The Thai Economy Is In Crisis

[VegasVic]

First of all, let us all agree that stock markets are really a poor economic indicator particularly of future events. Every great crash in every market was proceeded by a run up beyond fundamentals. Right now in the US there is a massive subprime bubble that will need to be swallowed in the near term and yet the stock market continues to climb.

I think GDP is much better indicator and arguing over 4.1 versus 5.2% is somewhat irrelevant in the long term. In a closed society with strong savings, the real estate market is mostly irrelevant as well.

I think the key issues for Thailand remain exports which are consistently reported as somewhere over 60% of GDP. If exports fall off, the impact on Thai society will be dramatic and far reaching. With the baht so strong and the US about to go through a rather painful correction I think there are some people in the know who are seriously worried.

xbusman, spot on buddy! Kudos to you for laying it out! Every great equity crash in history has indeed been preceeded by a run up beyond fundementals and this is precisely why the chinese equity market is ready for one heck of a crash. At over a 50 PE ratio the Shanghai exchange is at even more unrealistic valuations (and don't forget to take into account that there are many firms not even profitable that are subsidised by the central government) than the NASDAQ was in early 2000. The U.S. S&P 500 on the other hand trades at approximately a 17.2 PE ratio which is historically slightly below average (of course the weak U.S. dollar is feeding this thing like a big dog) so the U.S. markets are poised to go higher still, that is until the dollar starts to strengthen which could take a while. Thailands economy will be one of the prime benefactors after the chinese market crash, because the baht will do a flip flop and that will help exports and tourism. Its nice to see a few folks on these boards understand how a market economy works!

[Maxi101]

Although I don't share Thaigoons optimism I like to see that there is one who is trying to keep optimism up.

How sad would it be only to read the bad news. He is kind of playing the devils advocate I grand him that.

But in the end facts matter and reality will come trough.

Keep going lads !

[Carmine6]

First of all, let us all agree that stock markets are really a poor economic indicator particularly of future events. Every great crash in every market was proceeded by a run up beyond fundamentals. Right now in the US there is a massive subprime bubble that will need to be swallowed in the near term and yet the stock market continues to climb.

I think GDP is much better indicator and arguing over 4.1 versus 5.2% is somewhat irrelevant in the long term. In a closed society with strong savings, the real estate market is mostly irrelevant as well.

I think the key issues for Thailand remain exports which are consistently reported as somewhere over 60% of GDP. If exports fall off, the impact on Thai society will be dramatic and far reaching. With the baht so strong and the US about to go through a rather painful correction I think there are some people in the know who are seriously worried.

Xbusman, you are the smartest man(?) I've seen on this forum in a long time. Exports from Thailand are in jeopardy with the strong baht, and teetering. IF the US goes through a correction it could have devastating consequences. If not, all should be ok but at a sustained lower GDP growth rate.

Pundit Chinthee

Not saying imports won't fall off, but it's worth looking at some data to put things in perspective. 2 interesting websites:

Export Import Bank of Thailand - International Trade Statistics

Bank of Thailand Economic Statistics

If accurate, in 2006 the US represented only 15% of exports, down from 19.8% of exports in 2002. China bought 9% of 2006 exports, and this had increased in baht terms 21.2% from 2005 to 2006. Australia, though representing just 3.3 % of exports, had increased in baht terms 30.1%. Note that in baht terms, exports to the US increased from 579,072 million baht in 2002 to 740,902 million baht in 2006. Exports to other countries had grown faster which is why the US is now a lower % of the total.

Also interesting is the top 10 categories of exported products. Garments for example were #4 in 2002, but fall out of the top 10 in 2006. Rice was #8 in 2004, but then falls out of the top 10. Iron & Steel don't show in the top 10 until 2004, but are #8 in 2006. "Refine Fuels" aren't on the list until they show up at #7 in 2006. Rice and Garments didn't necessarily decrease a lot, they just didn't increase enough to stay in the top 10.

So, the economy is more dynamic than it seems and has adjusted the export mix in recent years. The US economy is less directly important for exports than is maybe expected.

However, the baht/dollar rate is very important for exports since 81.6% of receipts in 2005 were in dollars. I imagine China in particular is paying mostly with dollars.

Export_Destinations.pdf

Major_Export_Market.pdf

Top_10_Exports.pdf

export_e__history_93_05.xls

[Carmine6]

Forgot this one, but really look at the other files at the sites. Some interesting stuff there.

Major_Export_Market_Shares.pdf

[highdiver]

some of the above posts were realy great...

nothing to do with reality however.

