Baht keeps strength despite coronavirus outbreak, economic decline

[stament]

6 minutes ago, saengd said:

I wouldn't want to begin to guess at what the rates might do over the next few months, all the indications are that THB will weaken but anything could happen, the flu is a real game changer and also a huge unknown. The 200 day moving average tells the story, that determines a meaningful trend. I'm only really interested in the longer term direction, 2, 5 and 10 years and looking at that picture I continue to think THB will remain strong(er), 25 per USD is the future.

If it gets to 32.+ over the next couple of months I will be more than happy.

[saengd]

12 hours ago, ThaiBrian said:

It broke out of a long, long downtrend with the BAHT/USD pair. I'm in desperate need of BAHT but I'm waiting until the end of the month when rent and bills are due. And I'll only take out what I need as I suspect the baht will continue to drop against the dollar.

 

Actually, I'm wrong. Just pulled up the chart. On the daily, we're very bullish, but weekly and monthly shows we are very far from breaking the downtrend. But, the fundamentals can change that. Thailand seems to be on the cusp of an economic recession/depression. 

You can't really tell much about trend using intraday readings, a trend is not confirmed on anything less than a 200MA, you may as well look at the tea leaves to be honest.

 

And when you mention fundamentals whatever are you talking about? Thailand's economic fundamentals don't change by the day or at the drop of a hat, they include such things as:

 

- low tax regime

- high foreign currency reserves

- readily available work force

- low social security overheads

- complete infrastructure

- low foreign debt, low government debt

- governed by the rule of law

 

All of that said, it is very probable that Thailand will see negative growth for two or more consecutive quarters this year, technically a recession, but there again many many other countries will also be in that same boat, this year and next so there's nothing too interesting or unique about that.

 

 

[saengd]

The upsurge in flu cases in Japan and Korea is a real worry for Thailand's economy downstream, this is potentially a game changer for Thailand's economy. Global supply chains have already been disrupted as a result of the situation in China, components are no longer shipped and assembly plants have stalled because of labor shortages and government closures. The impact of these things on Thailand's manufacturing and assembly business could be harsh. But it now looks like Japan and Korea could also follow the same pattern as China and if so, that will compound the problem. The impact on Thailand's exports may be dire and reduce substantially all exports that are dependent on overseas inputs. Here's Thailand's top 10 exports:

 

1. Machinery including computers: US$40.2 billion (16.4% of total exports)
2. Electrical machinery, equipment: $33.9 billion (13.8%)
3. Vehicles: $28.9 billion (11.8%)
4. Gems, precious metals: $15.7 billion (6.4%)
5. Rubber, rubber articles: $15.3 billion (6.3%)
6. Plastics, plastic articles: $13.3 billion (5.4%)
7. Mineral fuels including oil: $8.5 billion (3.5%)
8. Meat/seafood preparations: $6.7 billion (2.7%)
9. Optical, technical, medical apparatus: $5.4 billion (2.2%)
10. Organic chemicals: $4.6 billion (1.9%)

The top 3 exports represent 42% of all exports and all of them are dependent on foreign imports, mostly from China, Korea, Japan and the US. Around twenty other countries each supply lesser amounts in order to complete the chain but if the top three countries can't deliver supplies, that will have a negative impact on the economies of those countries also.

 

If the pattern continues as at present there is a good chance Thailand could see not only it's tourism business take a significant hit but also a huge chunk of its (other) export business also, recession is almost assured. I'm sure that most Thai bashers will blame this on government but the real cause is the high degree to which everything is interconnected and the dependency businesses have on external factors.

 

The only slight compensation I can see if that happens is that many many other countries will be in a similar position, worryingly that would probably see the global economy enter recession. But we're not there yet so let's not jump the gun, hopefully things won't pan out this way and there will be a change for the better, soon.

 

 

 

 

 

[stament]

Seems like the dollar might beach the ???? mark from what I've read. People looking for gold and USD as a safe haven would be good news for USD owners like me wanting baht.

 

 

[saengd]

4 minutes ago, stament said:

Seems like the dollar might beach the ???? mark from what I've read. People looking for gold and USD as a safe haven would be good news for USD owners like me wanting baht.

 

 

USD has reached 163 in the past, 100 is nothing to get too excited about.

