The Thai Economy Is In Crisis

[highdiver]

englishoak,

you may have been able to run away from the west, but you can't run away from reality......

reality is delicious, have a taste......less rhetoric and more facts please.....

City office building market sluggish in 1st quarter

Supint Meechucheep, the company's president, said impacts of the political uncertainties on the property business had gained clear momentum as could be witnessed by a decline in consumer spending, investment, and business expansion by the private sector

http://etna.mcot.net/query.php?nid=29294

baring in mind that the whole world is suffering from a real estae slug in the 1st quarter. I think your above statement is not relevant . unless you are blaming the Thais for the fact the the USA and erutope are slow as well.

once again there are projects in bangkok that sell well and others that dont. and the fact that a president of one company is not doing well and blaming it on the econmy is not a beahvior limited to Thais only.

i have been following your posts and in many occasions you do have a valid point. however you tend to use a bashing anti thai form and post it over and over again. its a pity as you have some serious points to the discussion.

what? i am not talking about the US in the above post, the title of this forum is "Thai Economy in Crisis". Your pity is unecessary. You are the one living in denial. Thailand WAS a stable country on the uswing prior ot the coup, but no longer. If you think the pseudo-elections this year will be legitamized, you are kidding yourself. Your utter devotion to Thailand in the face of an obvious downturn deserves pity. Your vehement defense of Thailand in the face of obvious facts suggests you are codependent.

now back to the headlines........

Rally to seek removal of PM

http://www.nationmultimedia.com/2007/05/13...cs_30034078.php

Dearest Bingo

It seems that instead of debating the issue of financial crisis you rather post headlines from the Nation on each item that refelcts your views that thailand is going down. ok we understand that you belive it.

i find you attempts to relate all those problems only to the Thais as ridiculous and childish. face reality and understand that the Thai economy is controled by forign powers and that the Thai are actuallyattempting to get controll back.

your condecending views of Thai people and Thai culture are best kept to yourself.

As for your personal conclusions about me being codependent. i am glad to see that you have some idea about psychology.

and that you have attepted to dazzel me with a nice knowledge of "big words"

so just to refresh your memory

Symptoms of codependence are controlling behavior, distrust, perfectionism, avoidance of feelings, problems with intimacy, excessive caretaking, hypervigilance or physical illness related to stress. Codependence is often accompanied by depression, as the codependent person succumbs to feelings of frustration or sadness over his or her inability to improve the situation.

Wow that sound just like you!!!

[VegasVic]

more flip flopping.......the indecision of this group truly is unbelievable.....

BoT not removing 30% withholding on inflows

The Bank of Thailand (BoT) reiterated Friday it has no plan to remove the 30 percent reserve requirement on certain inflows in the near future.

According to BoT Assistant Governor Nitaya Pibulratanagit, the central bank will not end the 30 percent reserve requirement anytime soon, as the central bank is still concerned about current inflows into the Thai stock market. The 30 percent reserve requirement still have some psychological impact, to keep the baht from appreciating even further.

The Nation

http://www.nationmultimedia.com/breakingne...newsid=30033968

Well it looks like the BOT board of governers has a clue as to what dynamic is at work here, some of the posters on this thread would do well to read this article and pay attention. Prediction: the next rate cut will be 50 basis points and will occur within the next 30 days!

[bingobongo]

highdiver, thank you for your commentary, #s do not lie....

Thailand economy is slowing......if you care to debate, then please explain why Thai imports of crude are falling DESPITE the strengthening of the baht?

oil is denominted in US$, oil would be cheaper for Thailand in baht relative to the dollar due to the baht strength, so if Thailand was flourishing, they would need to import more not less, but the problem is that less Thais can afford oil/gas and less is needed as the economy goes nowhere

Oil production falls 10.9pc in Q1

Thailand came second, as it imported 9.63 million barrels by end of March 2007, against 13.43 million barrels, constituting a drop of 28.3 per cent

http://timesofoman.com/inner_cat.asp?cat=4...A26duPc80rWEYKQ

Edited May 13, 2007 by bingobongo

[cclub75]

Hum... This thread really makes sense... It's like a puzzle, with a never ending flow of new pieces.

