1 + 1 = 2 : because of the recession, profits of companies listed on SET plunge by 48 %

Another Green Shoots Story. Another 1+1 = 2 equation that any child at school would have been able to understand… All but the stupid politicians, bureaucrats and Lalaland inhabitants of course.

Listed companies posted first-quarter net profits totalling 80.27 billion baht, a 48% decline from the same period last year, according to the Stock Exchange of Thailand.First-quarter sales totalled 1.35 trillion baht, a decline of 24% from the same period last year.

Of the 468 companies reporting results, 325 posted a net profit and 143 a loss, said SET president Patareeya Benjapolchai. (Bangkok Post)

Recession = sales down = profits down = corporate taxes down = investments down = unemployment up = consumption down etc.

It’s a text book.

In february, Korn, the alleged Finances Minister, was thinking that corporate taxes would save the day… and replenish quickly the state’s coffers. Wishfull thinking, plain stupidity or plain lie. Pick up your choice…

I can hear already some people saying : “wait a minute, and what about the comparison with Q4 2008 ? It looks much better !” Okay, let’s go.

But profits were up sharply from the fourth quarter of 2008, when listed companies posted a net loss of 83.6 billion baht, said Ms Patareeya.

A Green Shoot ! A Green Shoot ! At last, we have found one ! Sorry folks but it’s not.

The dramatic drop of profits on Q4 was mainly caused by inventories and the drop of crude oil prices

The Q4/2008 net loss was THB83.40 billion, vs. Q4/2007 net profits of THB104.82 billion. The rapid drop in crude oil prices led to inventory losses in the Resources Industry Group. This sector accounted for 77% of net losses of all listed companies. Exchange rate losses also affected operating performance in Q4/2008. (Asean Affairs)

77 % ! So my point : Q4 was abnormal

Q1 2009 is the first normal quarter with normal recession results… AKA sales and profits are going down.

Sales for the whole 2008 year were still up 22 % ! On Q1 2009, sales are falling by 24 %…

So it’s only the beginning.

When profits are falling with sales, companies cut costs and reduce, cancel or postpone investments projects… that lead to further economic downturn.There is no point, currently, to increase capacities… Demand is still depressed.

It’s a negative loop. But a healthy one : this process destroys over capacities and bursts bubbles and puts pressure on prices… It’s healthy. It’s a normal step within the economic cycle.

Painful but healthy. But all the clowns, the politicians and the bureaucrats in the world are currently doing everything they can to… postpone, cancel, reduce this process !They want the dream of increasing assets prices, bubbles and growth to continue for ever and ever.

It’s childish.

And with their actions, the pain will be stronger. And will last longer.

10 Responses to “1 + 1 = 2 : because of the recession, profits of companies listed on SET plunge by 48 %”


  1. 1 antipadshist 24 May 2009 at 6:15 pm

    Is the govt’s massive loan package wise?
    http://www.nationmultimedia.com/2009/05/23/opinion/opinion_30103448.php

    “In theory, a one-time stimulus budget should help create jobs. But the Bt160-billion stimulus package introduced when Abhisit assumed office was earmarked for consumption.

    According to MR Pridiyathorn Devakula, former finance minister and Bank of Thailand governor, only Bt7 billion of that amount would have been spent on creating jobs, when actually the government should have focused more on generating employment

    If the depression is prolonged, Thailand needs to have the capacity to survive. The most important thing is that it should keep its fiscal health at the best position. Thailand’s fiscal position is quite sound with low public debt, though we will still see a revenue shortfall of almost Bt300 billion in the fiscal 2010 budget. If that is to be the case, then the government should try to live within its means and not overburden itself with the loan, which amounts to spending money for the future…

    Amid this gloomy global outlook, the Abhisit government should reconsider its Bt800-billion borrowing package carefully. We can’t borrow on this massive scale for another two or three years, especially if the depression drags on longer than expected. Next, the government should ensure that it spends the borrowing package wisely. It should closely study its options, and see which will produce quick results and be the most-effective way to spend the taxpayers’ money. Besides, the government should make the right alliances that will work in tune with each project.

    Of the Bt400-billion package proposed in the executive decree, about Bt50 billion to Bt60 billion will go to rail projects that will serve the interests of a coalition partner. We all know that politicians love mega-projects because they all try to squeeze at least 30 per cent of cash from every project. It is this Cabinet’s responsibility to not let this happen.

    In addition, the Abhisit Cabinet should take into account the 40 million Thais who are farmers or labourers and ask if any of the cash from the borrowing package will benefit them instead of the politicians.”

    wow! it is a surprise to read this on Nation ! 🙂

  2. 2 antipadshist 24 May 2009 at 10:18 pm

    remember earlier there was article on Reurters quoting Korn saying that in Q1 Thai GDP dropped 6% ?

    well, here is an Update from his buddy Abhisit :

    Thai PM says Q1 GDP contraction may be 5-8 pct
    http://www.reuters.com/article/rbssInvestmentServices/idUSBKK46618020090524

    It may be worse than the previous fourth quarter. For this time round, it may be a contraction of five, six, seven or eight (percent). These are all possible,” Abhisit during his weekly television address.

    possible? why not say it plainly – 8%

  3. 3 loic 24 May 2009 at 10:50 pm

    but the SET is up more than 20% this year!!,so even with the crisis it was the good choice to invest in.