[Kenny202]

2 hours ago, saengd said:

The upsurge in flu cases in Japan and Korea is a real worry for Thailand's economy downstream, this is potentially a game changer for Thailand's economy. Global supply chains have already been disrupted as a result of the situation in China, components are no longer shipped and assembly plants have stalled because of labor shortages and government closures. The impact of these things on Thailand's manufacturing and assembly business could be harsh. But it now looks like Japan and Korea could also follow the same pattern as China and if so, that will compound the problem. The impact on Thailand's exports may be dire and reduce substantially all exports that are dependent on overseas inputs. Here's Thailand's top 10 exports:

 

1. Machinery including computers: US$40.2 billion (16.4% of total exports)
2. Electrical machinery, equipment: $33.9 billion (13.8%)
3. Vehicles: $28.9 billion (11.8%)
4. Gems, precious metals: $15.7 billion (6.4%)
5. Rubber, rubber articles: $15.3 billion (6.3%)
6. Plastics, plastic articles: $13.3 billion (5.4%)
7. Mineral fuels including oil: $8.5 billion (3.5%)
8. Meat/seafood preparations: $6.7 billion (2.7%)
9. Optical, technical, medical apparatus: $5.4 billion (2.2%)
10. Organic chemicals: $4.6 billion (1.9%)

The top 3 exports represent 42% of all exports and all of them are dependent on foreign imports, mostly from China, Korea, Japan and the US. Around twenty other countries each supply lesser amounts in order to complete the chain but if the top three countries can't deliver supplies, that will have a negative impact on the economies of those countries also.

 

If the pattern continues as at present there is a good chance Thailand could see not only it's tourism business take a significant hit but also a huge chunk of its (other) export business also, recession is almost assured. I'm sure that most Thai bashers will blame this on government but the real cause is the high degree to which everything is interconnected and the dependency businesses have on external factors.

 

The only slight compensation I can see if that happens is that many many other countries will be in a similar position, worryingly that would probably see the global economy enter recession. But we're not there yet so let's not jump the gun, hopefully things won't pan out this way and there will be a change for the better, soon.

 

 

 

 

 

Thats an interesting breakdown, particularly Gems precious metals? Is there a mining industry here or is it processing other countries minerals / gems?

Edited February 23, 2020 by Kenny202

[saengd]

4 minutes ago, Kenny202 said:

Thats an interesting breakdown, particularly Gems precious metals? Is there a mining industry here or is it processing other countries minerals / gems?

There is some gold mining here but the gems industry expertise is in the area of finishing, 80% for export, some useful blurb below. It's a big industry that employs over 1.5 million people, that's a lot given the workforce is only 22 million. But the sector is buoyant and very profitable.

 

https://infocenter.git.or.th/Content_View.aspx?id=2404&lang=EN&mail=1

https://www.boi.go.th/tir/issue/201412_24_12/42.htm

[stament]

7 hours ago, saengd said:

USD has reached 163 in the past, 100 is nothing to get too excited about.

WHOA

[morrobay]

On 2/20/2020 at 5:34 PM, saengd said:

Sorry, forgot to add....I'm very much in the camp that says USD/THB will head towards 25 over the next decade, I just don't believe for one second it's going the other way. And since GBP/USD is based almost solely on USD/THB, I'm expecting low to mid 30's for the Pound over that same period.

The THB/GBP is based on: 31B/$ / P/$1.3 = 40.1B/P  For your 30B/P = 25B/$ / P/$1.2 

[saengd]

18 minutes ago, morrobay said:

The THB/GBP is based on: 31B/$ / P/$1.3 = 40.1B/P  For your 30B/P = 25B/$ / P/$1.2 

Yep, I screwed that one horribly, sorry, I got my currency codes the wrong way round!

[Roadkillaf]

I have a ton of my funds now in Baht, so I'm confident that it will only increase in value. I'll seek out of information supporting my preference and then it will be fact. I insist. 

[saengd]

3 hours ago, Roadkillaf said:

I have a ton of my funds now in Baht, so I'm confident that it will only increase in value. I'll seek out of information supporting my preference and then it will be fact. I insist. 

If you live here it won't need to increase in value, in fact it could even fall, it won't matter....the Baht in your pocket and all that!

[Airalee]

16 hours ago, saengd said:

There is some gold mining here but the gems industry expertise is in the area of finishing, 80% for export, some useful blurb below. It's a big industry that employs over 1.5 million people, that's a lot given the workforce is only 22 million. But the sector is buoyant and very profitable.

 

https://infocenter.git.or.th/Content_View.aspx?id=2404&lang=EN&mail=1

https://www.boi.go.th/tir/issue/201412_24_12/42.htm

Thanks.  I was going to ask the same question.   I was also curious about the gold exports as lately, it seems as if when the reports were coming out regarding exports falling but gold exports rising it made me wonder what kind of gold are they exporting and to whom?  Is it Thai gold (lower purity) or are they exporting .999 bullion?  And is it freshly mined (for lack of a better descriptor) or is it also central bank gold reserves as I noticed a slight dip in the central bank holdings (sorry that I don’t have the official link for that).   Gold has always seemed to be one of those strange markets (outside of jewelry) that it is hard for me to wrap my head around.