Soon, I guess, more and more people will get... the whole picture.

Okay, on the daily harvest, I picked up this one :

Pawnshops doing brisk trade

The pawnshop business has shown strong growth this year, up 16.2 per cent and worth Bt106.7 billion to date.

The study found that pawnshops had shown a strong increase in business this year after the economic slowdown had a negative impact on the earnings of consumers.

http://www.nationmultimedia.com/2007/05/14...ss_30034117.php

Crisis are good indeed for some businesses. We all know that pawnshops and loan sharks are 2 institutions in Thailand... An increase in their turn over is indeed a very bad signal regarding the health of the economy. Again this shows the problem of solvability...

Inflation, wages under pressure because of the slowing economy... people have more and more problem to cope with their expenses.

Edited May 13, 2007 by cclub75

[cclub75]

oil is denominted in US$, oil would be cheaper for Thailand in baht relative to the dollar due to the baht strength, so if Thailand was flourishing, they would need to import more not less, but the problem is that less Thais can afford oil/gas and less is needed as the economy goes nowhere

Attention. Those figures are for Oman. Thailand is buying oil from other countries.

The stats are available on the (very good) website of EPPO.

Imports crude oil --- Thai production

(in barrel per day)--- (in barrel per day)

2004 869 924 --- 85 515

2005 827 701 --- 113 889

2006 829 300 --- 128 949

http://www.eppo.go.th/info/2petroleum_stat.htm

On another document, we have the sales of gasoline (regular, premium, diesel), per month (in barrel per day), from january 1986, until january 2007.

http://www.eppo.go.th/info/stat/T02_03_04-1.xls

2006 shows a small decline, compare to 2005 (drop in diesel, and in premium, but increase for regular). We would need to see the effect of GPL.

And 2005 was in decline, compared to the levels of 2004 and 2003.

However, a calculation "Commercial Primary Energy Consumption (BBL/Day Crude Oil Equivalent)", monthly, shows that Thailand continues to increase its consumption of energy. At least, until end of 2006.

The imports of coal are litteraly surging for instance. But "petroleum" is decreasing a bit in 2006 compare to 2005 (in contradiction with the previous datas).

http://www.eppo.go.th/info/stat/T01_01_09-1.xls

There are 3 month lag for the stats. In september we should have a better view for the first semester.

Many other datas to pick on this website.

Edited May 13, 2007 by cclub75

[bingobongo]

oil is denominted in US$, oil would be cheaper for Thailand in baht relative to the dollar due to the baht strength, so if Thailand was flourishing, they would need to import more not less, but the problem is that less Thais can afford oil/gas and less is needed as the economy goes nowhere

Attention. Those figures are for Oman. Thailand is buying oil from other countries.

The stats are available on the (very good) website of EPPO.

Imports crude oil Thai production

(in barrel per day) (in barrel per day)

2004 869 924 85 515

2005 827 701 113 889

2006 829 300 128 949

http://www.eppo.go.th/info/2petroleum_stat.htm

On another document, we have the sales of gasoline (regular, premium, diesel), per month (in barrel per day), from january 1986, until january 2007.

http://www.eppo.go.th/info/stat/T02_03_04-1.xls

2006 shows a small decline, compare to 2005 (drop in diesel, and in premium, but increase for regular).

And 2005 was in decline, compared to the levels of 2004 and 2003.

However, a calculation "Commercial Primary Energy Consumption (BBL/Day Crude Oil Equivalent)", monthly, shows that Thailand continues to increase its consumption of energy.

The imports of coal are litteraly surging for instance. But "petroleum" is decreasing a bit in 2006 compare to 2005 (in contradiction with the previous datas).

http://www.eppo.go.th/info/stat/T01_01_09-1.xls

Many other datas to pick on this website.

cclub75, thanks for the clarification, it is nice to see someone intelligently rebut my posts with hard #s as opposed to rhetoric, good catch, the numbers you post are interesting, will be interesting to compare March 2007 (Q1) #s to see if decline in imports from Oman is an anomaly or part of a larger trend.

