Bot Intervention Weakening...fewer Spikes

[jumbo]

Another forecast 6 months 36.5

http://www.neatideas.com/bhat.htm

But it's anybody's guess...

[Thaddeus]

pears of wisdom.

How many of those do you get for one apple of serendipity?

Sorry guys, but speculating about the Baht exchange rate is a totally futile waste of time and energy, if it was only set by viewable market forces it would not be at the value it is currently.

[bendix]

I don't know why you guys are wasting your time speculating on this subject.

Don't you realise that topfield is working on this day and night so that everyone else can sleep easily?

[somtaamgaiyang]

probably helped that he was deputy PM at the time and knew that the BOT had no more reserves to prop up the baht.

I am sorry but I find it hard to believe that the reason that Chavalit and Taksin alledgedly made large amounts of money from currency speculation has anything to do with the fact that they were the policy makers at the time.

Your hypothesis makes no sense.

It is similar to by brother, who when he was young, used to build small houses and other shapes out of his mashed potato, while eating dinner.

My mother used to tell him not to. But is wasn't often we ate potato, so he never perfected the 4 storey shophouse slum that he had planned.

I like to think of that story, whenever people tell me that you can make money easily speculating on currency.

Because....it is a nice story.

George Soros, and a boat load of other people in the country saw what was coming in Thailand in 97. There was a fundamental mismatch of duration of USD loans to the country, versus Baht returns, a fixed exchange rate and free capital movement.

It was a recipe for disaster, since you cannot have a fixed exhange rate and free capital movement out of the country for any extended period of time. USD loans of short duration were being granted to banks and they were using these to finance projects of considerably longer duration (capital investment and property). The time came to pay back or roll over, and eventually the loans were called. Result, insufficient USD to pay and a massive crash. The BOT tried to cover it, but was impossible. This is no different from borrowing one a one year term to buy a property with a 25 years payback. Can be done but very ver difficult and cash flow is everything.

To keep the Baht at 25, in 97, they differential between Thai and USD exchange rates was about 6%. So everyone borrowed dollars and spent baht. You cannot have free capital movement and a fixed exchange rate for any great amount of time. What has the BOT done, put in quite strict capital controls to stop too much money filtering into the country. This unfortunately will have the effect of not just pinching off speculative flow, but investment and foreign finance. Less investment, less finance, less GDP growth, higher financing costs.

They are balanced on an absolute knife edge. They have used a very strong tool to limit foreign inflows, yet are hoping that it doesn't contribute to a reduction in GDP growth and a slowing of the economy.

I believe that the pressure for the Baht to appreciate will be too stong over the next few months, and it will increase no matter what the BOT does. Then it will be back to square one. An economy running at 67% of GDP exported to mainly foreign mutlinationals, and domestic Thai companies focussing on low value, low tech products. Not a great mix if you are a nationalist, but this is the way it is.

They need to open the door to all foreign investors, whilst keeping a few absolutely STRATEGICALLY important industries all Thai. By that I do not mean retailing, but possibly electricity generation etc. Only with FDI will this country get richer. They will have to accept that the title of "No 1 rice exporter is not a priority" in the medium term and attract gradually higher value, higher quality exports than rice, fruit and textiles. I used to work in agricultural exports around the world, price wins 99% of the time and Thailand cannot rely on price anymore.

[samran]

probably helped that he was deputy PM at the time and knew that the BOT had no more reserves to prop up the baht.

I am sorry but I find it hard to believe that the reason that Chavalit and Taksin alledgedly made large amounts of money from currency speculation has anything to do with the fact that they were the policy makers at the time.

Your hypothesis makes no sense.

It is similar to by brother, who when he was young, used to build small houses and other shapes out of his mashed potato, while eating dinner.

My mother used to tell him not to. But is wasn't often we ate potato, so he never perfected the 4 storey shophouse slum that he had planned.

I like to think of that story, whenever people tell me that you can make money easily speculating on currency.

Because....it is a nice story.

George Soros, and a boat load of other people in the country saw what was coming in Thailand in 97. There was a fundamental mismatch of duration of USD loans to the country, versus Baht returns, a fixed exchange rate and free capital movement.

