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

Verawat Kirinruttana holds an MBA from MIT’s Sloan School of Management. He also holds a bachelor’s degree in engineering from Chulalongkorn University with first-class honors and gold medal. Verawat is currently a vice president of investment advisory services at Siam Commercial Bank (SCB). In his role, he provides asset allocation strategies and investment recommendations for private banking and affluent customers. Prior to this, he was a vice president of corporate strategy at SCB where he shaped the direction for the bank by developing strategic and tactical business plans and drove many transformation initiatives, such as the national e-payment. Before joining SCB, he was a management consultant at the Korn Ferry Hay Group (now Korn Ferry) at 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 would believe that found a diamond but management, the corporate governance of that company might not be good at that at the level on the status” – Verawat Kirinruttana Lessons learned  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 even try to figure out what happened, the unclear nature of the market and the how you access the information can be very really limited.   Solution: Cut losses as soon as possible but in frontier markets, liquidity can be the problem and may not be able to sell your position.    Andrew’s takeaways  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 non-existent or scarce so that you don’t really know what is going to happen, even of you know people on the ground.    Liquidity issues are key. A 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.   Using a stop loss methodology for quantitative strategy doesn’t always work. Even having a stop loss in place makes it hard to execute where there is thin volume.   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   How to Start Building Your Wealth Investing in the Stock Market   My Worst Investment Ever   9 Valuation Mistakes and How to Avoid Them    Connect with Verawat Kirinruttana  LinkedIn  Verawat Kirinruttana Connect with Andrew Stotz  astotz.com  LinkedIn  Facebook  Instagram  Twitter  YouTube  My Worst Investment Ever Podcast Further reading mentioned     Alice Schroeder (2008) The Snow Ball  Michael E. Porter (1979) How Competitive Forces Shape Strategy