Edited May 13, 2007 by bingobongo

[bingobongo]

another dose of reality......Thailand is export dependent is it not?

Strengthening Thai currency hurts exporters

Sharing the opinion was Chookiat Ophaswongse, president of the Rice Exporters Association, who said the strong baht had impacted Thailand's export performance while farmers' income also retreated.

http://etna.mcot.net/query.php?nid=29371

[jaidam]

quote Highdiver "face reality and understand that the Thai economy is controled by forign powers and that the Thai are actuallyattempting to get controll back"

Nice try. Which foreign powers are responsible for the mess that is the Thai economy? I suppose you could blame the Chinese, in that they make up most of the govt and elite in the country.

I believe the Thai economy is slowing due to missmanagement by the Thai government, and no other significant reason. Its hard to understand how beneficial overseas investment is for 3rd world countries. The easiest way is to look at countries with virtually no foreign investment. Zimbabwe, Myanmar, and North Korea. So why are we going quickly down that same road?

The significant thing about the abovementioned countries is you will find the leaders stay in power for a long time.

[englishoak]

Oh the serial quoter is uncommonly active today.

Far from having "rose colour specs" I happen to know that the Thai economy is indeed in trouble. But I got all that from my own experience and sources. Nor do I have the urge to gloat at every opportunity.

I'm not in the slightest bit of the opinion that the current situation is good or can't you read ? Thailand will bounce back though and I look forward to the recovery more than the bust. Everything moves in cycles and NO economy is immune to downturns.

So you carry on quoting away,have your fun and gloat. Gentlemen I have far more pressing things to attend to than playing amateur economists so if you'll excuse me ..............................

[Old Man River]

more flip flopping.......the indecision of this group truly is unbelievable.....

BoT not removing 30% withholding on inflows

The Bank of Thailand (BoT) reiterated Friday it has no plan to remove the 30 percent reserve requirement on certain inflows in the near future.

According to BoT Assistant Governor Nitaya Pibulratanagit, the central bank will not end the 30 percent reserve requirement anytime soon, as the central bank is still concerned about current inflows into the Thai stock market. The 30 percent reserve requirement still have some psychological impact, to keep the baht from appreciating even further.

The Nation

http://www.nationmultimedia.com/breakingne...newsid=30033968

Well it looks like the BOT board of governers has a clue as to what dynamic is at work here, some of the posters on this thread would do well to read this article and pay attention. Prediction: the next rate cut will be 50 basis points and will occur within the next 30 days!

The 30% reserve requirement no longer covers the equity market. Hence, how does the 30% RR impact current inflows into the Thai stock market?

It sounds to me like the BOT is afraid they are missing something and want to keep capital controls in place until they figure out what it is.

[highdiver]

more flip flopping.......the indecision of this group truly is unbelievable.....

BoT not removing 30% withholding on inflows

The Bank of Thailand (BoT) reiterated Friday it has no plan to remove the 30 percent reserve requirement on certain inflows in the near future.

According to BoT Assistant Governor Nitaya Pibulratanagit, the central bank will not end the 30 percent reserve requirement anytime soon, as the central bank is still concerned about current inflows into the Thai stock market. The 30 percent reserve requirement still have some psychological impact, to keep the baht from appreciating even further.

The Nation

http://www.nationmultimedia.com/breakingne...newsid=30033968

Well it looks like the BOT board of governers has a clue as to what dynamic is at work here, some of the posters on this thread would do well to read this article and pay attention. Prediction: the next rate cut will be 50 basis points and will occur within the next 30 days!

The 30% reserve requirement no longer covers the equity market. Hence, how does the 30% RR impact current inflows into the Thai stock market?

It sounds to me like the BOT is afraid they are missing something and want to keep capital controls in place until they figure out what it is.