It was a recipe for disaster, since you cannot have a fixed exhange rate and free capital movement out of the country for any extended period of time. USD loans of short duration were being granted to banks and they were using these to finance projects of considerably longer duration (capital investment and property). The time came to pay back or roll over, and eventually the loans were called. Result, insufficient USD to pay and a massive crash. The BOT tried to cover it, but was impossible. This is no different from borrowing one a one year term to buy a property with a 25 years payback. Can be done but very ver difficult and cash flow is everything.

To keep the Baht at 25, in 97, they differential between Thai and USD exchange rates was about 6%. So everyone borrowed dollars and spent baht. You cannot have free capital movement and a fixed exchange rate for any great amount of time. What has the BOT done, put in quite strict capital controls to stop too much money filtering into the country. This unfortunately will have the effect of not just pinching off speculative flow, but investment and foreign finance. Less investment, less finance, less GDP growth, higher financing costs.

They are balanced on an absolute knife edge. They have used a very strong tool to limit foreign inflows, yet are hoping that it doesn't contribute to a reduction in GDP growth and a slowing of the economy.

I believe that the pressure for the Baht to appreciate will be too stong over the next few months, and it will increase no matter what the BOT does. Then it will be back to square one. An economy running at 67% of GDP exported to mainly foreign mutlinationals, and domestic Thai companies focussing on low value, low tech products. Not a great mix if you are a nationalist, but this is the way it is.

They need to open the door to all foreign investors, whilst keeping a few absolutely STRATEGICALLY important industries all Thai. By that I do not mean retailing, but possibly electricity generation etc. Only with FDI will this country get richer. They will have to accept that the title of "No 1 rice exporter is not a priority" in the medium term and attract gradually higher value, higher quality exports than rice, fruit and textiles. I used to work in agricultural exports around the world, price wins 99% of the time and Thailand cannot rely on price anymore.

What you say is all true and is the standard analysis around.

Sure, Soros knew that he could break the BOT if he wanted. I mean he did it with the Bank of England.

What I'm saying is, just prior to the BOT and Ministry of Finance anounced they were going to float the baht, the policy makers who had known (not speculated....known) were protecting their pretty <deleted>, while telling the general public that everything was OK.

Wasn't like say, former Australian Treasurer Paul Keating floating the dollar in 1983. The press conference was announced on the morning of the float. The stock market was closed for the day, and no-one apart from one or two key treasury people know about it. So no insider knowlegde.

[backflip]

"George Soros, and a boat load of other people in the country"

Which country, the US?

"a fixed exchange rate and free capital movement...you cannot have a fixed exhange rate and free capital movement... You cannot have free capital movement and a fixed exchange rate"

You are repeating yourself, and it seems that you copied and pasted someone else's vent without reading it. Regardless, we got your point. But that doesn't mean we agree with you. Two words: Bretton Woods.

"Then it will be back to square one."

Is that square one with George Soros? An appreciated baht? A depreciated baht?

"An economy running at 67% of GDP exported to mainly foreign mutlinationals, and domestic Thai companies focussing on low value, low tech products."

If an economy can exist by exporting 67% of its GDP, why would anyone care about the mix of value and technology?

"They need to open the door to all foreign investors"

The country is open to investors. In case you hadn't been reading the threads, the concern is the ownership of the companies invloved.

"whilst keeping a few absolutely STRATEGICALLY important industries all Thai. By that I do not mean retailing, but possibly electricity generation etc"

I can hardly wait to read the continuation of "etc". What do you mean to keep, as an example, "electrical generation all Thai". Do you mean using Thai technology to develop electrical generation? Do you mean keeping the electrical generation company 100% Thai-owned?

[topfield]

Saw this all in May '97. That time the BOT were holding the floodgates in a desparate attemt to hold the baht from falling .

The exact same situation prevails now but in reverse with the BOT desparately holding the floodgates to prevent the baht from rising..

The 1997 intervention falied as market forces became too strong . Same will happen this time.

TIP : If you need or will be needing to buy baht , you should buy in Thailand NOW.

