The Baht Goes Crazy

[Irene]

I feel the baht won't drop below 34 (I'm talking against the USD and when xchanged here in LOS). I'm no expert; just a gut feeling that it's leveling off now and within 1 year will crawl back to 40.

Maybe it's just wishful thinking........bet on black.......

Hi, LoveDaBlues,

I like to think that you are right. But I think you are having a high hope for the Baht to be weakened to 40. Because of the weakness of USD due to US's imbalance of trade and Asian surplus reserve being invested in USD, it is avoidable that Asian currencies would go on to be stronger. Breaking 34 is not difficult if no governmental intervention. I just simply hope that I am wrong for the sake of Thai exporters and tourist industry.

[bingobongo]

these clowns cant do anything correctly

Thailand Investment Curbs Backfire, Set Stage for Rally in Baht

``The capital controls are supposed to curb the baht's rise but every time they do something stupid it decreases consumption and imports.''

http://www.bloomberg.com/apps/news?pid=206...&refer=asia

Edited April 1, 2007 by bingobongo

[LaoPo]

these clowns cant do anything correctly

Thailand Investment Curbs Backfire, Set Stage for Rally in Baht

``The capital controls are supposed to curb the baht's rise but every time they do something stupid it decreases consumption and imports.''

http://www.bloomberg.com/apps/news?pid=206...&refer=asia

Interesting article....thank you Bingobongo!

All in all, imports have dropped significantly and the surplus have never been so high and: "Currency reserves reached $69.6 billion, the report showed.".

Forecast growth however is down to 4% from 4.3%. ...in a region that only shows growth!

The forecastreports say the value of the Baht is increasing....

It's just a matter of time that exports will drop dramatically.

The vessel 'Thailand' is approaching bad weather...very bad.

LaoPo

[bingobongo]

the strengthening baht is ot only affecting exports, but also tourism

Business >> Monday April 02, 2007

TOURISM ASIAN ARRIVALS

Japanese tourists drop on security fears, baht

Concerns about safety and the ongoing appreciation of the baht have taken a toll on tourism, with Japanese arrivals to Thailand dropping by 10% year-on-year in the first three months of 2007.

''Normally, the annual growth of Japanese tourist arrivals to Thailand is about 8-10%. If the downward trend continues until the end of the year, we're afraid that Japanese arrivals will not reach the number we achieved last year,'' said Anake Srishevachart, president of the Thai-Japan Tourism Association, representing inbound travel providers.

Last year, Japanese tourist arrivals totalled 1.3 million, a rise from 1.1 million in 2005.

Although the figure for the first three months of 2007 is not yet official, Japanese tourist arrivals at Suvarnabhumi Airport were reported down by 7.93% to 95,759 from 100,028 at the same period last year.

Mr Anake attributed the drop to a lack of confidence in Thailand's safety measures, growing unrest in the South and fears of further incidents in Bangkok such as the Dec 31 bombings.

Many charter flights such as large tour, incentive and student groups had been cancelled, with most deciding to visit other countries such as China and Vietnam.

Mr Anake said the baht's appreciation had also played a key role by increasing the cost of visiting Thailand. The baht recently reached a high of 28 against 100 yen and now is trading around 29.5, compared with 38 in the first two months of last year.

To encourage Japanese tourists to visit Thailand, authorities are being urged to request co-operation from major Japanese tour operators to help reassure potential travellers.

Mr Anake said the private sector should also focus on attracting tourists from Eastern Europe, the Middle East and India.

Thai authorities are scheduled to visit Japan from today until Friday to promote trade, investment and tourism as part of the celebration of the the 120th anniversary of diplomatic relations between Japan and Thailand.

Seminars on trade, investment and tourism will be held in Tokyo and Osaka.

