Thai govt warned to brace for recession threat as funds flee markets

[BritManToo]

14 hours ago, PingRoundTheWorld said:

Nonsense. The baht is at least 10% stronger against any major currency, literally meaning every single Thai export product is now 10% more expensive compared to alternatives from other countries. It's a complete no-brainer that this is the reason Thai exports are suffering. And now with China devaluing the Yuan it'll just makes things worse.

As another thread pointed out

Thai Hom Mali rice $1,200

Viet Hom Mali rice $550

 

Who's daft enough to buy the Thai rice?

[TheHangingJudge]

Surely a misunderstanding lol.

[Krataiboy]

15 hours ago, PingRoundTheWorld said:

Nonsense. The baht is at least 10% stronger against any major currency, literally meaning every single Thai export product is now 10% more expensive compared to alternatives from other countries. It's a complete no-brainer that this is the reason Thai exports are suffering. And now with China devaluing the Yuan it'll just makes things worse.

 

Investing in public projects in general stimulates the economy: it injects money into the economy by creating thousands of jobs - those people then spend more locally. It's true that exports won't rebound as a result, but most exporters also sell products locally, so if local consumption rises it'll help offset the drop in exports. Also better infrastructure usually means more productivity so it's good for the economy long term. The high speed rail project that'll connect DMK-Bangkok-BKK-Pattaya-UTP is especially a good idea as it'll encourage more tourism. Pattaya is "dead" today but if/when this project completes expect it to flourish.

 

Having said all of that - with both tourism and exports declining, there's simply no avoiding a recession - the only question is whether it's going to be bad or terrible. And let's not even start about the real estate/condo bubble and what happens when THAT explodes...

. . . not to mention the derivatives bubble waiting to burst.

 

The top 25 U.S. banks have 222 trillion dollars of exposure to derivatives, roughly equivalent is approximately twelve times the gross domestic product of the world's wealthiest economy.

 

http://theeconomiccollapseblog.com/archives/tag/derivatives-bubble

 

[TommyUK1960]

22 hours ago, RichardColeman said:

I'm sorry but I always fail to see how investing in these things helps exporters, their employees or their repayments to the bank. "We cannot export anything, hey let's build a new bridge, everybody forgets their financial problems when we build a new bridge"

Why you sorry? Just make your comment

[Isaan sailor]

Biggest question: where did Thailand get those billions of USD in reserve?  It wasn’t a gift of support from the US government.

[Handsome Gardener]

19 hours ago, Berkshire said:

Foreign funds leaving the Thai financial markets is good news, and should lead to the weakening of the THB....albeit gradually. 

With the 7th highest (last time I looked) reserves of dollars in the world, it will take a very long time before that is no longer there to plug the gap - its exactly why the baht is strong.

[Handsome Gardener]

On ‎8‎/‎16‎/‎2019 at 2:59 AM, Isaan sailor said:

Just lower the Baht.  Stupid BoT.

Then you will be accused of currency manipulation and face sanctions which can do enormous damage to an economy. 

[Handsome Gardener]

21 hours ago, brain150 said:

It's a very well known fact that every reserve currency has to fail at one point !

The US dollar is no exception. 

... it's just a matter of time until the US dollar will fail. In fact it's already overdue to do so.

 

All currencies devalue ... the US dollar has lost 90% of its value already over the last 90 years..

Maybe you should learn something about what a currency actually is ! It is NOT money !!!

 

Expect a depression, not a recession - WORLD WIDE !!!

Calm yourself - read something informed below rather than hysterics based on not a lot

 

Dear Valued Client,

 

Please find a quarterly update from our Discretionary Fund Managers regarding the ongoing volatility in global financial markets:

 

The inversion of the US yield curve, which drove Wednesday and yesterday's dip, was a further sign of the mixed signals from equity and bond markets. We have to date interpreted the different messages from the equity and bond markets as more a question of signal-sets. Against the context of supportive employment and consumer demand in the US coupled with a muted inflationary backdrop supporting equities, we believe the bond market has been taking its signal less from the economy, and perhaps more from expectations for greater central bank accommodation. This has provided the unusual conditions of rising equities and falling bond yields, although until we see broader indicators of pressure on the US economy or rising inflation (inhibiting the US Fed's ability to provide support), we believe a US recession is still unlikely in the short to medium term.

 

In short, the yield curve inverting was likely the most significant cause of the soft market over the last couple of days. However, the inversion between the 2-10yr (the first time in a decade) doesn't necessarily mean longer-term pain in the stock market. Historically, equity markets tend to rise quite quickly off the back of this inversion. On average, after an inversion in the yield curve like this, the US market (S&P) has returned 2.5% in the following 3 months, 4.9% in 6 months and over 16% over the next 3 years.

 

Now, the stock market and the economy are two different topics of conversation. The talk at the moment is of recession fears because the inverted yield curve has preceded the last 5 recessions. As a soundbite this is headline-grabbing. But the sub-heading is significant: it isn't immediate. Historically it's taken 15 months for recession to start, on average.

 

The temptation with economic commentary is to exclaim that "this time it's different". There is certainly an argument to be made that says the inversion of the yield curve this time is different because it's actually the 10 year coming down rather than the short term going up. Also, central bank intervention is playing a part in a way like never previously.

 

But if it isn't different, if it's actually a sign of impending recession then the recent cut in interest rates by Jerome Powell is a much more expedient response than the Reserve had in 2006/7. We believe this can only be a good thing.

 

However, the yield curve isn't necessarily the only factor driving the market fears. Manufacturing data in the US has been weak and, again historically, this has been seen as negative for the wider economy. So, amongst the doom and gloom here is some positive news: 'In July, US retail sales rose 0.7% month on month, beating the 0.3% consensus. Without volatile categories like fuel and cars, sales actually saw a 0.9% monthly gain. While Amazon’s prime day of spending may have helped boost July results a bit—a development also reported in the UK’s July retail sales—most retail categories grew, from electronics to food and beverage. The regular caveats apply here: Retail sales record only a part of total personal consumption—most services spending isn’t included—and one monthly reading matters less than the longer-term trend. On that note, US retail sales have fallen on a monthly basis just once this year. Many point to manufacturing weakness as a sign of broader economic trouble to come, but in a services-driven economy like the US, the numbers keep refuting that fear.'

 

One of the other topics which might be fuelling fears of a global recession is the German contraction. On Wednesday Germany announced a -0.1% quarter-over-quarter contraction in their GDP growth rate. According to some more sensationalist reports (Julia Horowitz for CNN) this is the end of for Germany's "golden decade". This article fails to acknowledge, however, that the German economy actually shrank by the same amount in Q3 2018 and then went on to reach new heights in each of the following two quarters. I'd suggest then that, in isolation, this recently announced contraction is not a reliable predictor of things to come.

 

The gap between reality and expectations is when equities move the most. Expectations are surely close to their lowest at the moment so any good news, however trivial, will surely bring positive returns to the stock markets. Today the FTSE closed 0.71% up with the S&P currently up 1.33% at the time of writing.

 

Finally on Brexit, the election of Boris Johnson has seen the chances of a No Deal Brexit increase and we would expect the Sterling to depreciate further in this scenario. With this in mind we remain extremely well diversified on a currency basis and the exposure to international assets should do well in this outcome. Even within the UK, the FTSE 100 may do well in this scenario given the international earnings, although the picture is more mixed in this regard. With this in mind, compared to historical allocations and benchmarks we remain underweight to the UK, although were we to see any form of resolution to Brexit uncertainty, the value in the UK may provide an attractive entry point.

[metisdead]

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