36 to the dollar / around 71 to the pound . Current rate outside Thailand 35 to the dollar 69 to the pound (approx)

[topfield]

Re the many postings on who knew and acted on information concerning the float/devaluation of the baht in '97 readers might be interested to know Sontee's take on this ( the publisher who drove Taksin out not the General) , it seems that Taksin persuaded Chavalit to replace Viravan the then Finance Minister with Tanong Pittaya who happened to be in the employ of Taksin . Tanong who of course then found out that BOT reserves were almost exhausted informed his erstewhile employer who made "the necessary financial arrangements " that ensured Shin would be the only major co in Thailand not to lose out by the devaluation. Furthermore Taksin was in Hong Kong for the handover at the time of the announcement and as reported in a later parliament censure debate, was seen going from bank to bank just prior to the float announcement.

Worth mentioning Tanong was later rewarded for his good deeds by being made Finance Minister in Taksin's administration ..............right until he was booted out in the coup

Edited January 24, 2007 by topfield

[cclub75]

Is Miss "doctor" Tarisa opening the parachute ?

Last week she was speaking (with common sense for once) about "global imbalances" regarding the USD problem... It's not a thai problem, it's a global one. Indeed.

And now she speaks about the possibility to be convinced that THB could stay steady versus USD ? It's rather strange.

BoT may ease capital controls if baht steadies

The Bank of Thailand said Wednesday that it may consider relaxing capital control rules if authorities are convinced that the Baht would hold steady against the U.S. dollar.

"We're ready to do anything that will not make the Baht fluctuate so much. We're especially ready to do something for money coming in for real investments and not just for hidden speculation," central bank governor Tarisa Watanagase said.

"The bank does not want to impose this measure for a long time and it is ready to ease the measure if the baht's stability would not be affected," she said.

Agence France Presse

http://www.nationmultimedia.com/breakingne...newsid=30024965

[steveromagnino]

Despite multiple references, AFAIK i think Soros has denied that he was involved in the attack on the baht, and for the most part if he was, he certainly wasn't the most active.

Much of the attack on the baht came from the inside.

I have some sympathy for companies like TPI, as they were told that their BOT would defend the baht, so they borrowed USD on this basis; many of my friends' parents were totally shot after 1997 and some who survived vowed they would never allow their families to not be privvy to political decisions again; hence the increase in Thai Chinese business families getting back into politics and funding again plus also infiltrating the senate. In TPI's case, I am not familiar with the specifics but as far as I understand,their borrowing requirements were so large, that they could not finance it internally anyway and had to go offshore; but I could be totally wrong about that.

Anyway...TPI were shot as soon as Senor Squareface was in power, as he had his eyes on that prize right from the beginning. Ditto for PhayaThai Hospital and others.

[wintermute]

If an economy can exist by exporting 67% of its GDP, why would anyone care about the mix of value and technology?

Low value and low technology manufacturing..let's see how many countries in the world do that? Oh..wait just about every single developing country on earth does it. This means that Thailand is hedging its future in something that is not competitively sustainable against big competitors like China and India. Their currency controls are a very very short term band aid solution on a long term problem. Thailand is becoming uncompetitive. Can you name ONE single area in the general industrial, technology, or biomedical field that Thailand specializes in that no other country can do? There's plenty of countries using Thailand as a big factory but very very few Thai specialists with skills or knowledge.

The country is open to investors. In case you hadn't been reading the threads, the concern is the ownership of the companies invloved.

Open as in creating highly restrictive and opaque policies that most investment bankers, mncs, and financial analysts overseas can't make head nor tails of? If so then this regime has succeeded brilliantly in alienating investors.

[tomyamg00ng]

While I agree with alot of what you say Wintermute,its also worth remembering that Thailand is the 5th biggest food exporter and the number 1 rice exporter. A fair achievement for a country the size of France.

The other major point is that tourism is massive in Thailand. This does a tremendous amount to support the economy. I think thailand isnt too far away from having a good economy. There is great potential. If they make the regulations abit more relaxed then we can see big improvements. Whether they will in the future is another matter.

[steveromagnino]

Can you name ONE single area in the general industrial, technology, or biomedical field that Thailand specializes in that no other country can do? There's plenty of countries using Thailand as a big factory but very very few Thai specialists with skills or knowledge.

