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Finance: Where to invest after Trump victory

Legacy Phuket Gazette

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PHUKET: As the world learned that Trump had won, equity futures plunged – only to turn positive just minutes after the market opened the next day, with the rally lasting the rest of the week.

The fact that the Dow and small cap US stocks shot up by 10 per cent to a new high shows that the market has voted and so far likes Trump.

While it’s true that Trump has made many conflicting policy statements, he has made it clear that he wants to ‘drain the swamp’, meaning fewer politicians milking the system, better trade deals that benefit the USA and a reset of foreign policy. These policies will not benefit every sector or asset class, but they will benefit business in general and ultimately investors.

Let’s not forget what happened after the new approach championed by Reagan and Thatcher to dealing with the stagflation of the 1970s that had stymied traditional politicians. Their approach to the economy and government helped launch important start-ups such as Microsoft, Cisco, Amazon.com and Facebook.

Right now, America badly needs to be more creative. Would-be entrepreneurs must have a goal beyond government subsidies, to create the next generation of Microsofts, Ciscos, Amazons and Facebooks.

However, investors still need to keep in mind that while the overall market may be going up right now; the following sectors or asset classes are turning out to be losing bets.

Government Bonds: The iShares Barclays 20+ Year Treasury Bond ETF (NASDAQ: TLT) dropped 7 per cent alone in the week following the election as money flowed back into the riskier equity class.

Emerging Markets: The iShares MSCI Emerging Markets Index ETF (NYSEARCA: EEM) fell off in the days after the election. If EEM fails to rebound and breaks towards the US$30 level, investors will want to avoid emerging market asset classes and country ETFs.

Gold: This traditional safe play was rallying earlier this year, but is now breaking lower. This development goes against some people’s political views that Trump is the end of the country and the notion that there is still a considerable amount of risk or uncertainty in the world.

Utilities: Many investors have been buying utilities over the past few years as a safety play and for dividends. However, the Utilities SPDR ETF (NYSEARCA: XLU) has been hitting lower highs and lower lows since July – a clear downtrend.

Dividend Paying Stocks: Recently, too much investor money flowed into dividend paying stocks. The PowerShares S&P 500 Low Volatility Portfolio (NYSEARCA: SPLV) is now seeing money outflows while the PowerShares S&P 500 High Beta Portfolio (NYSEARCA: SPHB) representing growth stocks is seeing money flows coming in; as that’s where investors want to be positioned right now.

If the economy does pick up, good old fashioned earnings and sales will start to matter, while risk will once again be rewarded. In other words, investors will want to be positioned in growth stocks and not in sectors that will not benefit from a Trump administration.

Don Freeman, BSME, is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket. He has over 15 years experience working with expatriates, specializing in portfolio management, US tax preparation, financial planning and UK pension transfers. Call for a free portfolio review. Don can be reached at 089-970 5795 or email: freemancapital@gmail.com

— Don Freeman

 

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

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Thai Airways’ creditors to vote on rehab plan today

Maya Taylor

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PHOTO: Pixabay

Today is D-Day for Thai Airways, with 13,000 creditors voting on whether or not to accept the struggling airline’s rehabilitation plan. According to a Bangkok Post report, a source at the airline has warned that should creditors reject the plan, the carrier will be declared bankrupt and they would only receive 12.9% of what they’re owed.

In the event of a bankruptcy declaration, the airline’s assets will be appraised to decide how much of its debts can be repaid. The estimate of 12.9% is based on the value of assets currently held by the carrier.

The Bangkok Post reports that the rehabilitation plan which was submitted in March covers debts of around 410 billion baht. It’s understood major shareholders own around 180 billion baht of that debt between them. Should the rehab plan be accepted today, it’s likely Thai Airways will be given a certain timeframe in which to turn itself around.

The plan calls for the repayment period of debts arising from unsecured bonds worth 70 billion baht to be extended to 10 years, with a debt moratorium in the early stages of repayment. The airline is also introducing tough cost-cutting measures, including job reductions via early retirement for thousands of its 20,000 workers.