According to Phornsiri Manoharn, the governor of the Tourism Authority of Thailand, the Japanese and Thai governments have agreed to designate 2007 as the Thailand-Japan Tourism Exchange Year. Many activities will be staged to underline the relationship between the two countries.

http://www.bangkokpost.com/Business/02Apr2007_biz31.php

Edited April 1, 2007 by bingobongo

[Naam]

I have more money than you, I make more money than you and I kick your ass in every market in any time frame. How does that sound to you?

it sounds terrifying that you are able to look into my portfolio and compare my holdings with yours. are you a clairvoyant or do you possess a crystal ball? can you tell me what trading hours you use that i can avoid your kicking my ass in the markets?

now go to Mama and tell her you made again an ass of yourself.

[Khun Bob]

apologies all for my earlier OT questions - however thankyou for the good advice

KB

[j_cheung]

in the present global financial environment i also don't see too much profit trading bonds but i am a firm believer of investing in bonds. we had nearly a decade of big bond price fluctuations, alas... that period ended more or less two years ago. the same goes for yields. five years ago i wouldn't have looked at debtors (sovereign and corporates) who offered a yield of less than 15%, in some not so rare cases yields of 20% were quite common. nowadays i scour the bond market's new emissions and consider myself lucky if i find in €UR a 7.5% and in USD a 9.5% yield (all of course in relation to risk).

Hello Dr. Naam & the rest. It's always nice to learn from experienced investors around this forum & beyond. Do you have any opinions on those high yielding Central & Eastern European gov't. bonds (e.g. Hungarian) or non-indexed Icelandic T-bills & T-bonds (i.e. Icebonds)?

Thanks,

J

[sfokevin]

Repo rate could spell end for Tarisa's term

The decision of the central bank's Monetary Policy Committee (MPC) on the one-day repurchase rate at their April 11 meeting is likely to prove critical to Tarisa Watanagase's position as governor of the Bank of Thailand (BOT) amid wide rumours that politicians are not satisfied with her performance.

The unremunerated reserve requirement is the biggest issue threatening the central bank chief's position, followed by the latest request to commercial banks to adjust their net foreign positions.

Politicians, who see strong reasons to sack her at the moment, might use the MPC decision on policy interest-rate reduction as an excuse.

Finance Minister Chalongphob Sussangkarn's commitment to give the BOT a free hand to run its monetary policy cannot safeguard the governor's position. As an economist, Chalongphob can understand the differing views of other economists within reason, but that may not be the case with non-economists, who are unlikely to see reason in policy decisions eroding their wealth.

MR Chatu Mongol Sonakul was fired as central-bank governor during Thaksin Shinawatra's first stint as premier. He was accused of not satisfying the government's need to cut the policy rate as the BOT was too concerned with inflationary pressure, especially as the inflation-targeting framework had just been adopted at that time.

The Finance Ministry and economists have put tremendous pressure on the central bank to cut the key rate by 0.5-1 per cent, saying the fragile state of the economy needs a boost while inflation is falling. The big cut in interest rate is believed to be the once-and-for-all medicine for the baht's appreciation.

The prospect of a 50-basis-point cut in the key policy rate now looms, following the sharp rise in oil prices again following new tensions in the Middle East, between Iran and Britain.

The BOT, which once strongly confirmed its stance to focus mainly on the inflation-targeting framework, last week ignited market hopes by signalling that a 50-basis-point cut made sense if economic growth was lower than expected, as inflation was under control.

The central bank is more optimistic that oil prices will remain at last year's level while sluggish consumption will not accelerate inflation.

This hints at the possibility of a half-percentage-point rate cut, but the decision would not guarantee Tarisa her post, especially if politicians cite the rate cut as not enough.

The BOT could be blamed for giving a vaccine overdose by introducing the capital-reserve requirement with the aim of weakening the baht. Although the stock market crashed one day after the bitter measure was prescribed on December 18 last year, and the bond market has been in high volatility, the one-way baht appreciation at least has ceased as seen by the fact that the currency has appreciated only slightly since the beginning of this year.

The baht now moves in a range of Bt34.80-Bt35 to the US dollar, compared with Bt35.46 at the beginning of this year.

The central bank realises that it underestimated the market's reaction and the extent of the negative impact of the measure, so it has tried to meet the market's needs as much as possible.