1.stock market are key indicators of investors confidence. and they are an indicator of a strong economy. this indicator is usualy underestimated specuialy by those who are not in the game. all tose dooms day predictions about a stock bubble are not true. as the BOT 30% restriction does not allow for short term players to speculater the market the market is dominated by long term players.

2. the ones worried about the agri economy please take a load of. the US has just signed a treaty enabling thai farmers to export many types of fruit to the US.

the price of rubber is on the rise and so is othe agri products.

3. the baht apreciating will result in Eurpoean and US cusotmers buying at more expensive prices as thailand is producing food and those countried who do produce still need to eat something. if you look at the rates of the derevetive market you will see how they are prepared to pay a lot more in the future for the same product.

4. the ongoing intrest by forign investors in stocks and in direct investment through BOI is an indicator that many forign investors regard thailand as still beng an emerging market where profits can be made on the contrary to the overcrowded Eurodollar markets with a very low yield.

there is no crisis. thailand has suffered a very mild slow down for 4 months but all the indicators are there that the thai economy is stable and going forward.

[LaoPo]

there is no crisis. thailand has suffered a very mild slow down for 4 months but all the indicators are there that the thai economy is stable and going forward.

Unfortunately, the expensive Baht is taking it's toll:

Japanese businesses cutting investments in Thailand due to strong baht

07.04.07, Forbes.

BANGKOK (Thomson Financial) - Japanese companies in Thailand are beginning to reduce their investments in the kingdom due to the strong baht and negative perceptions about the investment climate, a survey said Wednesday.

Japan is Thailand's biggest foreign investor, but a survey of the 351 members of the Japanese Chamber of Commerce found that business sentiment in Thailand is 'deteriorating' for the first time since 1998.

Japanese businesses saying their investments in Thailand would decrease, outnumbered those planning to increase capital spending here, according to the survey conducted by the Japan External Trade Organization (Jetro)

The value of planned Japanese investments in Thailand this year has already fallen 11 percent from 2006, the survey said.

'It was the first time in nine years that we found those results, with sentiment deteriorating continuously,' Jetro Bangkok president Yoichi Kato told reporters.

'We found the willingness to invest declined compared to a year before,' he added.

The twice-yearly survey, conducted from April 27 to May 23, found the appreciation of the baht was the top concern for Japanese companies in Thailand, followed by political instability, economic policies and rising labor costs.

'Japanese firms view that the exchange rate of 37.25 baht to the dollar is a profitable rate. But the current market rate of 34.49 baht makes them lose 7.4 percent in profits,' Kato said.

Kiyoharu Yukiyoshi, executive director of JCC Bangkok, said Japanese firms have adopted a wait-and-see stance before making new investments in Thailand.

'We will probably wait until the election before making a decision whether to raise investments in Thailand. Hopefully, Thailand will have the election in November as the prime minister promised,' Yukiyoshi told Agence France-Presse.

'Baht appreciation is our major concern at the moment. There will be a bigger opportunity for us to move to Vietnam if the baht gets stronger,' he added.

Strong economic data released over the last week has helped push the Thai stock market to a 10-year high, but foreign inflows to the market have sent the baht even higher. The Thai unit was trading at 34.20-21 to the greenback at midday Wednesday.

Source: Forbes

LaoPo

[LaoPo]

..Meanwhile:

Bank of Thailand rules out intervention despite sharp rise of baht

07.04.07, 5:57 AM ET, Forbes.

BANGKOK (Thomson Financial) - The Bank of Thailand (BOT) on Wednesday ruled out any intervention to slow the rising baht, which was trading at a new 10-year high against the US dollar as foreign capital poured into the Thai bourse.

'The central bank sees no need to intervene in the exchange rate at the current stage. The baht is getting stronger because of the huge amount of capital flowing into the stock market,' BOT deputy governor Atchana Waiquamdee told reporters.

The Stock Exchange of Thailand broke through the 800-points barrier to close at a 10-year high Tuesday while the baht traded to a 10-year high of 34.31-33 to the US dollar.

The Thai currency continued to strengthen on Wednesday and was at 34.20-21to the US dollar this afternoon

The rising baht has drawn complaints from exporters who fear that the exchange rate is making Thai products too expensive overseas.

Exports, the key driver of the Thai economy, have remained robust despite the strength of the baht but the central bank has previously warned of a slump in export growth due to a possible slowdown in the global economy. (LaoPo)

The baht has strengthened despite tough currency rules imposed in December, which required 30 percent of all incoming investment to be held by financial institutions for up to one year.

