Wren,
There seem to be a lot of foreword thinking managers within the CP Group. They were early adopters of a Thai web directory link and have been featured recently in several articles about "Business to Business" usage. The new US trade treaty with China granting them "most favored nation" status should have a positive impact on China and thus I would hope, the China investments by the Group. So, why is the stock price going down? Is it something specific to CPPKY or just the overall lack of enthusiasm for investing in Asia?
I would feel a lot better about commenting on CPPKY's prospects if I could figure out exactly what these ADRs represent. Initially, I was under the impression that CPPKY was primarily the "China/Hong Kong" portion of the conglomerate, CP Pokphand. Several months ago, I got a hard copy of the financial statements for 1998 from the Bank of NY. I went directly to the footnotes trying to figure out the significance of the company's "investments," "subsidiaries, " and "associated" companies. I ended up with more questions than answers.
Does CPPKY benefit indirectly from the "Telecom Asia" investment by virtue of its holding in CPF (Charoen Pokphand Feedmill Public Company Limited)?
Does CPPKY get a "slice" of the 7-Eleven Investment Pie by virtue of its holding in CPF?
How much does the poultry market really impact the CPPKY portion of the conglomerate? I don't remember exactly when I heard the news report that Tyson Chicken's earnings for the quarter were down due to an oversupply of chickens. I remember wondering what, if any, impact that might be having on CPPKY. I even wondered if the CP Group might actually be part of the 'cause' of the oversupply.
What about those insurance companies? Will CPPKY benefit from that? It seems likely since the CP Pokphand Finance Co. Ltd. is 100% owned (in 1998 anyway) by CPPKY.
Footnote 17 mentioned the November 17, 1998, restructuring of CPF which reduced CPPKY's holding from 25% to 19.2%. This means that CPF is now classified as a long term investment. However, what exactly is this company? The "main" Thai Parent? The Thai Agribusiness? How does Charoen Pokphand Feedmill Public Company Limited relate to Charoen Pokphand Foods PLC which recently issued new shares (see article excerpt below):
<<COMPANY REPORTS: The Nation (Thailand); 07-06-2000
CHAROEN POKPHAND FOODS PLC informed the Stock Exchange of Thailand
(SET) that it has sold Bt1.9 billion capital increase shares to its shareholders.
A further 1.6 million shares will be offered later for private placement.>>
Even if this sale had a dilutive effect on CPPKY's holding in CPF, it happened almost a month ago so one would think that any "impact" would have been factored into the stock price by now. There have been several favorable articles recently on the CP Group activities so I don't think the stock price is down because of anything directly related to the company.
Perhaps it is hard to be optimistic about a recovery in Asia when the Federal Reserve keeps raising interest rates in the US? I have some IRA shares in the Asian mutual fund, GFASX. They are down 15% since April so I haven't been too surprised that CPPKY was heading in a similar direction. Many of these Asian companies have US debt. I expect that the major banks & the government also have US debt. If the cost of this borrowing increases due to the rise in US interest rates, wouldn't that weaken their currency? If the US economy cools, will that throw the 'recovering' Asian economy into a recession? Is it really the Asian government's fault or is it the US Federal Reserve policies which are to blame? What do you think?
Viv |