When baht speculation by two Thai banks was discovered, the BOT asked the Thai Bankers' Association to tell its members to report foreign-exchange positions on a daily basis, paving the way for banks to check one another. Unfortunately, the message sent to banks was unclear, resulting in baht volatility and the rumour of a change in currency regime.

The BOT was blamed for its poor communication when commercial banks could not understand the message and not all the banks got the request for net-position adjustment at the same time. This disadvantaged banks which received the information late.

Actually, the BOT wanted to stop the baht speculation of the two Thai banks, accused of selling dollars largely on the same day as exporters' US dollar sell-off, which caused the baht to strengthen rapidly.

No one had expected any Thai entity to speculate on the home currency, especially after foreign speculators had been prohibited to do so. The BOT's secretive and quiet action has led to it become the scapegoat as the names of the two banks have not been divulged.

Tarisa may have let the two banks escape from the scandal, but will she herself become a scapegoat?

Anoma Srisukkasem

The Nation

[Naam]

Hello Dr. Naam & the rest. It's always nice to learn from experienced investors around this forum & beyond. Do you have any opinions on those high yielding Central & Eastern European gov't. bonds (e.g. Hungarian) or non-indexed Icelandic T-bills & T-bonds (i.e. Icebonds)?

the honey moon in HUF (hungarian currency) is over and that goes for all eastern european government and corporate bonds and their currencies. the only high yielding currencies in Europe (or nearby) are ISK (Iceland Kronar) and TRY (Turkish Lira). there is no need to buy T-bills etc. as a variety of A-AAA rated debtors exist which have emitted bonds in both currencies.

examples:

ISK - debtor Deutsche Bank XS0280185090 mat. feb1, 2008 - yield ~12.5%

TRY - debtor Republic of Austria XS0260875033 mat. jul15, 2008 - yield ~18.10%

higher yields in both currencies are achievable by investing in corporate bonds but not advisable as one adds debtor risk to currency risk.

another high yield currency is BRL (Brazilian Real) with government bonds yielding ~12%. not advisable too as the Real has strengthened considerably against most currencies during the last years.

[Naam]

another interesting HY currency is MXN (Mexican Peso), especially for "USD-investors". the higher yield in MXN (~9.5%-10% depending on debtors' rating) has more than balanced the depreciation.

[PCA]

I have more money than you, I make more money than you and I kick your ass in every market in any time frame. How does that sound to you?

it sounds terrifying that you are able to look into my portfolio and compare my holdings with yours. are you a clairvoyant or do you possess a crystal ball? can you tell me what trading hours you use that i can avoid your kicking my ass in the markets?

now go to Mama and tell her you made again an ass of yourself.

Oh you bad boy, I am really depressed now. I doubt that Mama can help me here so I will rather go to see the Doctor.

[ray23]

Dr Naam whats your best guess as to what we will see here in Thailand over the next 18 Months?

[old blighty]

Well, well, well. I can’t see any logical explanation of any of it.

No sooner do the wild gyrations in the trading of the Bendix / Topfield pair reach a gentlemanly equilibrium, clearly the result of the offshore Mustafa rate wittiness avoiding a “vicious cycle of an inexorably strengthening flame out” (Bloomberg), than a fairly strongly expressed opinion from the imperious, and (not so) humble Dr Naam results in a spike in hot words, only understandable in charts found in Germany and Pattaya.

In the circumstances, let us hope that the application of Occam’s Razor by Sonicdragon: “Although it's an extremely simple theory, it does seem to explain what has been observed. I like simple theories because they are easy to modify and build on” (Mustafa’s cousin in SupaRich is behind it all?) avoids BOT intervention causing immediate collapse in the value of the thread.

[wasabi]

.``The baht is generally strong because we've seen quite a big drop in imports,'' said Alistair Thompson, who helps manage $18 billion of Asia-Pacific stocks and global emerging markets at First State Investments in Singapore. `.

Why does a drop in imports make a currency rise? Logically I assume this means exports are strong but if the currency is rising why would they be strong and if Thai's can buy more with their baht why aren't imports stronger?