[saengd]

2 hours ago, Airalee said:

Thanks.  I was going to ask the same question.   I was also curious about the gold exports as lately, it seems as if when the reports were coming out regarding exports falling but gold exports rising it made me wonder what kind of gold are they exporting and to whom?  Is it Thai gold (lower purity) or are they exporting .999 bullion?  And is it freshly mined (for lack of a better descriptor) or is it also central bank gold reserves as I noticed a slight dip in the central bank holdings (sorry that I don’t have the official link for that).   Gold has always seemed to be one of those strange markets (outside of jewelry) that it is hard for me to wrap my head around.

I don't know much about what's happening with gold in Thailand, here's what I do know:

 

In about 2011 BOT doubled its gold reserves from about 80 to about 160 tons, in the last year BOT's gold reserves increased in value by a massive 20% but this was a result of gold price inflation. BOT's gold reserves are now the 29th largest of any country in the world, 

 

BOT has been selling gold during 2019 and again this year, I imagine this has something to do with currency management but I don't know what or how.

 

Gold Reserves are in addition to Foreign Currency Reserves, Gold Reserves are now USD 244 bill. whereas Foreign Currency Reserves are USD 219 bill. Put another way Thailand has one years GDP in a savings account! If anyone is wondering why the Baht is so strong this may be a clue!

 

Thai jewelry is mostly for export, Hong Kong is a huge market for them, what type of gold I've no idea although I seriously doubt they are exporting bullion.

 

There isn't much by way of gold mining in Thailand, the industry is currently in arbitration under WTO rules. I think the gold exports are a side effect of their gem setting and refinishing work but I'm not certain.

 

https://tradingeconomics.com/thailand/gold-reserves

https://tradingeconomics.com/thailand/gold-reserves?embed

https://goldprice.org/gold-price-charts/5-year-gold-price-history-in-thai-baht-per-ounce

https://www.bot.or.th/App/BTWS_STAT/statistics/ReportPage.aspx?reportID=94&language=eng

https://www.bullionvault.com/gold-news/infographics/worlds-central-bank-gold-reserves-interactive-map

 

 

 

 

[Chivas]

On 2/21/2020 at 4:56 AM, stament said:

If it gets to 32.+ over the next couple of months I will be more than happy.

Its only 32 Satang shy of that target interbank this morning

I'd be expecting 33 over next 1-2 months. The chickens are coming home to roost here

[saengd]

Both Dollar and Gold benefiting from being a virus hedge.

[stament]

2 hours ago, Chivas said:

Its only 32 Satang shy of that target interbank this morning

I'd be expecting 33 over next 1-2 months. The chickens are coming home to roost here

WOO HOO!

[stament]

2 hours ago, saengd said:

Both Dollar and Gold benefiting from being a virus hedge.

Yep, safe havens. Is there anything that could reverse this thinking and stop the buying of gold/USD with relation to the virus?

[saengd]

6 minutes ago, stament said:

Yep, safe havens. Is there anything that could reverse this thinking and stop the buying of gold/USD with relation to the virus?

A vaccine or news about how it could be stopped.

 

[stament]

1 hour ago, saengd said:

A vaccine or news about how it could be stopped.

 

So if the virus continues you would expect the dollar to continue to strengthen all other things being equal?

[ThaiBrian]

On 2/21/2020 at 11:56 AM, stament said:

If it gets to 32.+ over the next couple of months I will be more than happy.

Couple of months? I'm holding out for the end of this month. I usually withdraw sometime around the 15th. We're 0.25 away from 32. And I don't see it stopping there. The fundamentals look so ugly right now... and it looks like its going to get MUCH worse after reading today's news coming from Xi Jinping.

 

 

[saengd]

23 minutes ago, stament said:

So if the virus continues you would expect the dollar to continue to strengthen all other things being equal?

There are lots of possibilities with this, one is that China broadly recovers from the flu whilst it takes off in other parts of the world, possibly even in America. Another consideration is there are different hedges available, CHF is one, GBP can be another and of course there are other hedging options apart from currencies. Yet another scenario is that things get so bad that we see a global recession and we're not too far away from that point anyway, a market  meltdown is a real concern and get out at the right time.

 

But if you're looking for a temporary home to protect value, USD is a good bet but only if it pairs well with the currency you need and spend everyday anyway. But if you're looking to invest to make a profit there's no point in making a temporary profit that is lost when things return to normal, unless you are prepared to constantly watch the markets.