Foreign investors, who account for 40 percent of the Thai market, saw the rules as a steep tax on equity investments and quickly dumped shares, triggering the bourse's biggest-ever one-day drop in December with market losses worth 23 billion dollars.

The stock debacle later forced the army-backed government to reverse some of the currency rules.

The foreign currency controls have given companies an incentive to buy baht outside the country, making the currency even stronger in offshore markets where it trades at around 31.75 to the dollar.

Source: Forbes.

LaoPo

[mikalmus]

A lot of the talk has been about how the baht has strengthened so much against the dollar making exports less competitive but as shown above the US accounts for only 15%.

It is a case of the dollar weakening against every currency. 10 year high? I think the pound is at a 26 year high against the dollar.

[midas]

I'm not sure anymore if I believe there is a crisis after all

A Singapore based fund manager was interviewed on Bloomberg this morning

and he was very bullish about Thailand saying he and his fellow managers saw

tremendous strength in the consumer sector within Thailand !! This is why they are

buying Thai stocks so furiously and he even talked about a " second leg "

that will occur in the rally.

And yet throughout this thread that has been discussion as to how many

ordinary Thai's are struggling - so it's definitely a mixed picture out there !

[Old Man River]

I'm not sure anymore if I believe there is a crisis after all

A Singapore based fund manager was interviewed on Bloomberg this morning

and he was very bullish about Thailand saying he and his fellow managers saw

tremendous strength in the consumer sector within Thailand !! This is why they are

buying Thai stocks so furiously and he even talked about a " second leg "

that will occur in the rally.

And yet throughout this thread that has been discussion as to how many

ordinary Thai's are struggling - so it's definitely a mixed picture out there !

Fund managers make money by getting in, making profits and then getting out. They only have to make sure they can get out. I would take much more credence in this if the comments were being made by a longer term investor who couldn't take their money out at a moment's notice.

[Mid]

by a longer term investor who couldn't take their money out at a moment's notice.

would that be those Japanese gentlemen by any chance ?

[chinthee]

by a longer term investor who couldn't take their money out at a moment's notice.

would that be those Japanese gentlemen by any chance ?

Would those be the large VC and Private equity investors who've left by chance?

[A_Traveller]

To me a legitimate concern is the level of sticktion of the funds. Any SET activity should be viewed with caution. The level of capital market sophistication here is limited. Indeed, many in the market view it as a casino, not a CM, and in many cases that is how it is used. Picnic Gas anyone?.

Regards

[midas]

Well I certainly wouldn't invest in the SET - especially the moment !

The fund manager this morning just seemed very convincing and just momentarily-

I started questioning all the posts in this thread which seemed to make sense pointing out

some of the difficulties.

I have a Swiss neighbour who is actively day trading in the SET at the moment. Whilst he has made some decent

profits over the past few weeks, right now particularly at 822 I don't believe it's any different

to betting on the horses

[Old Man River]

many in the market view it as a casino.

Regards

Good analogy. You are betting on getting out before foreign fund managers take profits.

[chinthee]

I wouldn't confuse what's happening with the SET with the fundamental building blocks of an economy, although it is an important indicator.

Large foreign long term investors in huge investments in infrastructure, industry, etc., are attracted by stable governments, stable policies, and capital repatriation. We're not talking about fund managers. JAPANESE ARE ON HOLD.

Large Private equity players who do huge buy-outs etc., are also interested in making an investment, in say buying an airline, turning it more profitable, and then selling it and making the limited partners profits. THESE GUYS ARE GONE.

Small enterprise, the real building block of any middle class, can be measured by the level of venture capital investment, private and bank lending etc.. Again, all the VC funds and office in Bangkok have boarded up. GONE.

Foreign property investors are a mixed bag. Unclear yet.

This is more worrisome to me than watching the casino wheels turn on the SET.

[Old Man River]

I wouldn't confuse what's happening with the SET with the fundamental building blocks of an economy, although it is an important indicator.

Large foreign long term investors in huge investments in infrastructure, industry, etc., are attracted by stable governments, stable policies, and capital repatriation. We're not talking about fund managers. JAPANESE ARE ON HOLD.

Large Private equity players who do huge buy-outs etc., are also interested in making an investment, in say buying an airline, turning it more profitable, and then selling it and making the limited partners profits. THESE GUYS ARE GONE.

Small enterprise, the real building block of any middle class, can be measured by the level of venture capital investment, private and bank lending etc.. Again, all the VC funds and office in Bangkok have boarded up. GONE.

Foreign property investors are a mixed bag. Unclear yet.

This is more worrisome to me than watching the casino wheels turn on the SET.

My point, exactly.