[Old Man River]

.``The baht is generally strong because we've seen quite a big drop in imports,'' said Alistair Thompson, who helps manage $18 billion of Asia-Pacific stocks and global emerging markets at First State Investments in Singapore. `.

Why does a drop in imports make a currency rise? Logically I assume this means exports are strong but if the currency is rising why would they be strong and if Thai's can buy more with their baht why aren't imports stronger?

Wasabi, not wanting to go through a long economic explanation, and believe me I am doing you a favor, in short when exports exceed imports it means the country has a current account surplus. If this happens over a period of time, then the country will be bringing in more foreign currency than goes out, increasing its foreign reserves (which are now over USD 69 billion). Ordinarily, this would be a sign of health in a country.

However, we all know that Thailand's economy is not healthy, with consumer and investment spending down and export growth slowing. As this Bloomberg report pointed out, there are a lot of factors at play now and the situation is not rosy as the current account surplus would indicate.

[wilko]

It might be worth bearing in mind that the baht is an extremely small and little traded currency and the value is quite likely dictated by a small number of deals by an equally small number of people....mostly rich locals I would image who could have great fun switching their currency stocks around from time to time.

Edited April 2, 2007 by wilko

[Naam]

Dr Naam whats your best guess as to what we will see here in Thailand over the next 18 Months?

i don't even try guessing Ray but the appreciation has stopped since a few days. analysts expect another rate cut of 0.25%, a minority forecasts even a cut 0.50% by the BOT. perhaps that's why the markets are in 'stand-by' mode.

[bingobongo]

BOT fails to reveal which 2 thia banks were speculating.....this is getting interesting.

this is going to end very very badly.....

ANALYSIS

Repo rate could spell end for Tarisa's term

"No one had expected any Thai entity to speculate on the home currency, especially after foreign speculators had been prohibited to do so. The BOT's secretive and quiet action has led to it become the scapegoat as the names of the two banks have not been divulged. "

http://www.nationmultimedia.com/2007/04/02...ss_30030845.php

[sfokevin]

So it was not the EVIL foreigners causing all the problems... Will we ever get to know which THAI banks were speculating??? More cracks in the BOT face...

Edited April 2, 2007 by sfokevin

[cclub75]

So it was not the EVIL foreigners causing all the problems... Will we ever get to know which THAI banks were speculating??? More cracks in the BOT face...

Well... Not so fast. It could be a matter of... point of view.

A commercial bank who knows that the major trend of USD is negative... And therefore want to reduce its positions in USD (selling its USD against THB)... Could be a smart bank.

But in the BOT's eyes, this bank would be unpatriotic, would be an uggly speculator...

In the same way, the BOT increases its USD reserves (we almost reach 70 billions now after their several interventions on the market). And meanwhile the value of its reserves is going down.

This is idiotic. But for the BOT i'm sure they see themselves as saviors of the nation.

Edited April 2, 2007 by cclub75

[sonicdragon]

It's likely that there will be an interest rate cut soon. Personally I think the effect on the baht will be minimal. It might even cause a limited strengthening if only a small cut is implemented while the market expects more.

More importantly, the prospect of elections should have a much stronger bearing on the baht. If the market believes a new elected government with credible economic policies will be in power soon, it should support the baht. If elections are delayed and/or there are doubts about the credibility of economic policies (which I think is very likely) it will put pressure on the baht to weaken.

Another important factor is China. If the US imposes tarrifs on low value added goods made in china, which is more than a remote possibility (in fact it has already started), this will make other asian economies exports much more attractive, which will put upward pressure on their respective currencies.

[bingobongo]

Tuesday April 03, 2007

Officials may cut taxes to jolt economy

Populist schemes may be revived

WICHIT CHANTANUSORNSIRI

Policymakers will meet today to debate new tax cuts and stimulus measures to help boost economic growth. Finance Minister Chalongphob Sussangkarn is scheduled to meet with several ministry working groups that have been reviewing ways to accelerate fiscal spending to help increase consumption and investment.

The proposals include a call to temporarily cut special business taxes and transfer taxes for property transactions. Special business taxes will be cut to 0.1% from 3.3%, with transfer taxes reduced to 0.01% from 2% _ reductions that mirror tax cuts implemented after the 1997 crisis to boost the property market.