I think the guys at the BOT are very well informed and aware of the situation. however they are fighting a loosing battle unless they take some serious mesures to further controll the curency inflow.

the policy makers in the region are aggressively preventing a necessary currency appreciation via massive and growing amounts of forex reserve accumulation. Such reserve accumulation has been at the rate of $450 billion in 2006 alone and now at an even faster rate in 2007. By now the stock of forex reserve in Asia is over $2.5 trillion and rising rapidly.

These policies are however creating - via partially sterilized intervention such as the BOT - a massive growth of monetary base and of credit in Asia that is feeding a variety of asset and financial bubbles as well as leading to goods inflation in some countries; and an impact on export due to the curency apreciation. these bubbles are dangerous and likely to lead to a financial bust over time.

These currency policies have also made East Asia more dependent now than ever before on the US business cycle and on growth developments outside of Asia. Thus, China and Asia are now seriously vulnerable to a US hard landing that now looks more likely.

These Asian currency and financial policies have also contributed to global current account imbalances, to excessive global liquidity, to the bubbly conditions in a variety of global - not just Asian - asset markets and to a serious underpricing of risk in global financial markets.

Thus, Asia is fighting today the last war as vulnerabilities in Asia are very different today from those that led to the 1997-98 crisis. thailand is now facing a real chalange of a new and different type of financial crisis in Asia, one triggered by excessive liquidity, excessive credit growth and asset bubbles in many financial markets.

The BOT is aware of those changes and is attepting to resist those powers at the cost of taking steps that some will find restricting and anti forign investment. but the BOT must first look out only for the best intrests of thailand.

[Old Man River]

I think the guys at the BOT are very well informed and aware of the situation. however they are fighting a loosing battle unless they take some serious mesures to further controll the curency inflow.

As it relates to the existing capital controls on the debt markets, it is time to release them. The BOT now requires debt market fund inflows to be fully hedged. Dr. Tarisa stated last month that the main reason for keeping the 30% RR in place was to make sure that there are no other means to attack the THB through the debt markets that they haven't foreseen (hence my comment).

Concerns the BOT may have on the equity markets are unrelated. The comments by Asst. Governor Nitaya are confusing. The 30% RR no longer has anything to do with the equity markets. It did on day one, but not on day two. Hence, the 30% RR holds no psychological barrier as it relates to the equity markets. People know the BOT won't repeat that error again. In addition, FX speculators don't attack from the equity side due to the volatility in share prices which can erode gains from currency movements in a matter of seconds.

It is time to release the capital controls.

[bingobongo]

so either there are a lot of overindebted homdebtors sleeping on the floor since they can not afford furniture after paying bloated property prices, or a lot of unsold property......

so inflation is rampant in raw materials and people are unable to afford nonessentials.....nothing to see here....move along....

Economic woes hit SB Furniture

Major furniture manufacturer and distributor SB Furniture Industry is being affected by the sluggish economy.

Assistant managing director Tanatat Chawaldit pointed out two major factors causing difficulty: a downturn in the real-estate sector caused by the economic slow-down and an increase in costs of raw materials, particularly parawood.

http://www.nationmultimedia.com/2007/05/14...ss_30034126.php

[Naam]

The 30% RR no longer has anything to do with the equity markets. It did on day one, but not on day two. Hence, the 30% RR holds no psychological barrier as it relates to the equity markets. People know the BOT won't repeat that error again. In addition, FX speculators don't attack from the equity side due to the volatility in share prices which can erode gains from currency movements in a matter of seconds.