  4. 4 Lothar 25 May 2009 at 2:54 am

    The stock exchanges all over the world are running like crazy right now. So why should the SET be different.

    Problem is that there is absolutely no number to back this up. It’s again a financial dream. The guys have to invest somewhere all the money they get from Helicopter Ben.

    I’m sure that a lot of this rally is coming from Banks buying stock options on credits – does this ring a bell? It should.

  5. 5 ThaiCrisis 25 May 2009 at 4:19 am

    The issue is not the SET… but the companies listed on the SET.
    😉
    And by extensions, all the businesses, even the non-listed…

    To hear a minister, or even the BOT, saying that there are some good indicators like for instance the rebound of the SET, as a “green-shoot” is surreal.

    Nobody gives a rat shit about the SET. The SET is not the real economy. How many people, on the 60 + millions thais, care about the SET ?

    They should focus instead on the ground level : companies, their results, their perspectives, their markets, their ways of financing, their decisions of investments, etc.

    Again, this little fact shows the huge gap between dream and real economy… A rallye for suckers on a small stock market is absolutely not a proof of a recovery of the economy. Anytime soon.

  6. 6 ray 25 May 2009 at 10:42 am

    lothar

    u are correct. the money that has been printed ahs to go somewhere. as the prices on stock markets go up the earnings of those companies go down( as thaicrisis article a few days back). this makes sense. the shares are getting expensive and earnings are lowering because of the economic conditions. this autumn/winter will be interesting. there could be another crash coming and this time no ralying back. as finance sectors shares go up in the usa the insolvent banks are selling new shares and higher paices( for eg citi from $1 to $4) and suckers are buying because the think things are getting back to normal again.
    2009 will be very brutal for thailand. thai gdp is 70% exports and exports are gown 25% to 30% on average. i am pretty sure the gdp will shrink by alot more than 5% or 6%.

    exports down 30%
    tourism down 30%( no proof just feeling)
    people spending less money.

    govt borrowing money.. if the spend it then we are screwed.
    if they invest in logistics we should be fine. but i am going with screwed!

    in contrast indonesia gdp for 1st quarter grew by abt 4%.. wonder what they are doing right

  7. 7 fall 25 May 2009 at 10:49 am

    The issue is not the SET… but the companies listed on the SET.

    To expand on this, Thailand SET is not a fundamental market, where stock price goes with par value and ROI. It’s a technical market, where stock price goes with trend and speculation. So SET is not a good indicator of economic situation.
    However, companies listed in SET are big and MUST submit their financial statement. Their financial statement are use to assess economic situation.

  8. 8 Lothar 25 May 2009 at 6:32 pm

    2009 will be very brutal for thailand.

    But we now already half the way through 2009 and here in poor old Mae Hong Son i can’t see it. Restaurants are full as ever. My girlfriends shop (Hair Cut/Beauty Salon) is running extremely well. Everybody seem to spend like usual.

    Maybe people are just living of there savings? I don’t know.
    Just the lack of Farangs tell me that something is different.

    Or maybe i’m living in a parallel universe. Not only here in THailand, even in Germany i see the same signs. All my friends are already pissed off by my negative views – they see the numbers but they are not afraid – crisis is over, economy will go up, business will be booming again.

    It’s strange for me, really.
    If i hadn’t this and other Blogs/Forums i think i would became crazy.

  9. 9 ThaiCrisis 25 May 2009 at 7:19 pm

    Lothar, you’re not hallucinating : the situation is indeed weird.

    Take one very simple example :

    -you are a civil servant, working in France. Your position is secured. You can’t lose your job, nobody can fire you. Your income doesn’t change (no variable part). You feel perfectly sabai, you don’t feel the crisis, your purchasing power doesn’t move or even increase (because some prices are falling, real estate, cars etc.).
    The crisis ? You’re laughing. And believe me more than 5 millions people in France are laughing very hard right now… So hard that employees of public companies (like SNCF, railroads) organize… a strike for tomorrow ! Because they can, they can afford this luxuary, because they’re laughing at you (all the people taking risks in the private sector), because they despise you… Because they just don’t care : you can die, the mouth open, they don’t care.

    -you have a job in a private company working as a subcontractor for the car industry (in France, Germany or USA). Now, your view is totally different. first, the boss reduced your number of hours of work. Your income droped. Then, they started to fire some employees. You feel the heat. Then they are talkking about closing the factory… You’re afraid. For you the crisis is more than real : it has a direct impact on your life. You are 45 years old…. you won’t find another job, no way…

    Voila.

    As for Thailand, like you found people in Mae Hong Son who do not feel the crisis, you could find (easy) other people working in tourism in other parts of Thailand who would tell you that they suffer a lot.

    And for a more macro point of view : you speak about consumption. Consumption has dropped. The GDP report for Q1 shows it :
    Household consumption reduced by 2.6%, the first reduction in 10 years since 1Q99 owing to a fall of real sector in line with world economic slowdown.

    It’s a statistics. 2,6 % doesn’t seem a lot. But for specific market the real drop is huge : for instance – 30 % for cars.

  10. 10 CNXJeffrey 26 May 2009 at 8:06 am

    What we are seeing in the north of the country, both Lothar and myself, is probably the effects of a Ya Ba economy.
    The money flowing through the region is coming from sales of this illicit substance, great to stimulate local commerce, but along with the concurrent political chaos and lawlessness, it is unsustainable. In fact it may well become very, very dangerous.


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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.


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