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Paul Gambles
Co-founder of MBMG Group


Update November 28, 2015

Southeast Asia: Is it as good an area to retire as we think?

If you dream of sun, sand and sea but you’re worried about spending your entire pension inside a couple of years, Southeast Asia is one of the best places to retire… isn’t it?
World Rankings
Where would you like to live when you retire? I’ve recently come across a couple of interesting articles which cover this topic. The first, by International Living, went as far as to make a ranking for retirement destinations around the world.1 The second, from Investopedia,made a comparison between Thailand and Vietnam.2
What I noticed about the International Living piece was that it gave percentage marks in eight different categories. Ecuador (1st), Mexico (3rd) and Colombia (8th) all ranked above tenth-placed Thailand. As it is a US-based publication, I imagine that proximity and awareness of these Latin American countries plays a part in the fitting in score, and agreements between these states and the US factor into the benefits and discounts total.
Crime and safety rates
Curiously, there was no particular weighting, so points for infrastructure and the above-mentioned fitting in carried equal importance to those of healthcare. Also, safety and crime were not included – factors which I personally value very highly.
That brought me to look at the comparison website Numbeo,3 which analyses surveys and costings for cities and countries throughout the world. According to this website, the perception of safety in Thailand is much higher than Ecuador, Mexico and Colombia and the crime rate is much lower – something which I’d suspected. In fact, in these two variables Thailand outscores Australia, the UK and the US; as well as neighbouring Cambodia, Malaysia and Vietnam.
Healthcare and cost of living
The Land of Smiles also scores exceptionally well on healthcare. In fact it ranks fifth in the world, according to Numbeo’s Healthcare Index,4 which factors in (among others) the overall quality of the healthcare system, healthcare professionals, equipment, staff, doctors, and cost. With a score of 80.73, Thailand easily outscores Australia (72.72), the UK (73.68) and the US (67.13).
Retirement also means that you may find yourself with less income, yet more time to spend it. Thus cost of living can be a crucial part of your decision where to live in retirement. It’s no secret that Thailand offers a relatively low cost - just going for a meal out exposes that. In fact government statistics suggest that, at the last count in 2012, there were around 96,000 migrants aged 50 or above living in Thailand. Around a third of those were aged 60 or more.5 Those statistics don’t define what a migrant is, so they may not even factor in those people who live six months a year or less in Thailand or those with other specific personal circumstances.
If we compare the largest cities in several countries, we can see how true the assumption about Thailand is. Numbeo’s Cost of Living Index (including rent) measures local consumer price indices for products and services including groceries, restaurants, transportation and utilities. Bangkok’s score is almost a third of that of New York and just short of half that of Sydney (see chart).


Thailand and Vietnam
The Investopedia article caught my eye as it talks specifically about Vietnam as an alternative to Thailand. Both Hanoi and Ho Chi Minh City are pleasant cities to be in, with their excellent cuisine, street cafés, wide pavements and beautiful architectural sights.
Since Vietnam began economic reforms just under thirty years ago, it has made huge strides in terms of development. GDP per capita is expected to be eight times greater in 2015 than it was in 1986. Whilst Numbeo doesn’t give Vietnam a healthcare index rating, International Living puts it at 76 points, compared with Thailand’s 89 and Malaysia’s score of 94. In terms of cost of living including rent, Numbeo charts Ho Chi Minh City as still cheaper than Bangkok; yet in terms of crime and safety, it fares better than Malaysia but worse than the US, for example.
Heart and head
All of these costings and ratings act merely as a guide. In the end it boils down to personal circumstances and preferences. Health insurance premiums don’t just take into account where you live but also your age and health. Your nationality may make one country easier to get a visa to live in, as well as go in and out of, than another.
In Thailand, for example, one available visa is the Retirement (Non-immigrant “O”) Visa, designed for foreigners over 50 who have held a minimum of THB 800,000 in their bank account for at least the past 3 months; or transfer a retirement income of at least THB 65,000 into Thailand every month. This visa is renewable annually and to obtain it you’ll have to pay an initial fee of THB 1,900 and, once received, apply for a re-entry permit. For more information on this, ask an independent expert.
All that aside, some people prefer the atmosphere of one place rather than another for whatever reason. To avoid future headaches it is, however, crucial that when deciding where’s best for you to retire, the decision is made with the head as well as the heart – so it’s best discussing the facts with an expert before deciding.
Nevertheless, it pays tribute to the economic stability of Southeast Asia that the region has become so popular with retirees.

5 Statistica.pdf

Please Note: While every effort has been made to ensure that the information contained herein is correct, MBMG Group cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Group. Views and opinions expressed herein may change with market conditions and should not be used in isolation.