It is time to release the capital controls.

the restrictions never targeted the equity markets but were suppossed to prevent foreigners buying short term bonds leveraged. the impact on SET was merely an unavoidable side effect of the restrictions.

edited for bloody grammar

Edited May 14, 2007 by Dr. Naam

[bingobongo]

hello englishoak old friend, so much relevant news to "Thailand in Crisis" i may consider supergluing my fingers to the CTRL-C and CTRL- V buttons

so lets recap (check previous posts for info), I will sum up so you dont have to go thru 9 pages of this topic

Stronger baht - check

Declining oil imports (as of Q1, 2007) - check

Work halted on numerous property deverlopents - check

Declining property sales - check

Banks offering no interest/no closing cost loans for 3 months (Via teaser rates) - check

Furniture sales down - check

Auto sales down (again) - check

Housewares sales down again - check

BOT cutting rates to stimulate economy - check

Advertising spending declining - check

Incerase in short term speculative inflows - check

Thailand trailing all other economies in region - check

Economy slows on weaker domestic demand - check

Consumer confidene lowest in 5 years - check

Sony, Toshiba, Pioneer (electronics) report lower YOY demand - check

Thai Airways profits slump 31% - check

Thai Gross Domestic Happiness falling - check

Pawn Shop loans increasing - check

did i miss anything? you see, english oak, i am not making up reality, just conveying the truth that the Thai economy is taking it on the chin across a wide variety of industries

i will be sure to add to the list englishoak, at this pace i may need more than 1 sandwich board or should i say som tham board?

Edited May 14, 2007 by bingobongo

[cclub75]

Daily harvest....

FINANCE/POLITICS

It looks secondary... but Finance Minister has stopped the reform of the BOT.

The BOT was working on a new draft (since 9 years, ah ah ah !) that would have given to a special committee the power to hire and sack BOT governor.

Why I would like to put this item into the "Crisis" thread ?

A so called "independant" BOT was already a mess. But now that it is officially under the Finance Minister's control, well it can only be worse.

And again : on the international level, that looks pretty bad. Many people knew that BOT was controled by the thai politicians... But now... well it's official.

http://www.nationmultimedia.com/2007/05/15...ss_30034207.php

REAL ESTATE

"In the first two months of this year the Government Housing Bank announced total transfers of 5,326 units - down 5 per cent compared with the first two months of last year."

http://www.nationmultimedia.com/2007/05/15...ss_30034212.php

Those datas don't match thoses given on the BOT website (despite the same source, AKA Government Housing Bank ).

http://www.bot.or.th/BOTHomepage/databank/...oad/Tab71-3.xls

By the way, if you understand on this file the difference between "Condo registrations" and "New housing : appartement and condos" that would help.... Look at the figures, it's strange.

By the way, you'll notice in the Nation article, this very tasty comment : "Chief executive and managing director Thongma Vijitpongpun said banks rejected loans to 27 per cent of customers buying its projects off plans. This resulted in missed first-quarter revenue targets."

So now, it's the fault of the... naughty banks.... that are not generous enough with their loans !

It's getting better and better.

Edited May 14, 2007 by cclub75

[jcgodber]

One day in 1997 I had several million baht deposited in the Bank of Bangkok saved for my coming retirement. The next day 1/2 my money was vaporized, like in

GONE.

Jim

[mumbu]

not there yet, but with the US GDP coming in at a paltry 1.3% , its only a matter of time before Thailand takes it on the chin....

Four Asian nations hit by 1997-98 financial crisis face vulnerability

Thailand now faces greater risks due to a decline in the ratio of foreign reserves to short-term debt and an increase in short-term capital inflows.

http://www.iht.com/articles/2007/04/19/news/currency.php

I agree with you. but maybe not got the same reason.

Thailand is facing another financial crisis vulnerability because huge hedge funds and investment banks have taken position on the thai baht. As such Thailand is now at the mercy of those forign speculators that can decide to draw out and repeat the same crisis as in 97. Unfortunatly this is now a problem not only for thailand but for the whole world. the Huge fund mangers have only one consideration and that is to make more and more profits. they dont care if they can ruin a country or devestate an economy while doing so.

All the economical factors are in favour for thailand to continue growth but a bunch of greedy speculators can realy rock the boat.

there is no way to stop this as if you put limitations on short-term capital inflows the speculators are going to go to the govermants and complain about thailands monitary policy and thailand does not want tpo upset the americans or the europeans. so at the end of the day a few greedy managers are basicly running the world.

