Possible fallout from tommorrow's PTT decision?
By Jon Fernquest |
What is the potential economic impact of delisting PTT from the Stock Exchange of Thailand (SET)?
M.L. Nattakorn Devakula, well-known news analyst and son of former central bank governor and Finance Minister M.R. Pridiyathorn, takes a closer look at possible economic implications of a delisting decision in his weekly Bangkok Post column.
If there is a delisting decision tommorrow, the near-term outlook for Thai financial markets doesn't look good.
Granted, the PTT privatisation was not perfect:
"Make no mistake about it: the privatisation and enlistment of PTT was not without its flaws.The separation of the gas pipelines has already been completed as promised. They are now under the control of a central energy regulatory board. The divvying up of the initially offered publicly traded shares may have gone to those who ingratiated themselves to some cabinet members at the time of the allotment.
Mysterious Singaporean-based nominees do currently hold PTT shares."
It has been seven years since the privatisation.
With every passing year history becomes more difficult to reverse since PTT is a very important part of Thailand's economy and financial markets:
"PTT Public Limited Company (Plc) is Thailand's flagship conglomerate. It has replaced Siam Cement Plc as the most profitable business organisation in the country. Its market capitalisation, if calculated from last week's closing market price of 356 baht and taking into consideration that there are 2,816,975,625 outstanding shares, reaches over 1 trillion baht. The market would effectively lack a monumental cornerstone without PTT Plc.""Not counting other companies under its umbrella, the company normally accounts for 1/20 of the average total SET daily turnover. The award-winning company's earnings improved during 2003 to 2006, from 39.4 to 95.2 billion baht. It is arguably the most successful business, entity-size and profit-wise - ever since the formation of this kingdom."
The negative fallout from the delisting could be significant:
No investor would buy another share of companies formerly run by the state, and no sensible government would push through monumental policy changes of a similar kind.Gridlock in the domestic financial markets and in the formation of policies for capital markets and economic development would instantly result.
The expropriation-equivalent act may prompt downgrades of the Thai economy and several key SET-traded companies. Prices of all former state-owned enterprises will drastically plunge on the added expropriation risks.
This would range from massive price falls for all companies under the PTT umbrella, i.e. Thai Oil Plc, PTT Chemical Plc, Aromatics Thailand Plc, PTT Exploration and Production Plc, and IRPC Plc.
It would drag down other former enterprises of the state too, i.e. Airports of Thailand Plc, Thai Airways International Plc, etc.
The market would be in a state of shock, a shock that will embarrass the country once again the world over.
Is the goal of conformation to a set of principles, assuming that these principles have been violated, worth destroying the reputation of an economy?
A delisting decision could send several negative signals to international financial markets that might impede the development of the Thai economy:
"The following signals would be heard loud and clear in the global investment community when it comes to Thailand, if consumer groups represented by the likes of Rossana Tositrakul and Sari Ongsomwang have things their way.- We have a strategic policy ambiguity when it comes to privatisation of state-owned enterprises. A government administration may decide to pursue something only to have the judiciary branch reverse the process down the road when everything has already been completed.
- We don't give a care in the world to investors who legally possess equity holdings that they had paid money for and that as an economy we have no respect for the protection of private property rights.
- We discourage any and all future privatisations of inefficiently performing state-owned enterprises on the grounds that few government administrations would have the guts to push through the process, knowing fully well that consumer groups' petitions could derail the final success ex-post."
Let's hope what M.L. Nattakorn predicts does not come to pass.
(Source: Bangkok Post, Editorial, 13-12-07, temp-link)
Vocabulary:
fallout - the negative things that happen after an event occurs
a delisting - removing a stock from public trading on the stock exchange
implications - things that might happen after somethign else happens
near-term - in the near future
the outlook - what people think will happen in the future
granted, x - admitting that x is true even though you really don't want to admit that x is true, conceding point x
privatisation - making a public company (owned and controlled by teh government) into a private company, owned by private individuals
was not without its flaws - it had problems, it was not perfect
regulatory board - the group or committee who oversees an industry and issues regulations and rules to control it
divvying up of - breaking it into parts and giving to different people
ingratiated themselves to - make people like them so that they can receive favours
allotment - when the parts of something are handed out and divided up among different people
nominees - people who own a business in name only, actually they actually own it for someone else
a flagship - the most important company, among all the companies owned
conglomerate - a large company that owns other companies
market capitalisation -
monumental cornerstone - like a big stone in the corner of a building holding the whole building up, keeping it from falling down
under its umbrella - controlled by it, part of it, owned by it
negative fallout - bad things that happen as the result of an event
gridlock - like a traffic jam, when work cannot move through the system and decisions and actions are not taken
expropriation - taking away from
equivalent - same thing as, equal to, =
drastically plunge - fall suddenly by a large amount
send signals - doing things that implies indirectly what you will do in the future (if you delist once, you're likely to do it twice, for example)
ambiguity - meaning not clear
private property rights - a person or company's right to own and use property (real estate or things) and not have other people or the government take it away from them
have the guts to push through - have enough courage (brave enough) to force something to happen
petitions - a list signatures used to presuade teh government to do something
derail - ruin plans that have already been made
ex-post - after the fact, afterwards (See Wikipedia latin phrase list)
come to pass - actually happen in the future
