Thailand could be a loser due to Covid-19, deglobalisation: Tisco analyst

By Wichit Chaitrong
The Nation

 

Head of Tisco’s economic strategy unit Komsorn Prakobphol

 

In an exclusive interview with The Nation, Komsorn Prakobphol advises investors to also closely monitor the US election and key business risks

 

Thailand may be a loser in this Covid-19 era amid deglobalisation, a Tisco analyst told The Nation in an exclusive interview, as he advised investors to also keep a hawk’s eye on the US election, which is among the four key risks. 

 

The US will hold its presidential election in November and investors are keenly watching the latest developments. Democratic candidate Joe Biden is presently ahead of President Donald Trump in opinion polls.

 

Trump has implemented business-friendly policies such as tax cuts. But Biden is campaigning for higher tax rates, the head of Tisco’s economic strategy unit Komsorn Prakobphol noted during the exclusive interview.

 

Trump is cutting income tax for the top bracket to 37 per cent and corporate tax to 21 per cent. Biden is expected to revert to the pre-2017 tax cuts level of up to 39.6 per cent for individuals earning more than $400,000 (Bt12.6 million) and a corporate tax of 28 per cent.

 

A latest opinion poll also suggests the Democrats will control both lower and upper Houses instead of just the lower House at present.

 

“Should that happen, it would give Biden a full mandate to implement his tax hike policy,” Komsorn said. 

 

Higher corporate tax would eat into company profits and, in turn, affect their share prices.

 

He said the tension between the US and China will continue even if Biden is elected the new US president. Biden will pursue a similar strategy to former president Barack Obama, such as creating a free trade zone without China, while he is even expected to take tougher action against Beijing than Obama did.

 

Another major risk is a second wave of Covid-19 infections.

 

While the number of new cases is creating a fresh record almost every day worldwide and especially in the United States, US stocks are still on a rising trend. New daily cases in the US in early July were more than 60,000, up from about 30,000 in April. But the present fatality rate of between 700 and 800 a day has dropped from over 2,000 in late March and early April.

 

“Investors are paying more attention to the sharp fall in the death rate, given advancing virus therapy and positive vaccine trial results,” Komsorn said.

Weaker-than-expected economic recovery is also another key risk for investors, he said, adding that a large number of workers have been laid off worldwide, while rehiring could be slower than expected.

 

“Large economies such as the US and China would be able to steer their economies out of trouble, but smaller ones such as Thailand would find it very difficult,” he warned.

 

Thailand which depends largely on export markets will suffer from a slower recovery as export markets shrink. Moreover Vietnam, equipped with many free trade agreements, is biting into Thailand’s global market share. 

 

Tisco forecast that the Thai economy will contract sharply by 6.4 per cent this year.

 

Thailand’s manufacturing sector is also a laggard, producing low-tech products. Meanwhile, South Korea and Taiwan will benefit from the advent of 5G technology, he said.

 

Komsorn proposed asset allocation themes based on global mega-trends.

 

Firstly, income inequity has been widening. Capitalists and business leaders benefited greatly from globalisation as they moved their production bases out of advanced economies to emerging countries such as China. But workers in advanced countries have lost jobs or were forced to take lower-wage jobs, leading to Brexit and the election of Trump, who took the nationalistic path, campaigning for “America First”.

 

Now, Covid-19 has worsened income inequality. Central banks around the globe are injecting money into the market via quantitative easing (QE) measures to shore up their economies. The resulting huge liquidity in the market is making share prices recover quickly and greatly benefiting investors, although a large number of workers worldwide have been laid off due slowing economies.

 

For example, the US Federal Reserve has gone in for massive QE, estimated to be $3 trillion in a matter of just a few months compared to similar accumulated amounts over the past 10 years, Komsorn pointed out.

 

Income inequality will be a time-bomb, he warned.

 

"There is also inequality between generations. Youth are revolting against older generations, as we have seen in the climate change campaign led by teenager Greta Thunberg. New generations tend to elect politicians who propose higher tax rates and generous social welfare. But faced with high debts, many governments will find it very difficult to implement generous social welfares programmes," he said.

 

In these circumstances, investors are advised to also hold gold as a hedge against risks, Komsorn said.

 

The reversal of globalisation, or deglobalisation, will lead many manufacturers to relocate their factories back to their home countries. Since advanced economies have a limited working force, factories will install more robots and go in for increased automation.

 

In this situation, emerging economies like Thailand would be the losers, he said.

 

The coronavirus pandemic may also change consumer behaviour: many people might stop going to shopping malls in a post-pandemic situation as they become used to online shopping and social distancing caused by the virus, Komsorn added.

