Pakpoom Vallisuta is chairman of The Quant Group, a leading investment bank based in Thailand with a specific focus in mergers and acquisitions. Pakpoom spent the first five years of his career as a computer engineer and the last 27 years in investment banking, including almost 20 years with The Quant Group since he founded the company. He has an MBA from Duke University’s Fuqua School of Business and serves on the school’s Board of Visitors and East Asia Regional Advisory Board.
Pakpoom discusses his career journey, the state of the finance industry in Asia and what he looks for in new talent in this Fuqua Q&A.
Q) Your career journey into finance has been unique. How do you think your experience as an engineer prepared you for your role today?
I was a computer engineer. In other words, I coded. In coding, you can’t miss a step or spell things wrong as that causes syntax errors and compilation errors. Nothing comes out except those error messages. So it’s habitual that I don’t skip any steps when I think about finance. When I look at deals, I see precise flows of money going in a direction in exchange for securities coming out from such and such entities. I make sure there is clarity in the risk-reward profiles, no matter how complex.
Having said that, computer programmers can still have logic errors. That’s the worst kind because the compiled program doesn’t even tell you there’s an error. So dealing with coding trained me to think in very precise steps. I am not sure that this type of training would benefit everyone, but that is just how I think.
When I worked at Hewlett-Packard, I read in our TQM (Total Quality Management) handbook and discovered a profound formula which I use as our mantra at The Quant Group:
Productivity = Doing The Right Thing X Doing Things Right.
“Doing things right” is about efficiency. “Doing the right thing” is about direction and strategy. If you don’t have both of these elements you can end up doing the wrong thing very efficiently. Spend time and get your bearings right first.
Q) Your Bangkok-based firm conducts business all over the world. What are the advantages and challenges of being a global firm based out of Asia in 2016?
Mergermarket tallies M&A value in 2015 at US$989 billion which represents 23.1 percent of the global M&A value. Clearly M&A activities in Asia or by Asian players have increased substantially over the past decade in large part thanks to China and India—two very large markets. But in the aggregate we are still the less developed economies and therefore the characteristics of these markets include shortfalls in varying degrees on ESG (environment, social, governance) disclosures, accounting standards, enforceability of contracts, market depth (liquidity in credit and equities), and an educational gap.
Q) We are currently experiencing volatility globally in the world of finance with economic challenges facing China and some concerns about another potential rate hike by the Federal Reserve in the U.S. What is your advice in navigating through uncertain financial times?
Sprinters know well that they spend a lot of their energy fighting wind resistance. Professional cyclists on the other hand learn how to follow a lead cyclist and ride in a pack called a peloton to cut down on wind resistance.
There used to be a time when Asian economies and other global economies basically followed whatever the U.S. did. We practically outsourced our monetary policy to the U.S. The U.S. pumped money, we pumped. The U.S. cut rates, we cut rates. Any country that tried to overtake the peloton by raising rates while the U.S. cut rates for example, would do so at the expense of currency appreciation and lower price competitiveness in their exports.
The U.S. rate hikes raise another challenge as Asian companies are still trying to lift themselves out of slower growth than in the past. These asynchronous steps are tricky for the Asian economies balance of payments, as money flows towards the direction that offers a higher interest rate.
Asian companies face other structural headwinds such as dwindling advantages in cheap labor to name one. The economic model is not as simple as a base of cheap mass production. It is increasingly about serving its own domestic market, intra-regional trades, intra-regional labor mobility, reduction and elimination of tax barriers and quotas, and developing its own brands for customer stickiness.
My advice is to know what challenges we are facing and address them by adjusting your business model.
Q) According to The Economist, four of the top 10 fastest growing economies (Laos, Cambodia, Myanmar and Vietnam) in 2016 will come from your home region Southeast Asia. What are the main points you want leaders to know about doing business in that region?
Laos, Cambodia and Myanmar sans Vietnam are very small economies, and therefore the broader implication I believe is looking at AEC (ASEAN Economic Community) as a whole. AEC combines some US$2.5 trillion in GDP and 622 million people and is larger on these counts than 2 of the 4 BRIC countries (Brazil and Russia). There are about 100 million consumers and the average GDP per capita of AEC is slightly over US$4,000. Therefore, consumers spending growth is expected to be more than twice that of the GDP growths (4-6 percent).
AEC sits on vast natural resources. It produces about 87 percent of the world’s palm oil, 80 percent of its natural rubber, and 44 percent of Asia’s natural gas.
To reiterate on a couple of points touched prior, AEC companies need to pay attention to ESG framework and standardization of its products in order to serve the world market as there is increasing scrutiny on traceability, compliance, etc.