Martin Hutchinson

Finding a Sea of Calm in the Rising Market Mania – Martin Hutchinson – Money Morning

The markets have begun to swoon and one of the canaries was two Thai tycoons.

This pair of Thai tycoons, neither of them well-known internationally, has made a total of $27 billion in acquisitions in the past year, more than all Thai companies spent abroad in the preceding three years.

That’s the kind of statistic common in today’s global deal mania, fueled by the glut of funny money. It raises a dreaded question: what happens when the music stops, and when global leverage stops being so available?

We’re about to see….

The Thai billionaires – 74-year-old Dhanin Chearavanont and Charoen Sirivadhanabhakdi, 69 – were both well-established in the Thai business community, but nevertheless their combined $27 billion of acquisitions represented a risky gamble.

One bought a wholesaler on 50 times earnings, while the other bought the flagship Singapore brewer Fraser and Neave for $11 billion, quadrupling his holding company’s debt-to-earnings ratio.

The Trouble is Thailand has been here before – and well within living memory. It was an orgy of leveraged and overpriced acquisitions that led to the Thai banking and monetary crisis of 1997 that sparked an Asia-wide crisis and led to the Thai stock market losing nine tenths of its value.

In today’s markets, the aggressive Thai acquirers seem likely to be the first victims of any credit squeeze that might occur.

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