It’s understood the plan does not call for the Ministry of Finance to provide a loan but says anyone can obtain the loan and the ministry can help with cash injection negotiations. The State Enterprise Policy Office has already stated that the government will not re-capitalise the airline.

SOURCE: Bangkok Post

 

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Government will not re-capitalise struggling Thai Airways

Maya Taylor

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PHOTO: Wikimedia

The State Enterprise Policy Office says the government will not back a billion-baht cash injection for Thai Airways. The national airline is currently been dragged through bankruptcy proceedings.

Pantip Sripimol from the SEPO says the Thai Finance Ministry will not re-capitalise the carrier, although it remains its largest shareholder. The Bangkok Post reports that there are concerns Thai Airways could become a state enterprise once more if the ministry were to assume a majority stake once more.

Last September, the Finance Ministry reduced its stake in the national airline to less than 50%, in an effort to facilitate the debt-rehabilitation process. As a result, the carrier is no longer a state-owned enterprise and it’s understood a number of cabinet ministers are concerned that, should the airline regain its status as a state enterprise, the government would have to guarantee a billion-baht loan to ensure its survival.

The Bangkok Post reports that both the Finance Minister, Arkhom Termpittayapaisith, and Deputy PM, Supattanapong Punmeechaow, both support re-establishing the airline as a state enterprise. They argue that doing so would improve its financial situation and provide more leverage for negotiating with creditors. Such a move would mean the Finance Ministry becoming a majority shareholder once again.

As it is, the airline’s bankruptcy proceedings have been taken up with renegotiating with creditors – mostly aircraft lessees. The majority of Thai Airways’ fleet remains grounded and gathering dust, parked at Suvarnabhumi airport.

However, Pantip says the ministry will not re-capitalise the airline and is prepared to reduce its shareholding if other investors purchased additional shares. The ministry currently has a 49.9% stake in Thai Airways, with Pantip saying it would be difficult to justify a further cash injection to shareholders.

With the airline now operating as a private business, the government is no longer obliged to prop it up monetarily, nor is the Finance Ministry obliged to offer financial help to a private company, despite being its largest shareholder.

On Wednesday, creditors will meet to discuss the airline’s debt restructuring plan and decide if they are to accept it.

SOURCE: Bangkok Post

 

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Thailand jumps on the electric bandwagon, aims to become EV production hub

Maya Taylor

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PHOTO: Flickr / JCT 600

The Thai government has ambitious plans to turn the Kingdom into a Southeast Asian hub for the manufacture of electric vehicles. Nikkei Asia reports that big companies in Thailand are preparing to invest substantially in the greener mode of transport, after the National Electric Vehicle Policy Committee suggested a new manufacturing target could mean half of Thailand’s auto-production is made up of electric vehicles by 2030.

The message to car manufacturers and energy suppliers is to grab this opportunity to invest in the necessary infrastructure to support electric vehicles, as the number of drivers using such cars is expected to rise significantly. The Thailand Board of Investment says that between 2017 and 2019, investment in EV production and its infrastructure reached 79 billion baht. That figure is expected to rise at a much quicker rate over the next 3 years.

According to the Nikkei Asia report, Toyota was the first car manufacturer to make EVs in the Kingdom, with Chinese manufacturers becoming more competitive in recent years. The latest Chinese firm to join the EV revolution is Great Wall Motor, which plans to launch electric vehicles this year. The number of EV manufacturers in Thailand is also growing, but Surapong Phaisitpattanapong from the Federation of Thai Industries’ Automotive Industry Club says they still need to overcome serious supply chain challenges. He says manufacturers of the traditional internal combustion engine now find themselves trying to supply parts for electric vehicles, including batteries, motors and converters.

“It’s all about the economy of scale. If the number of EV users goes up substantially, it would be worth investing, and everyone, including auto parts makers, would be ready to switch to producing EV parts, and that would create supply chains that are ready for the development of EVs, but it will take time.”

Surapong points out that the government hasn’t provided enough subsidies to encourage the purchase of electric vehicles, saying there needs to be more of an incentive to deliver the sales boost needed.

“We think there should be a more direct subsidy for EV buyers to promote EVs, but we haven’t seen the government issue any kind of subsidies like that yet.”

SOURCE: Nikkei Asia

 

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