Finance Ministry officials privately agree that the measures are unlikely to have a significant impact on the property market, as transactions have fallen in recent months due to weak sentiment and consumer confidence rather than concerns over prices.

''But at the least, it will be a positive sign for the economy, which to date has been hit only with negative news,'' one official said.

More tangible will be a revival of state development programmes for low-income rural communities.

A number of development programmes initiated under the Thaksin Shinawatra government were cut back following the Sept 19 coup after his critics labelled them populist and said they undermined financial discipline among rural households.

Authorities now are considering reviving several spending programmes to help directly inject state funds into rural communities as a rapid and relatively efficient means of spurring consumption.

State development banks such as the Government Savings Bank and the Bank for Agriculture and Agricultural Co-operatives will also be urged to review their lending plans upwards after several bank leaders indicated that lending growth would fall this year due to the weak economy and growing concerns over asset quality.

Dr Chalongphob recently told state bank executives that they should focus on lending growth, albeit while maintaining prudent credit standards to minimise potential non-performing loans.

State enterprises and government agencies will also be directed to accelerate budget disbursements and new investments to meet an overall disbursement target of 93% for the fiscal year ending in September.

Meeting the investment target however would require spending of up to 180 billion baht per month for the six months remaining in fiscal 2007, an unlikely task given that state spending programmes have stalled because of bureaucratic fear of an expanding corruption investigation into the actions of state officials by the Asset Scrutiny Committee.

The 2007 fiscal budget calls for expenditures of 1.56 trillion baht, with state enterprises budgeting another 400 billion in investments this year.

The Finance Ministry currently forecasts economic growth this year at 4% to 4.5%, although most private economists say growth is likely to be lower due to political and economic uncertainties.

According to the Bank of Thailand, a number of companies in the electrical appliance, auto, textiles and construction sectors have already begun cutting back production due to weak demand.

Production of televisions, for instance, fell 8.8% in February from the year before, the fourth straight month of declines, while production of electric fans dropped 11.2% in February from the year before.

Production of other kitchen appliances, including refrigerators and rice cookers, registered similar declines, although the output of air-conditioners and washing machines increased in the first two months of the year compared with the same period last year.

Edited April 2, 2007 by bingobongo

[j_cheung]

Tuesday April 03, 2007

Officials may cut taxes to jolt economy

Populist schemes may be revived

WICHIT CHANTANUSORNSIRI

Policymakers will meet today to debate new tax cuts and stimulus measures to help boost economic growth. Finance Minister Chalongphob Sussangkarn is scheduled to meet with several ministry working groups that have been reviewing ways to accelerate fiscal spending to help increase consumption and investment.

The proposals include a call to temporarily cut special business taxes and transfer taxes for property transactions. Special business taxes will be cut to 0.1% from 3.3%, with transfer taxes reduced to 0.01% from 2% _ reductions that mirror tax cuts implemented after the 1997 crisis to boost the property market.

Finance Ministry officials privately agree that the measures are unlikely to have a significant impact on the property market, as transactions have fallen in recent months due to weak sentiment and consumer confidence rather than concerns over prices.

''But at the least, it will be a positive sign for the economy, which to date has been hit only with negative news,'' one official said.

More tangible will be a revival of state development programmes for low-income rural communities.

A number of development programmes initiated under the Thaksin Shinawatra government were cut back following the Sept 19 coup after his critics labelled them populist and said they undermined financial discipline among rural households.

Authorities now are considering reviving several spending programmes to help directly inject state funds into rural communities as a rapid and relatively efficient means of spurring consumption.

State development banks such as the Government Savings Bank and the Bank for Agriculture and Agricultural Co-operatives will also be urged to review their lending plans upwards after several bank leaders indicated that lending growth would fall this year due to the weak economy and growing concerns over asset quality.

Dr Chalongphob recently told state bank executives that they should focus on lending growth, albeit while maintaining prudent credit standards to minimise potential non-performing loans.