[midas]

I wouldn't confuse what's happening with the SET with the fundamental building blocks of an economy, although it is an important indicator.

This is more worrisome to me than watching the casino wheels turn on the SET.

My point, exactly.

nevertheless even though I'm not participating, I have a feeling the SET rally will continue quite strongly tomorrow

or Monday ? it takes a strong nerve though to hold at this sort of level and we still have a military

[LaoPo]

nevertheless even though I'm not participating, I have a feeling the SET rally will continue quite strongly tomorrow

or Monday ? it takes a strong nerve though to hold at this sort of level and we still have a military

Friday is always a good day for profit-takers, so I'm not sure about that; the market is very nervous...

But, you're right, it takes strong nerves but the 'military' is not important, at this stage, for share speculators.

They just look at the present laws for going into the market fast and out again [with their money].

LaoPo

[VegasVic]

I'm not sure anymore if I believe there is a crisis after all

A Singapore based fund manager was interviewed on Bloomberg this morning

and he was very bullish about Thailand saying he and his fellow managers saw

tremendous strength in the consumer sector within Thailand !! This is why they are

buying Thai stocks so furiously and he even talked about a " second leg "

that will occur in the rally.

And yet throughout this thread that has been discussion as to how many

ordinary Thai's are struggling - so it's definitely a mixed picture out there !

Fund managers make money by getting in, making profits and then getting out. They only have to make sure they can get out. I would take much more credence in this if the comments were being made by a longer term investor who couldn't take their money out at a moment's notice.

It looks like someone knows how the game is played. When fund managers and investment bank mouthpieces are touting an investment in the press they do it for a purpose, it is to give them cover while they exit their fund and their high dollar clients out of that particular investment or sector. About a month ago Morgan Stanley made similiar statements, if you see Goldman and Soloman making these same statements in the very near future then I would head for the hills. The same thing occured right before the NASDAQ crash in the U.S. in 2000, all these funds and high powered investment banks were publicly hyping the NASDAQ, when in fact they had begun to liquidate months earlier (in the aftermath some off these firms got stung with some hefty fines for this practice but in relation to the huge profits they had already booked it was inconsequential, just the COB).

[wintermute]

I'm not sure anymore if I believe there is a crisis after all

A Singapore based fund manager was interviewed on Bloomberg this morning

and he was very bullish about Thailand saying he and his fellow managers saw

tremendous strength in the consumer sector within Thailand !! This is why they are

buying Thai stocks so furiously and he even talked about a " second leg "

that will occur in the rally.

And yet throughout this thread that has been discussion as to how many

ordinary Thai's are struggling - so it's definitely a mixed picture out there !

Fund managers make money by getting in, making profits and then getting out. They only have to make sure they can get out. I would take much more credence in this if the comments were being made by a longer term investor who couldn't take their money out at a moment's notice.

It looks like someone knows how the game is played. When fund managers and investment bank mouthpieces are touting an investment in the press they do it for a purpose, it is to give them cover while they exit their fund and their high dollar clients out of that particular investment or sector. About a month ago Morgan Stanley made similiar statements, if you see Goldman and Soloman making these same statements in the very near future then I would head for the hills. The same thing occured right before the NASDAQ crash in the U.S. in 2000, all these funds and high powered investment banks were publicly hyping the NASDAQ, when in fact they had begun to liquidate months earlier (in the aftermath some off these firms got stung with some hefty fines for this practice but in relation to the huge profits they had already booked it was inconsequential, just the COB).

I remember a fairly famous dot com MSNBC analyst was telling everyone to BUY BUY BUY prior to the crash. He was later fined and fired for using insider information from various dot com companies. He was planning on pumping up the stock and dumping it before the crash. The SET is probably even more risky, they have a nice P/E ratio but the whole thing is a grey market investment. I imagine with the corruption and all there's tons of insider trading going on with thai companies. It's not a safe long term investment for a regular investor.

Not to mention some of those investors have infiltrated thai visa as well. Not too long ago we had an investment property developer flaming anyone who criticized the state of the economy. Not suprisingly he sold high end condo units in Bangkok. Anytime a broker, real estate agent, investor, or fund manager tells you it's a good time to invest it's probably better to do a lot of research on your own first.

[LaoPo]

Anytime a broker, real estate agent, investor, or fund manager tells you it's a good time to invest it's probably better to do a lot of research on your own first.

Indeed: a MUST.

LaoPo

[midas]

nevertheless even though I'm not participating, I have a feeling the SET rally will continue quite strongly tomorrow

or Monday ? it takes a strong nerve though to hold at this sort of level and we still have a military

Friday is always a good day for profit-takers, so I'm not sure about that; the market is very nervous...

