Bras in the Streets: Time to Buy Thailand

In a bloodless September coup, the military took control in Thailand.

In order to maintain the peace, demonstrations were banned in the country until the restoration of democracy.

But in October, fed-up workers from the Gina Form Bra factory ignored the ban... Risking being arrested, they demonstrated in front of the U.S. Embassy in Bangkok, with bras atop their picket signs.

They were picketing because they just lost their jobs. You see, Gina Form Bra, a maker of lingerie for Victoria’s Secret, the Gap, and Calvin Klein, decided to leave Thailand.

Thailand’s currency has strengthened so much, it became too expensive for Gina Form to produce in Thailand. The company closed up shop and moved to mainland China.

To help the bramakers and the rest of Thailand’s working class, Thailand’s central bank twice tried to introduce measures to discourage speculation in the currency. It didn’t work. Then earlier this week, the central bank did the unthinkable...

“This is about as incompetent as it gets,” said Julian Jessop, an economist at Capital Economics Ltd. in London.

Mr. Jessop was describing the comical restrictions placed on foreign investors earlier this week and the quick about-face to partially reverse them. (The details of these ridiculous restrictions are not important to this article, as they shouldn’t affect us as stock investors.)

The announcement of the restrictions caused a stock market panic, with the benchmark stock index falling by 15% in one day. That evening, the restrictions were partially reversed, and the stock market recovered significantly the next day. The shares may have recovered, but the credibility of Thailand’s interim government can’t.

As the dust is settling, U.S. investors in Thailand are down about 10% this week (based on the performance of the Thai Fund, symbol TTF).

I think it’s time to buy into Thailand...

Thailand is the world’s cheapest stock market. Stocks like Siam Cement, Bangkok Bank, and oil company PTT – the big blue chips – will be fine. These stocks are the top holdings of the Thai Fund as well. The only catch with the funds like the Thai Fund is they’re trading at a premium to the value of the underlying shares they own.

For new money going into Thailand, I’d buy the individual stocks, though it’s a bit difficult. If you already own the Thai Fund, or a fund like it, keep holding it.

The Thai companies are cheap and just fine. It’s the government that’s currently a mess. One of our maxims here at DailyWealth is to buy when things are going from bad to less bad. Things should be going from bad to less bad in Thailand soon...

Baron von Rothschild grew his wealth by following his famous saying, “buy when there’s blood in the streets.” It’s when uncertainty is the greatest that assets are the cheapest.

That’s exactly where we are in Thailand now... only we need to modify Rothschild’s maxim just a bit. It happened to be a bloodless coup... but we have bras in the streets.

Good investing,

Steve