MBMG Group is an advisory firm that assists expatriates and locals within the South East Asia Region with services ranging from Investment Advisory, Personal Advisory, Tax Advisory, Corporate Advisory, Insurance Services, Accounting & Auditing Services, Legal Services, Estate Planning and Property Solutions. For more information: Tel: +66 2665 2536; e-mail: [email protected]; Linkedin: MBMG Group; Twitter: @MBMGIntl; Facebook: /MBMGGroup

Update November 22, 2015

Act quickly to get maximum benefit from RMFs of LTFs

If you’re earning a Thai Baht salary, Retirement Mutual Funds (RMFs) and Long-Term Equity Funds (LTFs) can represent an opportunity for sizeable tax savings – but you may have to act quickly.
What are they?
The idea behind a mutual fund is that numerous people contributing to the pot is that it is a lot easier to invest than buying and selling individual stocks and bonds on your own.
A retirement mutual fund (RMF) is a pool of money put together by several investors with the idea of providing a long-term savings plan for when they retire. Investors are obliged to stay in the fund until they are 55 years old, as they are designed to be a retirement planning instrument.
Long-term equity funds (LTFs) are similar. The difference is that they offer more flexibility, as they have no age restriction. That said, they do have a holding period of five calendar years before any redemption can be made. The calendar part is crucial. It means you can actually be in the fund for as little as 3 years and 2 days, as the duration must occupy five different consecutive calendar years. However, this will change: as of 1st January 2016 the minimum holding period before redemption will become seven calendar years1 - thus a minimum of five years and 2 days.
To encourage investment into Thai markets, the Thai government sought to offer tax incentives to invest into Retirement Mutual Funds and Long-Term Equity Funds. In a nutshell, the amount that you invest in RMFs and LTFs can be deducted from your annual taxable income, reducing your income tax.

Euronext last 10 years

Chart 2 - Sources: & Euronext

Dow Jones Industrial Average index last 10 years

Chart 3 - Sources:

LTFs and RMFs invest into Thai equities markets, which have performed equally as well as the world’s major stock markets in recent times (see charts 2 & 3). The main stock market, the SET, has consistently been a reliable performer. It rebounded strongly from the impact of the Global Financial Crisis, the terrible flooding in 2011 and the political crisis in late 2013 and early 2014 (see chart 1).

Chart 1

Tax benefits
However, the return on investment is not only the performance of the investment itself but also on the tax savings for which the fund qualifies.
To qualify for tax benefits through and RMF, a minimum yearly investment is required of 3% of your annual income or THB 5,000 (whichever is higher).
LTFs have a maximum yearly investment ceiling of 15% of your annual income, not exceeding THB 500,000. The same limits apply for an RMF, provident fund and state pension collectively. The example in chart 4 is illustrated on an annual net income of THB 5 million per annum. If, from that income, THB 1 million per annum is invested in an LTF and RMF, the tax saving of THB 350,000.
Thus, by investing THB 1 million split between an LTF and an RMF, you can reduce your assessable income from THB 5m to THB 4m. This is a saving of 35% on the THB 1 million of income at the top of the tax spectrum. Furthermore, any gains that the LTF/RMF make are not subject to Capital Gains Tax as long as no terms and or conditions are broken.
Time running out
Whilst these instruments could be an interesting opportunity to both invest in your future and receive tax benefits, their future is in the balance.

Chart 4 - Source: MBMG Group

Although tax-reform plans (announced in mid-2014 and due to be implemented in 2016) initially looked like putting an end to tax breaks for LTFs,2 the Ministry of Finance has just announced a three-year extension to the scheme. A government official stated that the Ministry “acknowledged the severely negative effect on the stock market that might occur if it let the privileges expire in 2016, as a huge portion of investors are invested in LTFs to tap tax benefits.”3
So if you want to invest an LTF with a shorter lock-in period, you’ll have to invest before the current system expires at the end of the year.
It’s important to note that, like all other investment products, RMFs and LTFs do not suit everyone. After all, when we invest we all have different objectives, priorities and levels of risk we’re prepared to take. There are many deductible allowances in addition to RMFs and LTFs, so it’s worth exploring the possibilities. That’s why it’s important to ask an independent regulated advisor before making a decision.


Update November 14, 2015

Can AEC deliver for investors?