But, you're right, it takes strong nerves but the 'military' is not important, at this stage, for share speculators.

They just look at the present laws for going into the market fast and out again [with their money].

LaoPo

LaoPo I actually agreed with you when I read this but it seems the punters havent had enough yet

[LaoPo]

nevertheless even though I'm not participating, I have a feeling the SET rally will continue quite strongly tomorrow

or Monday ? it takes a strong nerve though to hold at this sort of level and we still have a military

Friday is always a good day for profit-takers, so I'm not sure about that; the market is very nervous...

But, you're right, it takes strong nerves but the 'military' is not important, at this stage, for share speculators.

They just look at the present laws for going into the market fast and out again [with their money].

LaoPo

LaoPo I actually agreed with you when I read this but it seems the punters havent had enough yet

I humbly agree and was wrong.

The SET Index went up (unofficially) by + 1.03%

Gainers 228

Unchanged 104

Losers 131

LaoPo

[highdiver]

all you guys seem to foirget that those investing in SET can not sell and get out as you would in western countries. this is beacuse the BOT is holding 30% of all the indirect invetments. fund managers are aware of this and are still pouring in.

it seesm the largest funds in the world have decdided to take positions in the thai SET. those positions are long term positions and the rest of he funds gang is following. the Thai market is now one of the favorites for long term investments.

As such the stocks are going up as any fund manager is willing to invest long term in the Thai market.

once again a proof that the thai economy is not in crisis and that investors confidence is mesured in cash and in words.

[Mid]

BoT explains foreign capital influx into stock market

BANGKOK, July 5 (TNA) – Bank of Thailand Deputy Governor Atchana Waiquamdee on Wednesday said foreign capital had flowed into the Thai stock market in a large amount because it is a channel where investors could bring foreign currencies into the country without complying with the 30 per cent reserve requirement or the fully hedged measure.

[Maxi101]

all you guys seem to foirget that those investing in SET can not sell and get out as you would in western countries. this is beacuse the BOT is holding 30% of all the indirect invetments. fund managers are aware of this and are still pouring in.

it seesm the largest funds in the world have decdided to take positions in the thai SET. those positions are long term positions and the rest of he funds gang is following. the Thai market is now one of the favorites for long term investments.

As such the stocks are going up as any fund manager is willing to invest long term in the Thai market.

once again a proof that the thai economy is not in crisis and that investors confidence is mesured in cash and in words.

[Maxi101]

... what about greed and gambling ?

[Mid]

Thai bourse to continue rising next week

Saturday 7 July 2007 01:03:01 PM (GMT+7:00)

BANGKOK, July 7 (TNA) - Continued foreign capital inflows into the Asian region, including Thailand, and the country's improved local political climate are expected to help push the Stock Exchange of Thailand (SET) composite index to continue advancing next week, analysts said.

Investors are anticipated to monitor the Chinese stock market, as well as developments regarding the acceptance of Thailand's draft constitution and foreign capital inflows into Thailand next week.

The support level is projected at 825 points while the resistance level is at around 840 points next week, they said.

On Friday, the SET rose 8.45 points to close at 832.38 after dipping slightly on Thursday. Total turnover was about Bt29.34 billion as foreign investors continued to be net buyers of around Bt1.31 billion.

An analyst at Sicco Securities in Bangkok said the market rose again Friday on the back of continued foreign inflows into the Thai equity market and on investor confidence that this country's general election would be held in November. (TNA)-E111

November is the eleventh and penultimate month of the year in the Gregorian Calendar and one of four Gregorian months with the length of 30 days.

[Steely Dan]

all you guys seem to foirget that those investing in SET can not sell and get out as you would in western countries. this is beacuse the BOT is holding 30% of all the indirect invetments. fund managers are aware of this and are still pouring in.

it seesm the largest funds in the world have decdided to take positions in the thai SET. those positions are long term positions and the rest of he funds gang is following. the Thai market is now one of the favorites for long term investments.

As such the stocks are going up as any fund manager is willing to invest long term in the Thai market.

once again a proof that the thai economy is not in crisis and that investors confidence is mesured in cash and in words.

You could have argued that the U.S economy was going to the moon in 2000 just by looking at the Nasdaq. Speculation is a herding instinct the fuel for it being liquidity. To argue that funds with so called long term positions somehow sanitizes their speculation is a dangerous assumption just look at the CDO's (a.k.a toxic waste) being bought by pension funds for their longest of long term speculation. Imho world markets will have peaked by September if not before.