Ep71: Verawat Kirinruttana – Beware of Vietnam, Liquidity Risk is Very High  

Verawat Kirinruttana holds an MBA from MIT’s Sloan School of Management and a bachelor’s degree in engineering from Chulalongkorn University with first-class honors and gold medal. He is vice president of investment advisory services at Siam Commercial Bank (SCB), and in this role, he provides asset allocation strategies and investment recommendations for private banking and affluent customers. Prior to that, he was vice president of corporate strategy at SCB, where he shaped the direction of the bank by developing strategic and tactical business plans and drove many transformation initiatives, such as national epayment. Before SCB, he was a management consultant for Korn Ferry Hay Group (now Korn Ferryat its Southeast Asia office, where he spent more than four years in human capital management, organizational development, and performance management. 

 

“With a lot of analysis and valuation you might believe you have found a diamond, but management and the corporate governance of that company might not be good.”

Verawat Kirinruttana

Lessons learned 

  1. When investing in foreign markets, expect the unexpected. Things can happen that are beyond the mind’s ability to comprehend, events way beyond your control. This can be the case of a management decision and can happen even after a lot of analysis and careful valuation, which you believe puts things within your power. Management or corporate governance of a target company may not be good and when you try to figure out what happened, the unclear nature of the market and the how you access the information can be very limited. This solution to this is to cut losses as soon as possible, but in frontier markets, liquidity can be a big problem and you may not be able to sell your position.  

 

Andrew’s takeaways 

  1. Be careful about frontier markets. They can be very attractive, but the actual performance of an investment target may not turn out as good as is shown by the underlying economy. If you can access that market, it does not mean that it will also give you access to the same returns as those that exist in the market. Also, the flow of information can be scarce or non-existent so that you don’t really know what is going to happen, even if you know local talent.   
  2. Liquidity issues are key. company that is the target of investment should have about US$ 1 million dollars a day in average daily turnover, or else it is too dangerous to put money into.  
  3. Using a stop-loss methodology for quantitative strategy doesn’t always work. Even having a stop loss in place, which is a good thing, it can be hard to execute it where there is thin volume.  
  4. Looking carefully at corporate governance is crucial. Ask yourself, does the management show any real concern about minority shareholders.  

 

You can also check out Andrew’s books  

Connect with Verawat Kirinruttana 

Connect with Andrew Stotz 

Further reading mentioned  

About the author, Andrew

Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company that provides institutional and high net worth investors with ready-to-invest stock portfolios that aim to beat the benchmark through superior stock selection.

Leave a Comment