 

I hold GBP and THB in almost equal amounts and my income is in GBP, THB and USD. The value of USD is central to my holdings but since I don't spend USD I feel no need to hedge. If I earned in THB and had no other income right now I would probably hedge into USD until I was 50/50 or thereabouts, BUT, I would want to watch the markets like a hawk because I think the future of THB is up and that hedge could cost me in the medium term. But all of this is just me, others will have different thoughts based on their assets, holdings, income, future plans, currency needs etc etc.

Edited February 24, 2020 by saengd

[saengd]

7 minutes ago, ThaiBrian said:

Couple of months? I'm holding out for the end of this month. I usually withdraw sometime around the 15th. We're 0.25 away from 32. And I don't see it stopping there. The fundamentals look so ugly right now... and it looks like its going to get MUCH worse after reading today's news coming from Xi Jinping.

 

 

What are these fundamentals you mention?

[stament]

38 minutes ago, saengd said:

There are lots of possibilities with this, one is that China broadly recovers from the flu whilst it takes off in other parts of the world, possibly even in America. Another consideration is there are different hedges available, CHF is one, GBP can be another and of course there are other hedging options apart from currencies. Yet another scenario is that things get so bad that we see a global recession and we're not too far away from that point anyway, a market  meltdown is a real concern and get out at the right time.

 

But if you're looking for a temporary home to protect value, USD is a good bet but only if it pairs well with the currency you need and spend everyday anyway. But if you're looking to invest to make a profit there's no point in making a temporary profit that is lost when things return to normal, unless you are prepared to constantly watch the markets.

 

I hold GBP and THB in almost equal amounts and my income is in GBP, THB and USD. The value of USD is central to my holdings but since I don't spend USD I feel no need to hedge. If I earned in THB and had no other income right now I would probably hedge into USD until I was 50/50 or thereabouts, BUT, I would want to watch the markets like a hawk because I think the future of THB is up and that hedge could cost me in the medium term. But all of this is just me, others will have different thoughts based on their assets, holdings, income, future plans, currency needs etc etc.

I have USD and am looking to change into THB but the way things are going I'm thinking of holding out for a couple of months.

 

I also want to buy GBP but not that much to pay some expenses so aren't as bothered as lower value.

[Logosone]

I wouldn't hold the USD too long. It's been in a long uptrend, but we saw its gains take a nosedive last Friday with the poor PMI figures.

 

For the first time in four years US services did not have increased output. That's huge and could signal a slide down for the dollar now after the rally.

 

http://www.marctomarket.com/2020/02/the-rubber-band-snaps-back-dollar.html

[saengd]

9 minutes ago, stament said:

I have USD and am looking to change into THB but the way things are going I'm thinking of holding out for a couple of months.

 

I also want to buy GBP but not that much to pay some expenses so aren't as bothered as lower value.

Why not change 25% or so now and then set yourself a target price for the next 25%?

 

If you don't have strike price in mind that you're going to stick to you'll keep waiting and waiting and then suddenly the chance will have gone. I will buy THB at anything over 42, as soon as it hits 42 I will buy, regardless of whatever else is going on at the time. If I didn't do it that way I'd wake up one morning and all of sudden it would be 39 again.

[nauseus]

3 hours ago, stament said:

Yep, safe havens. Is there anything that could reverse this thinking and stop the buying of gold/USD with relation to the virus?

Gold has surged 27% since mid 2019, with the USD gaining slightly against most other paper money, way before the virus problem was known. The Thai Baht is actually down >5% against the USD since new year. 

 

This post makes a strange claim. 

Edited February 24, 2020 by nauseus

[saengd]

6 minutes ago, nauseus said:

Gold has surged 27% since mid 2019, with the USD was gaining slightly against most other paper money, way before the virus problem was known. The Thai Baht is actually down >5% against the USD since new year. 

 

This post makes a strange claim. 

I don't understand what you are saying is a strange claim, can you expand?

 

Against THB, gold has increased from 4100 to 5100 baht/oz

 

https://goldprice.org/gold-price-charts/5-year-gold-price-history-in-thai-baht-per-ounce

Edited February 24, 2020 by saengd

[nauseus]

1 minute ago, saengd said:

I don't understand what you are saying is a strange claim, can you expand?

Baht keeps strength

 

I am saying that it is weakening.

[saengd]

2 minutes ago, nauseus said:

Baht keeps strength

 

I am saying that it is weakening.

I agree THB is weakening also, I'm struggling to see where I have said otherwise.