 

Source: https://www.nationthailand.com/business/30391769

 

-- © Copyright The Nation Thailand 2020-07-23

 

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A lot to digest in the article.  Many things are currently occurring, and added to what the crystal ball outlook he posts about says it just might happen. Indeed should the cards fall as he says then it is another gut punch for Thailand.  Economically, Thailand needs to start getting investors lined up, but not put all there eggs in one basket like they have the past 5 years. Better to be diversified then hanging onto the coattails of the Chinese. 

Edited July 23, 20205 yr by ThailandRyan

3 hours ago, ThailandRyan said:

A lot to digest in the article.  Many things are currently occurring, and added to what the crystal ball outlook he posts about says it just might happen. Indeed should the cards fall as he says then it is another gut punch for Thailand.  Economically, Thailand needs to start getting investors lined up, but not put all there eggs in one basket like they have the past 5 years. Better to be diversified then hanging onto the coattails of the Chinese. 

Military juntas rarely think of investment, unless it is in arms. 

 

Thailand is more likely to be a winner from companies relocating out of China.

Deglobalisation is a good thing. While "Thailand", as in usurpers and other 1% might be losers, the common Thai might actually win their country back. All they need to do is to get rid of the aforementioned.

Edited July 23, 20205 yr by DrTuner

As long as nothing affects the London property market Swiss banks and the Cayman islands our generals can rest easy ????

12 minutes ago, mokwit said:

Thailand is more likely to be a winner from companies relocating out of China.

If they can distance themselves from the CCP and even try to look democratic, they can take away businesses moving from China. But with all these military goons in top positions, I'd still be steering clear because there's still no rule of law. 

This Guy clearly acknowledges the fact that Vietnam is becoming a threat to Thailands Global Market Share

Why ? Because they have in place many Free Trade Agreements. Thailand with its protectionist policies, has shot itself in the Foot, and there will be an ever declining Export market due to the high Tariffs and Wages Etc. 

6 hours ago, webfact said:

Thailand may be a loser in this Covid-19 era amid deglobalisation,

Thailand is quite capable of screwing itself... the PM s doing just fine on his own.

3 hours ago, rkidlad said:

If they can distance themselves from the CCP and even try to look democratic, they can take away businesses moving from China. But with all these military goons in top positions, I'd still be steering clear because there's still no rule of law. 

An Australian friend was working for a Japanese company on an oil & gas project in Bangkok earlier this year. They were having to deal with a (clueless) soldier during discussions about the project, they pulled the plug on the entire deal and left Thailand because of this.

Edited July 23, 20205 yr by Andrew65

1 hour ago, Andrew65 said:

An Australian friend was working for a Japanese company on an oil & gas project in Bangkok earlier this year. They were having to deal with a (clueless) soldier during discussions about the project, they pulled the plug on the entire deal and left Thailand because of this.

They couldn’t afford an advisor? 
 

 

37 minutes ago, welovesundaysatspace said:

They couldn’t afford an advisor? 
 

 

A polite word for pimp

2 minutes ago, soalbundy said:

A polite word for pimp

Advisors are more like hookers. And depending on the firm you’re either a high-class escort or a 500

baht beach road bitch. 

Without major changes, Thailand is doomed economically-this article is quite accurate I believe.

4 hours ago, Cake Monster said:

This Guy clearly acknowledges the fact that Vietnam is becoming a threat to Thailands Global Market Share

Why ? Because they have in place many Free Trade Agreements. Thailand with its protectionist policies, has shot itself in the Foot, and there will be an ever declining Export market due to the high Tariffs and Wages Etc. 

I think this is the most important part of this article. Everyone can talk about how Thailand hasn't diversified its investments, etc. (and no doubt that's having an effect on the economy), but  its Vietnam which is ultimately the biggest thorn in Thailand's side when it comes to manufacturing in SE Asia, and signing multiple free trade agreements with the EU, the U.S, and others. While Vietnam has been signing deals, Thailand has been left behind.

8 minutes ago, Aspaltso said:

I think this is the most important part of this article. Everyone can talk about how Thailand hasn't diversified its investments, etc. (and no doubt that's having an effect on the economy), but  its Vietnam which is ultimately the biggest thorn in Thailand's side when it comes to manufacturing in SE Asia, and signing multiple free trade agreements with the EU, the U.S, and others. While Vietnam has been signing deals, Thailand has been left behind.