Myanmar: Total Merchandise Trade

Source: Asian Development Bank

The Asean Economic Community – a sort of common market for Southeast Asia – is set to become some kind of reality at the end of the year and it’s already possible – in theory at least – to invest across borders. However, there’s no proof as yet that all this is built to last.
A few weeks back, Myanmar’s ministry of commerce reported that trade with its four neighbouring countries had reached almost USD 2.5 billion. To put that into context, it’s similar to the value in services the US exports to the Philippines.1
That may not be anywhere near the same scale as China-US trade but, considering where Myanmar has come from, it’s quite a step. Overall trade has increased massively since 1998 (see chart) and in that time so has GDP, which has gone up by a huge 348% (in Burmese Kyat terms or 747% in US Dollar terms).2
That bodes well for the future of the AEC, which is due to open for business at the end of this year. Myanmar has been consistently in the bottom two Asean member countries since Cambodia joined the group in 1999, in terms of GDP per capita (in current USD as well as based on PPP in International Dollars).3 As one of the AEC’s stated goals is to create a region of ‘equitable economic development’4 the fact that one of the region’s least developed economies is quickly catching up with the likes of Vietnam, the Philippines and Indonesia, is welcome news.
The AEC’s administrators have certainly followed the example of the European Union’s Single Market, in establishing fundamental freedoms on which the new common market will be based,5 which include: the free flow of goods, services and investment, as well as the freer flow of capital.
What does this mean for investors?
Although these objectives may sound purely theoretical, they may in fact become an everyday reality for Southeast Asian investors.
In August of last year, Asean announced that the offering of cross-border collective schemes between Thailand, Singapore and Malaysia was now permitted, under its Asean CIS Framework.6 The rules of the game are that schemes must receive their home regulator’s approval first before being able to be offered within one of the other two CIS countries. By September 2015, eleven funds had been granted such home approval; although none of them to my knowledge have yet received the green light from either of the two host countries.
CIS is following in the footsteps of the European UCITS framework, which first appeared in 1985 and allows investment schemes authorised in one EU country to be sold or promoted in another.7 Whatever UCITS’ strengths and weaknesses, with around USD 8.8 trillion of assets under management8 and accounting for around 75% of all collective investments by small investors in Europe, it can hardly be described as unused.
UCITS allows a fund management firm based in, say, northern Sweden sell its authorised financial products to someone in southern Portugal. The reality, however, has been a concentration of management firms in the jurisdiction which offers the best conditions regarding tax treatment, accessibility, regulation and investor protection. In Europe’s case, this is Luxembourg.9 It’s now up to the three Asean jurisdictions who have already rolled out the CIS framework to take advantage of their head start and provide the best conditions for managers and investors to do business.
Where UCITS differs significantly from CIS is that in the former only the home regulator’s authorisation is required. This exposes a gap in the system – and in the whole AEC plan for that matter. Whilst the different UCITS laws have passed through legislative processes, such as consultation, hearings in the European Parliament and the Council of Ministers, such mechanisms do not exist in Asean. For the CIS framework, the rules were drafted and those national regulators who agreed signed up. That’s why there are only three of the nine member states where a CIS is possible.
Not only that, once the CIS becomes used, there is no-one to regulate the regulators? If one national regulator decides to block CIS funds for no particular reason other than national interest, unlike in the EU, there is no supranational body with the legal power to stop it.
If regulators are really serious about an Asean environment where investors can buy properly regulated financial products with the peace of mind which meaningful protection can give, there has to be a supranational regulator and dispute settlements system in place.
Of course when we look at that, we face the bigger obstacle: how a group of nine states, including kingdoms, people’s republics and a sultanate to agree on the roles and limits of institutions. Such a process has taken the EU fifty years to get where it is today and its members have far more in common than the Asean states currently do.
The AEC as a whole, and the CIS in particular, are based on commendable objectives which may not bring about greater prosperity in Southeast Asia but could well enable it. I truly hope the project works, but I wouldn’t hold my breath.

2 IMF World Economic Outlook, October 2015
3 ibid
5 Asean Economic Community Blueprint, Asean 2008
6 content_id=00067

Update November 7, 2015

Forget perceived wisdom, there are few good buying opportunities out there

The recent dip in Eurozone stock markets is a relief from recent inflated prices. Yet it doesn’t necessarily mean that it’s the right time to buy.
Back in 2002, author Michael Lewis shadowed the management of baseball team the Oakland Athletics. In Moneyball: the art of winning an unfair game Lewis explains how, finding themselves unable to compete with the richer clubs, its management had thrown out the mix of statistics and gut feeling conventionally used for recruitment and started from scratch.

Chart 1 - Source: IMF.

The Athletics signed players overlooked by other teams because their faces didn’t fit, their bodies were the wrong shape or they didn’t measure up to traditional statistics. Few seemed to be questioning what chiselled faces, sculpted bodies and favourable century-old calculations actually meant in reality. The Athletics did, though, and their new system of analytics showed important qualities their rivals couldn’t see. Success was immediate and unprecedented – nowadays even the rich clubs follow their methods.