State enterprises and government agencies will also be directed to accelerate budget disbursements and new investments to meet an overall disbursement target of 93% for the fiscal year ending in September.

Meeting the investment target however would require spending of up to 180 billion baht per month for the six months remaining in fiscal 2007, an unlikely task given that state spending programmes have stalled because of bureaucratic fear of an expanding corruption investigation into the actions of state officials by the Asset Scrutiny Committee.

The 2007 fiscal budget calls for expenditures of 1.56 trillion baht, with state enterprises budgeting another 400 billion in investments this year.

The Finance Ministry currently forecasts economic growth this year at 4% to 4.5%, although most private economists say growth is likely to be lower due to political and economic uncertainties.

According to the Bank of Thailand, a number of companies in the electrical appliance, auto, textiles and construction sectors have already begun cutting back production due to weak demand.

Production of televisions, for instance, fell 8.8% in February from the year before, the fourth straight month of declines, while production of electric fans dropped 11.2% in February from the year before.

Production of other kitchen appliances, including refrigerators and rice cookers, registered similar declines, although the output of air-conditioners and washing machines increased in the first two months of the year compared with the same period last year.

Right, and let's blame Thaksin for all that & then some more! ... Just kidding ...

[j_cheung]

Hello Dr. Naam & the rest. It's always nice to learn from experienced investors around this forum & beyond. Do you have any opinions on those high yielding Central & Eastern European gov't. bonds (e.g. Hungarian) or non-indexed Icelandic T-bills & T-bonds (i.e. Icebonds)?

the honey moon in HUF (hungarian currency) is over and that goes for all eastern european government and corporate bonds and their currencies. the only high yielding currencies in Europe (or nearby) are ISK (Iceland Kronar) and TRY (Turkish Lira). there is no need to buy T-bills etc. as a variety of A-AAA rated debtors exist which have emitted bonds in both currencies.

examples:

ISK - debtor Deutsche Bank XS0280185090 mat. feb1, 2008 - yield ~12.5%

TRY - debtor Republic of Austria XS0260875033 mat. jul15, 2008 - yield ~18.10%

higher yields in both currencies are achievable by investing in corporate bonds but not advisable as one adds debtor risk to currency risk.

another high yield currency is BRL (Brazilian Real) with government bonds yielding ~12%. not advisable too as the Real has strengthened considerably against most currencies during the last years.

Thanks, Dr. Naam. I'll look into that later this week. BTW, TRY is for the Republic of Turkey I guess?

[Old Man River]

So it was not the EVIL foreigners causing all the problems... Will we ever get to know which THAI banks were speculating??? More cracks in the BOT face...

Well, it was both the evil foreigners and evil locals who have been speculating on the THB.

First, it was foreign speculators, which is why the capital controls were initiated, separating the offshore market and the onshore market.

Then, exporters (both foreign and Thai) speculated on the THB.

Then, two Thai banks got in on the action, but they would have needed offshore counterparties to arbitrage the onshore and offshore rates, so again both were involved.

In summary, when there is money to be made, nationalism often takes a back seat.

[ray23]

Thanks Dr. Namm

An interesting aside to this when I contact my friends in the Good of old US of A, they donlt have clue that thier currency is weakening, to them it is business as usual

I'm willing to bet the average Thai is no different

[Naam]

Thanks, Dr. Naam. I'll look into that later this week. BTW, TRY is for the Republic of Turkey I guess?

the issuer of the bond i mentioned is Republic of Austria but the bond is denominated in Turkish Lira. it's a hassle to deal with turkish government bonds because it requires a bank account in Turkey.

[ozzydom]

US $ down to 32.53 baht,where is the bottom?

[bendix]

US $ down to 32.53 baht,where is the bottom?

Well, the offshore rate fell below 32 last week, so perhaps it's found it already and we didnt notice.

Baht also seems to have weakened marginally against the Aussie and Kiwi this week too.

[ray23]

USD50 USD : 50-100 34.56 35.21

Bangkok Bank two Mins ago, but that seems to hold more steady then the off shore rate.

I have also noticed when I use my American ATM card at that bank I usually gte a little more then the qouted price.