Highdiver, You hit the nail on the head! I have posted multiple times on this subject but most people here just don't get it. When the hedge funds decide to get out of their investments and change their baht back in to euros and U.S. dollars then the Thai baht will do an absolute backflip. People don't realize the size and scope of these funds to change capital markets overnight and ruin a small countries economy as well, and you are correct that absolute greed is the only thing that motivates these people. It is truely unconsionable how governments both in the U.S. and Europe have been bought off and make no attempt to have any regulation or oversight on these hedge fund criminals. A good example was the democratic debate in south carolina yesterday, the moderator asked john edwards and hillary clinton the same question about what they would do to institute some oversight on the hedge fund industry if elected and both candidates completely dodged the question and talked about something else. The next question in the debate was directed toward chris dodd (a senator from conneticut that the hegde fund industry has in its back pocket) and you could see senator dodd sweating bullets thinking that he might be getting the same question on the hegde fund industry, but sadly the moderator seeing that he was not going to get a straight answer about hedge funds from these candidiates, changed the line of questioning and you could see the immediate relief on chris dodds face. Just as Jesus overturned the carts of the moneychangers in the temple, we need someone in power with a strong loyal following to turn over the carts of the hedge funds and watch as the cockroaches scrurry, if something isn't done soon then I feel that the price to pay will be devestating.

if you have proof that this is actually happening, then, let us all see it. otherwise, all this conspiracy stuff is old stuff, and the only thing it does is make foreigners more anti-american.

on the other hand, since you seem to think this is true, perhaps you can tell us all what thailand can do to stop this so-called conspiracy being implemented by evil rich americans?

your conspiracy theories are making it so that win or lose, america will look like the one to blame.

jesus, can't someone in this world take the blame for something THEY did for once?

yeah. maybe I am naive about all the evil in this world. so, please enlighten me. but some more constructive thought would help instead of just all the accusations. thank you.

Nick, First of all there is no conspiracy theory going on here, hegde funds and arbitragers have been with us for a while now and their size, strength, and political clout has grown into something that would make the tabacco industry evious. Secondly, this is not a uniquely american phenomonon there are many european hedge funds manipulating the thai market as well as many other markets in asia and elseware. Last week on 60 minutes (or maybe it was 20-20) there was a segment on just this, and senator grassley who had the guts to put forward some rather tame hegde fund legislation on the senate floor was interviewed and said that within 10 minutes of introducing his bill on the senate floor he was contacted by multiple parties(both other senators and lobbyists) to kill the bill. In this same segment it was made clear that on multiple occasions senator dodd has killed similiar bills and then 60 minutes went on to say that dodd recieved over 5 million dollars from the hedge fund industry in his last campaign. These are the hard cold facts my friend, I only wish it was just a bad dream or some bogus conspiracy theory. By the way americans are not to blame but instead are victims of these hedge funds as well. Perhaps when the valuation on the baht does reverse dramatically and some journalist can lay out just how all this occured, then perhaps you will not be so naive the next time around.

This is all an absolute bullshit. According to your "theory" all these hedge funds are in conspiracy against Thailand. The question: why Thailand? Why not , say, Malaysia? Badawi (prime-minister of Malaysia) in his recent interview to CNBC said that he see absolutely no signs of speculation with Malaysian ringit. Malaysia faces the same problems as Thailand (including currency appreciation and slow down in economy) but try to handle it in completely different manner: by encouraging investment in their economy. The economist in the beginning of this thread is putting it absolutely right.

You guys, simply have no idea what you are talking about. There certain global processes which effect all emerging markets from Slovakia to Brasil, from Turkey to Colombia. No one country (except for may be Venezuala) did inflict so much damage to

itself as Thailand did after the coup.

[Old Man River]

The 30% RR no longer has anything to do with the equity markets. It did on day one, but not on day two. Hence, the 30% RR holds no psychological barrier as it relates to the equity markets. People know the BOT won't repeat that error again. In addition, FX speculators don't attack from the equity side due to the volatility in share prices which can erode gains from currency movements in a matter of seconds.

