Profting from turmoil in Thailand

He has ruled through 12 US Presidents, a string of military dictatorships, several coups, and a historic transition to democracy. At 81 years of age, King Bhumibol of Thailand has really seen it all.

Despite his essentially ceremonial position, King Bhumibol is revered, almost worshiped, by his people– not like other constitutional monarchies where the royal family is merely a rubber stamp soap opera.

He has used his extreme influence on several occasions during his reign to intervene in many of Thailand’s crises, which seem to occur every other Tuesday when there’s a coup or ingredients for violent protest.

In 2003, for example, after an idiotic Thai actress sparked an international incident with neighboring Cambodia, angry Cambodians burned the Thai embassy in Phnom Penh to the ground. Naturally, an enraged Thai mob gathered in the streets to storm the Cambodian embassy in Bangkok… but Bhumibol intervened, requesting calm and that the people disperse. They obeyed like dutiful subjects.

I don’t really understand what makes one human being subjugate himself to another human being– to bow and curtsy and protect as inviolable even mere photographs of a monarch… yes, in Thailand, not only are insults to the King punishable by imprisonment, insults to his image are as well– by up to 30 years.

The ‘king culture’ is so deeply inculcated in Thai society that his death would have an enormous impact on the country and its economy. Two weeks ago, when rumors began circulating that the King was on his deathbed, Thai equities were rocked, falling 10.7% in just two days. Bond yields rose. Thailand’s currency, the baht, fell against major currencies.

The rumors turned out to be false, but the market’s reactions gave an indication of what will happen when the King’s reign finally comes to an end: investors view a Thailand without Bhumibol with the same level of risk as a Thailand in crisis without an elected government (1992, 2005-2006, 2008).

Each of these crises, whether a coup or the eventual demise of the King, is buying opportunity. There is no change to the long-term value of Thai equities or local assets due to political turmoil– as Thailand’s recent history shows, the country always rises from the chaos relatively quickly, and the markets recover accordingly.

In the case of this month’s health rumors, Thai markets recovered in about three days. The King made a public appearance to assure everyone that he is very much alive, and the Thai SET Index settled pretty close to its pre-rumor level.

When the King actually does pass away, it will be difficult to tell how long Thailand will be in ‘chaos’– perhaps hours, days, or a few weeks at the most, similar to how the entire Catholic world waits with baited breath for the College of the Cardinals to burn white smoke after the passing of a Pope.

Regardless of the duration, though, it will undoubtedly be a buying opportunity; once Thailand gets back to the business of doing business, markets will once again recover and investors can feel very smart for taking the risk.

In all fairness, the timing on these things is impossible to predict. Despite his advanced age and long list of existing medical conditions, King Bhumibol could end up being like Pope John Paul II was– very old, very decrepit, but seemingly able to last forever… and we’ll all be talking about him 10-years from now in the same way.

Statistically speaking, though, this is highly unlikely… and that’s why I’m headed to Bangkok next week where I will put boots on the ground to uncover some of the country’s best investments.

If you want to take a position in Thailand, you can buy the currency through an online FOREX platform like GFT Forex (www.gftforex.com), or you can purchase equities in the Thai market through Hong Kong based BOOM Securities.

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