1. You could argue some of what CPF is doing in food manufacturing is fairly leading edge, but there are other countries doing that; however look at the size of CPF and their future plans for value adding, and you would have to say that they are a major playa

2. Cobra is the world's biggest windsurfing manufacturing plant and has a virtual monopoly in that area and has run businesses in France, USA, INdo and others into the ground

3. Ability to make the world's biggest tom yum goong and the world's longest crabstick:-)

For that matter, I cannot think of anything that NZ does in yachting that another country cannot do; there are plenty of other countries that can DO it, but it just happens that for large sectors of the yachting market, NZ can be it marginally better and cheaper than the others, and is a hub or one stop shop for yachting stuff.

Despite that America and France are far bigger industries, even though both are fairly backward; they simply have local demand that generates immediate economies of scale and therefore don't need much innovation to immediately step up to the plate.

So....is your insistance of leadership in a field the most important thing? Or is perhaps a better measure one of areas of core competence (Porter/CK Prahalard type approach) and whether Thailand is reaching that in certain industries?

Stages of development; the issue of whether THai companies are transferring knowledge the way Chinese do with the intention of booting out the foreigners once they have picked their brains is indeed a valid one though.

[bkkandrew]

My sofisticated guess is:

1 USD = THB 38-39 before March 1, 2007.

Hey george - you didn't take up my bet! Shy or something?

[bkkandrew]

My sofisticated guess is:

1 USD = THB 38-39 before March 1, 2007.

Hey george - you didn't take up my bet! Shy or something?

Weekend rate is 33.50, guess you were lucky not to take the bet!!

Happy soothsaying..

[backflip]

"Open as in creating highly restrictive and opaque policies that most investment bankers, mncs, and financial analysts overseas can't make head nor tails of?"

Well, it's obvious that YOU don't understand the rules. However, looking at foreign investments that have been made in Thailand (high technology, hotel, food service, retailing, and others), international investors know how to invest. You do not.

[wintermute]

"Open as in creating highly restrictive and opaque policies that most investment bankers, mncs, and financial analysts overseas can't make head nor tails of?"

Well, it's obvious that YOU don't understand the rules. However, looking at foreign investments that have been made in Thailand (high technology, hotel, food service, retailing, and others), international investors know how to invest. You do not.

Oh yeah it's just me. Is that why just about every day in the Bangkok Post we have a column addressing the confusion regarding Thailand's business policies? Go take your crony apologism elsewhere.

[wintermute]

While I agree with alot of what you say Wintermute,its also worth remembering that Thailand is the 5th biggest food exporter and the number 1 rice exporter. A fair achievement for a country the size of France.

I've never heard of Thailand being the 5th biggest food exporter. That doesn't sound correct, in the annual Bangkok Post economic report and the CIA worldfactbook they had a breakdown of Thailand's GDP. 50% of the Thai labor force are involved in agricultural and it only contributes a very meager 10% of the gdp. Thailand's GDP is from exports of low tech industrial manufactured goods which is 50% of the GDP. From sources talking about globalization it seems the top food exporters are in fact various South American countries, India, and the U.S.

The other major point is that tourism is massive in Thailand. This does a tremendous amount to support the economy.

Tourism is extremely overrated in Thailand. The Bangkok Post economic report addressed this specifically. The Tsunami etc.. did major damage to the tourism sector but it had little effect on overall economic growth. However, a STRONG appreciating baht and competition would completely destroy Thailand's bread and butter which is low end/low tech manufactured exports.

I think thailand isnt too far away from having a good economy. There is great potential. If they make the regulations abit more relaxed then we can see big improvements. Whether they will in the future is another matter.

That's a very optimistic appraisal and not really taking into account the future competition Thailand will face. Countries like Vietnam are already noting Thailand's mistakes.

Edited January 28, 2007 by wintermute

[wintermute]

1. You could argue some of what CPF is doing in food manufacturing is fairly leading edge, but there are other countries doing that; however look at the size of CPF and their

future plans for value adding, and you would have to say that they are a major playa

How is what CPF doing different or better from let's say..Oscar Meyer, Hormel, General Foods, or any other leading western or asian brand that markets food products?

2. Cobra is the world's biggest windsurfing manufacturing plant and has a virtual monopoly in that area and has run businesses in France, USA, INdo and others into the ground

A business leader in a niche sport isn't going to drive a country's GDP.