Chart 2 - Source: IMF.

It’s no great surprise that Lewis has also authored books on finance, including last year’s excellent book about high-frequency trading, Flashboys. After all, just as in sport, there are perceived conventional wisdoms in the world of finance, which no longer necessarily apply.
One of those perceived wisdoms is that if there is a significant drop in stock prices, it’s an ideal opportunity to buy. This assumption can be correct in the short term. For example the main German stock exchange index, the DAX, was at 11,492 points on 22nd June, down to 11,058 on 29th June and back up to 11,673 on 13th July.1 So if an investor had taken the opportunity to buy on 29th June and sold again on 13th July, he or she would have made a nice little 5.5% return inside just over a fortnight.
Of course, there are two main complications with this: how to get the timing right to buy; and how to know if the price will go back up in the near future to sell. These are two good reasons why I don’t like short-term investments. The latter of these is particularly relevant in Europe today. Stocks in Europe were experiencing inflated prices during the first half of this year, while key indicators showed – and continue to show – that the economy was faltering.
Not surprisingly, Euro Area stock prices are no longer at the level they were back in April. We saw a significant drop in September, followed by what could rather optimistically be called a ‘mild recovery’ since then (see chart 3).

Chart 3 Source: St. Louis Federal Reserve.

It’s difficult to say with 100% certainty in which direction those prices will head next. Yet, given the above economic indicators, it wouldn’t come as a great surprise if they were to remain as low as they have been for almost three months.
That’s why I wouldn’t call Eurozone markets a place where investors could make any medium to long-term gain. As long as the ECB insists on its cocktail of public sector austerity measures, quantitative easing and emergency-level interest rates, it looks like a large part of the European Union is headed towards Japanese style debt-deflation.2 Thus any significant rise in stock prices would be without economic basis and therefore short-lived.
Elsewhere, China is showing cracks – ok, let’s face it, huge crevices3 – Japan is still in the doldrums after a quarter-century and the US, as well as other OECD countries, is still not showing concrete signs of recovery.4
In fact, looking at price/earnings ratios shows that, whilst the US is not currently at the extremes reached during the global financial crisis, the S&P 500 is looking expensive again (see chart 4).

Chart 4 - Sources: Robert Shiller, Irrational Exuberance and

Realistically there are few medium-to-long-term buyers’ markets. As I have said before, what goes down doesn’t necessarily come back up. We can control risk but only influence return.5
That said, there may be one possible opportunity: Russia. Looking at the Moscow stock exchange index (MICEX) shows that Russian stock prices have remained fairly stable over the last three years or so. However, the Russian Trading System Index (RTSI) – an index of 50 Moscow exchange-traded stocks – which was typically in synch with the MICEX, is considerably cheaper nowadays.
That’s no coincidence. The RTSI is calculated in US dollars. I’ve noticed that ever since the US imposed sanctions on Russia at the beginning of the Ukrainian crisis, the greenback has strengthened significantly against the rouble. In fact if we plot the rouble-dollar rate next to RTSI values, we can see there is a direct correlation (see chart 5).

Chart 5 - Sources: Bloomberg, MICEX & St. Louis Federal Reserve.

This anomaly makes the Russian stock market a potentially interesting buying opportunity should there be any further weakness either in stocks or in the rouble. That’s because the drop off in prices is because of exchange rates, which are affected by outside events which could change in the long term.
Of course, the big question remains how long will these low prices last? That’s the hard part. The answer possibly lies deep in the bowels of the US state department and, whenever sanctions are lifted, whether this will have any telling effect on the rouble-dollar exchange rate and Russian stocks and to what extent.
I’ll leave those kind of predictions to others. However, I believe there are three vitally important things to remember when investing in shares: spread risk by diversifying; go for market averages, not individual stocks; and seek advice from an independent advisor.

2 Steve Keen’s 2015 Economic Outlook,

Please Note: While every effort has been made to ensure that the information contained herein is correct, MBMG Group cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Group. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
MBMG Group is an advisory firm that assists expatriates and locals within the South East Asia Region with services ranging from Investment Advisory, Personal Advisory, Tax Advisory, Corporate Advisory, Insurance Services, Accounting & Auditing Services, Legal Services, Estate Planning and Property Solutions. For more information: Tel: +66 2665 2536; e-mail: [email protected]; Linkedin: MBMG Group; Twitter: @MBMGIntl; Facebook: /MBMGGroup


HEADLINES [click on headline to view story]

Southeast Asia: Is it as good an area to retire as we think?

Act quickly to get maximum benefit from RMFs of LTFs

Can AEC deliver for investors?

Forget perceived wisdom, there are few good buying opportunities out there