growth and real inflation that will outstrip and devalue debt (this has never worked before).
ii) The global economy will ‘turn Japanese’ and we’ll suffer lost decades while the debt slowly and painfully endures - except that this isn’t an outcome, just a long transition to an outcome.
iii) Some kind of re-set or event - a default, actual or effective, or the kind of event that ended the Great Depression, i.e. WWII.
Each outcome will create huge risks and opportunities - it’s impossible to know which outcome will prevail or the timing but awareness of these possibilities allows each investor to position for the full range of outcomes, according to their individual risk profile. It’s not about investing into a particular asset in anticipation of a single outcome. It’s about constructing risk-adjusted portfolios using asset matrices that can withstand the most unfavourable outcomes.
Duncan’s central premise was that, since 1945, the world has been dominated by ‘creditism’ - “We see all economic and capital market activity ultimately driven by credit. This is a manipulation. It’s not capitalism.” His scenario mainly anticipated a binary outcome.
Either the economy continuing to grow with QE being invested in a way that is more efficient - new technologies, green energy, etc - investing a further $5trn into productive sectors will generate adequate sustainable growth to fix the debt problem over time or a Japan-style lost decade or several lost decades will follow.
Keen focused on extreme levels of private debt seeing the economy right now as another accident waiting to happen - probably in the next 2-5 years. It could be just another recession in a long-term cycle of going nowhere for the next couple of decades, Japanese-style, but Keen also worries that social pressures, especially in Europe, could lead to the kind of austerity conditions that brought Hitler to power in the 1930s and led to WWII.
The range of outcomes and the risks inherent in each one only serve to reinforce our convictions about highly personalized risk management with diversification, a coherent outlook and patient pragmatism to the fore.

Don Mueang makeover set to handle 28-30 million pax annually

Don Mueang Airport in northern Bangkok is being renovated to cater for at least 16 million passengers this year and up to 28-30 million once completed in May 2014.
Don Mueang airport director Jaturongkapol Sodmanee said on Tuesday that the renovation of the airport’s two terminals and runways to expand its handling capacity for 28-30 million people annually is expected to be complete by May next year.
The airport is set to offer faster service for passengers starting this peak season by increasing X-ray scanners and security checkpoints. The renovated terminals will serve the region’s growing air travel as many airlines including Lion Air, the Jakarta-based low-cost carrier, will make Bangkok as one of its hubs and is supposed to launch its service here later this month.
Thai AirAsia’s commercial division director Santisuk Klongchaiya, meanwhile, said the airline is opening up new routes together with new promotions to meet expected demand during this peak travel season. The growing political tensions should not affect the Thai tourism.
According to Santisuk, Thai AirAsia has also introduced its “Fly-Thru” campaign which will help passengers connect with flights more conveniently. Passengers at Don Mueang Airport can transfer from one flight to another without hassle as their baggage will be collected at the destination. The campaign will be active from December 1 onward, covering 34 routes. (MCOT)

Commerce Minister admits Bt260 billion loss from rice subsidy

Thailand has lost Bt260 billion from the government’s rice pledging scheme in the last two years, according to Deputy Prime Minister/Commerce Minister Niwatthamrong Boonsongpaisan.
He said the government has sped up releasing rice from state stockpiles so as to pay debts to the Bank of Agriculture and Agricultural Cooperatives (BAAC) which has granted loans for the scheme.
The BAAC should be paid Bt200 billion by the end of the year despite declining rice prices in the global market, he said, adding that rice would be gradually exported to China from next month until December next year.
Thailand has sold one million tonnes of rice to China while a counter trade of Thai rice for the Chinese high-speed train project will be clear in Q3 next year, he said.
BAAC President Luck Wajananawat said the bank, at the next meeting of the National Rice Policy, would propose guiding principles in finding a revolving fund for the 2013/2014 harvest.
Loans totaling Bt140 billion may be sought to pay farmers for the 2013/2014 harvest while the Cabinet will be asked to extend the maximum revolving fund to Bt500 billion, said Luck.
He said the BAAC has paid Bt600-800 billion for the rice subsidy but was paid at only Bt140 billion, making it impossible for the bank to secure a new financial injection for the scheme. (MCOT)

Bangkok Bank opens 3rd Indonesia branch

Bangkok Bank opened its third branch in Indonesia, in Medan City in North Sumatra Province.
President / Director of Bangkok Bank Chartsiri Sophonpanich said Medan is the third largest city in Indonesia. It is the Bank’s third branch following Jakarta and Surabaya and the Bank’s 26th branch overseas.
Chartsiri said that to welcome the ASEAN Economic Community (AEC) in 2015, Bangkok Bank sees the potential of Indonesia, thanks to its many natural resources and outstanding agricultural products, such as oil palm.
Large and small alike, Thai entrepreneurs are prepared for the expanding ASEAN market, which will provide an ample opportunity for business expansion and more fierce competition, he commented.
Indonesia’s Bangkok Bank branches could create the highest profits compared to other overseas branches, he said. Credit there has continued to expand from US$500 million to US$750 million, and now to US$900 million in the past three years, while it is expected to increase to US$1 billion this year.
According to Chartsiri, half of the Bank’s customers are from Thailand and are large entrepreneurs in the agricultural, petrochemical and energy fields.
The quality of credit is good, he said. Non-Performing Loans (NPL) are lower than 2 percent, and the bank is trying to whittle this down to lower than one percent.
NPL levels for the banking industry in Indonesia are at 2.5-3 percent.
So far, Bangkok Bank has maintained its portion of revenue growth from overseas branches at 15-18 percent. It aims to strengthen itself by expanding it customer base both in Thailand and abroad. (MCOT)