Despite that America and France are far bigger industries, even though both are fairly backward; they simply have local demand that generates immediate economies of scale and therefore don't need much innovation to immediately step up to the plate.

America is actually a net exporter in high tech industrialized machinery, pharmaceuticals, food, and raw materials. It's really not just local demand, American branding is everywhere. There are all sorts of American namebrands in industrial equipment, aviation, and electronics manufacturing that you probably wouldn't notice without being in the business.

So....is your insistance of leadership in a field the most important thing? Or is perhaps a better measure one of areas of core competence (Porter/CK Prahalard type approach) and whether Thailand is reaching that in certain industries?

Two words.. Comparative advantage. Without it small countries like Thailand will be in serious trouble against growing regional competition. For example.. there is nothing Thailand has that Vietnam doesn't have. In fact Vietnam is better situated to NOT repeat the mistakes Thailand has made and it has a rapidly improving educational infrastructure and a very formidable work ethic.

Stages of development; the issue of whether THai companies are transferring knowledge the way Chinese do with the intention of booting out the foreigners once they have picked their brains is indeed a valid one though.

The difference is that requires an educational system that creates competent and educated people who are able to reverse engineer products or develop new ones. Thailand's education system is a mess and the quality of engineers, scientists, and academics is far far behind most of Asia.

[xbusman]

Actually that makes a lot of sense to me. The margins in food is really really small. Most food production is heavily subsidized all over the world, and heavily protected. Major food exporters like Brazil, Chile, United States, have minute margins on their exports. So by value it would not surprise me in the least if food were 50% of all Thai exports and less than 10% of the GDP. Assembling a single hard drive probably adds more to GDP than about a ton of rice.

Tourism is about 10% of GDP, the good part of tourism though is that it does not consume raw materials and directly impacts the service side of the GDP. Its mostly environmentally friendly and provides employment for the unskilled. All in all though, 10% of GDP is nothing to sneer at. If exports account for about 70% of your GDP, government projects account for around 8% of your GDP, of the remaining 22% of GDP tourism counts for about HALF. That means everything else, all services and products your entire economy makes for domestic consumption, about half is tourism. Think about it.

I agree with wintermute, in the end its education that makes the differance. That is amplified by opportunity. If you educate the population and give them a chance to get ahead, Katy bar the door. Ultimately, isnt that the secret that Europe and then America stumbled on over 100 years ago.

[wintermute]

I agree with wintermute, in the end its education that makes the differance. That is amplified by opportunity. If you educate the population and give them a chance to get ahead, Katy bar the door. Ultimately, isnt that the secret that Europe and then America stumbled on over 100 years ago.

Japan has a saying that they strive to become a country of middle class people. The reason why they became the #2 economy in the world was based on this principle of strong government intervention in education, work standards, and cultural reformation. I really don't see that happening in Thailand soon mainly because the culture is devoid of critical introspection. False nationalism is also too strong here to make progress so any outside foreign way of doing things is disdained even though it may in fact be better. It will remain backward for a long time to come, if you look at the next generation of Thais it's not improving at all. In fact with materialism and the bad habits picked up by thai youth these days it may get worse. I see Thailand as falling in somewhere around the same level as the Phillipines and Indonesia. Basically, a country whose time has come and gone and will remain "developing" probably forever.

Edited January 28, 2007 by wintermute

[backflip]

"Is that why just about every day in the Bangkok Post we have a column addressing the confusion regarding Thailand's business policies?"

The Bangkok Post is in the business of selling newspapers, not providing a balanced analysis of the issues involving Thailand. I know you think that every word, every phrase, every paragraph in the Post is accurate, and that's a shame.

"Go take your crony apologism elsewhere."

I'm sure that you're trying to insult me. You haven't succeeded.

[nikster]

I just found the grand-daddy of forex charts - yahoo charts allows forex symbols, and they have THB.

Kinda blows all other free charts I have seen clear out of the water - they have technical indicators, too, the URL below is with MACD:

http://tinyurl.com/34uv48

I am not sure you need a yahoo account or not. I have one but it seems like I wasn't logged in when using the chart.