The royalist elite at work

1 09 2014

PPT collectively controls capital sufficient to barely keep a northeastern farmer’s tractor running. Our knowledge of economics and investing is limited. However, this Bloomberg report seemed to tell a very interesting story. It begins:

Thailand’s millionaires are helping their military leaders revive lending as legal and political certainty spurs the super-rich to buy riskier bank debt.

Part of the reason for the Sino-Thai tycoons and other royalist rich doing this because their support of the anti-democrats not only brought down yet another elected government they hated, but also ran the economy into the ground and frightened the foreign investors they have long relied on.

The report explains that:

Thai banks have offered $1.6 billion in subordinated notes that cushion their balance sheets since the government made it clear three weeks after the May coup that high-net-worth investor purchases are allowed, data compiled by Bloomberg show….

Wealthy investors are taking advantage of higher returns on riskier debt, with TMB’s securities [i.e. the military’s old bank] offering 5.5 percent compared with an average 4.3 percent coupon on all Thai financial bonds issued this year.

The Army is still a major shareholder in the bank, although its shareholding has been greatly diminished since the 1997 economic crisis. It is controlled by the broader state and ING Bank. In its 2014 annual report, The Dictator, General Prayuth Chan-ocha was a director of TMB.

How keen are the rich to support the military dictatorship (and what they see as their best interests)?

“Banks have to rely on the high-net-worth individual investors” for subordinated sales as institutions must class the notes as junk holdings, Kowit Adireksombat, a senior associate at Baker & McKenzie LLP in Bangkok, said yesterday. “All of the bonds sold so far comply with the requirements to allow them to be sold to” such individuals, he said.

It was only after the coup that this process was permitted:

Thai banks didn’t conduct any large subordinated bond sales to the public from the start of 2013 until June this year, as lenders grappled with a lack of clarity on regulations. The Securities and Exchange Commission issued notices on June 16 confirming high-net-worth individuals and institutional investors were allowed to buy such bonds….

Three days after the clarification, Thanachart Bank Pcl sold 13 billion baht of 10-year subordinated bonds carrying a 6 percent coupon to local investors….

The SEC became “flexible on sales to high-net-worth individuals” of such bonds after the change of government, Ariya Tiranaprakij, executive vice-president at the Thai Bond Market Association, said in an interview from Bangkok Aug. 26.

This is the elite coming together to support the dictatorship it feels it needs to maintain its political and economic control.


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