Many companies have left or are leaving Thailand for Vietnam.  One of them is Panasonic, and Nike is already in Vietnam as well.  Then talk about the automotive industry taking a hit with domestic sales down over 30% makes one wonder why the government does not relax the import fees so that the cars can be sold.  A Mercedes C class can be bought in the US for around 1.5 MBht, while here in Thailand the price is over 3 MBht.  Talk about overpriced vehicles.  Then add in what they want for these new condo's in Bangkok and you can buy a house in Hua Hin or outside the city for 1/3rd of the price and get 3x's more room.  I have also noticed food prices creeping up and then one wonders why the gap between the haves and have nots has widened.

1 hour ago, ThailandRyan said:

I have also noticed food prices creeping up and then one wonders why the gap between the haves and have nots has widened.

Starbucks was more expensive in Thailand compared to the Netherlands, not sure if that is still the case. 

12 minutes ago, Mung said:

Starbucks was more expensive in Thailand compared to the Netherlands, not sure if that is still the case. 

 

A big Caffè Latte, in Netherlands E 4,10. Last time I was in the Starbucks in BKK I payed 140 Baht. It depends on the exchange rate, it is now a bit cheaper here.

 

Similar things you also see with the McDonalds.

 

 

Solutions :

 

open up the wider business market to foreign ownership
bin the foreign business act

open up the labour market 

get rid of loss making and corrupt public sector control in numerous areas

 

there you go...

 

every cloud has a silver lining, I am hoping the current economic malaise will trigger major developments on some of the above. 

Edited July 23, 20205 yr by realfunster
Spelling

The guy has some good things to say

but IMO,

It might work out better for Thailand if they don't embrace technology and industry being worked by robotics.

 

Those countries will just have worse problems with income inequality,

and huge economic and social problems from the unemployment technology brings.

 

And as for this spiel from every country that they havent got labour at home and need to look for immigrants workers...

 

well, thats the biggest lie ever thats been spun for the last 40 years.

Greedy corporations everywhere dont want to employ their own nationals..

they can get immigrants to do the same job for 25% less

1 hour ago, pookondee said:

It might work out better for Thailand if they don't embrace technology and industry being worked by robotics.

 

Those countries will just have worse problems with income inequality,

and huge economic and social problems from the unemployment technology brings.

 

Yes!  Everybody back to the rice fields. Away with income inequality!  Haven't they tried that before in Cambodia?

 

 

 

 

Edited July 23, 20205 yr by dimitriv

3 hours ago, Aspaltso said:

but  its Vietnam which is ultimately the biggest thorn in Thailand's side when it comes to manufacturing in SE Asia, and signing multiple free trade agreements with the EU, the U.S, and others. While Vietnam has been signing deals, Thailand has been left behind.

 

Protecting the interests of some rich family businesses in Thailand is much more important than free trade and competition.  

10 hours ago, mokwit said:

Thailand is more likely to be a winner from companies relocating out of China.

if thailands not carefull it could find itself economically colonised by china.

Edited July 23, 20205 yr by kingdong

1 hour ago, dimitriv said:

 

A big Caffè Latte, in Netherlands E 4,10. Last time I was in the Starbucks in BKK I payed 140 Baht. It depends on the exchange rate, it is now a bit cheaper here.

 

Similar things you also see with the McDonalds.

 

 

Well in Australia ( Perth ) I pay for a large pizza delivered 15 dollars ( about 300 baht )

The last time I had a pizza in Thailand I paid a lot more just eating in a pizza place.

I can buy a pizza here for 5 dollars ( regular size, eat in or pick up )

1 hour ago, Meat Pie 47 said:

Well in Australia ( Perth ) I pay for a large pizza delivered 15 dollars ( about 300 baht )

The last time I had a pizza in Thailand I paid a lot more just eating in a pizza place.

I can buy a pizza here for 5 dollars ( regular size, eat in or pick up )

 

2 large pizza's delivered from Pizza Hut are a bit over 600 Baht.  That's more than what I would pay in the Netherlands.

 

600 Baht for 2 pizza's or 140 baht for a Caffe Latte is crazy if you can buy a Pad Thai for 40 Baht.

 

In Italy, pizza is the food for the poor.

 

I never understood the psychology of pricing in Thailand. I know that there are Thai people who make enough money.  And even if it is only 10% of the population...  With over 8 million people in Bangkok there are enough people who can afford it.

 

But you would expect that a new company would see a market for cheaper pizza's. 

 

38 minutes ago, dimitriv said:

I never understood the psychology of pricing in Thailand.

Prestige pricing.

 

Prestige Pricing. a pricing strategy in which prices are set at a high level, recognising that lower prices will inhibit sales rather than encourage them and that buyers will associate a high price for the product with superior quality; also called Image Pricing.