It is time to release the capital controls.

the restrictions never targeted the equity markets but were suppossed to prevent foreigners buying short term bonds leveraged. the impact on SET was merely an unavoidable side effect of the restrictions.

edited for bloody grammar

The reason why they realized their mistake the next day is not important. Since the debt markets and equity markets are not the same and the capital requirements were never meant for the equity markets then why does Asst. Governor Nitaya make the statement that they need to keep the 30% RR in place because they are concerned about foreign inflows into the equity market? One doesn't relate to the other. This does not make sense.

[Mid]

People know the BOT won't repeat that error again

ya think ..............................

[Old Man River]

People know the BOT won't repeat that error again

ya think ..............................

Then why the comment from the BOT? Is it possible they will?

[Jai Dee]

Lehman Brothers forecast Thai economy has bright future

Lehman Brothers, one of the world’s leading investment bankers, indicates that the foundation of Thai economy is still strong, and if the political uncertainty in Thailand has ended, the economy should expand by 5.5 percent next year. The agency says investment in Thailand is still attractive as all investment factors are positive.

Lehman Brothers forecast that the Asian economy for 2007 and 2008 will have to deal with lower exports. However, three factors will help support the economy in this region, and they include low inflation, stimulation of investment, and the rising of the Southeast Asian economy. The firm believes the Asian economy will expand by eight percent this year and 8.2 percent in 2008.

According to the economic forecast, the export sector has a tendency to slow down but the general situation will favor the governments in Asia to increase the financial resources to spur the economy since the countries have low public debts. In addition, the inflation rates are still manageable and the economic foundations of Asian countries have become stronger. Investment on public facilities and funds are also increasing while interest rates are low.

Source: Thai National News Bureau Public Relations Department - 15 May 2007

[Prakanong]

"if the political uncertainty in Thailand has ended"

A bloody big if

meanwhile the rest of the region is booming. Singapore rents are shooting up due to the demand as more and more high end workers flow in.

[highdiver]

People know the BOT won't repeat that error again

ya think ..............................

Then why the comment from the BOT? Is it possible they will?

The current situation is paradoxical: almost 10 years ago - in the spring of 1997 - the Asian crisis started when pressures on the Thai currency led its government to impose some mild controls on capital outflows: then there was a large current account deficit, low forex reserves relative to short term foreign currency debt and an overvalued currency. To speculators mostly hefge funds Thailand looked like Mexico in 1994 and the speculative pressure started to build up in early 1997. Those mild controls on outflows did not work in 1997 and the currency collapsed in July 1997 - after a futile defense of the effective peg led to a massive foreign reserve bleeding hedge funds pulling out and the band waggon of others - triggering the Asian crisis that soon engulfed Indonesia, Malaysia and South Korea.

Today paradoxically the situation is the opposite : capital in flowing in, not out; the currency is appreciating rather than facing depreciating pressures; foreign reserves are high and short term foreign currency debt is low compared to 1997; and after the 1997 crisis Thailand started to run current account surpluses rather than the large deficits of the pre-crisis period.

So why the current turmoil in Thailand? It has to do with the typical problems that a small open economy has to deal with when it faces episodes of massive inflows of capital.hedge fund managers band wagon has taken positions on the Thai market. they may seem trivial to those huge hedge fund mamangers but they impose a true problem for a samll economy like Thailand.

So what should the BOT do??? The policy dilemma in these case are as follows:

- The country could let the inflow lead to an appreciation of its currency; but such appreciation may become excessive, lead to a competitiveness loss and worsen the external balance.

- The country can perform unsterilized forex interventions but such intervention increase the money supply, reduce domestic interest rates and may lead to an overheating of the economy that is dangerous

- The country can perform sterilized forex intervention but such sterilization - by keeping domestic short rates high and unchanged - leads to further inflows and further need to sterilize in an endless cycle that does not stop the capital inflow.

- The country could implement a fiscal contraction so as to reduce domestic rates (and induce less inflows) and so as to improve the external balance. But such fiscal contraction - in a country without fiscal problems - is politically unpopular and not likely. Also, deficit reduction may paradoxically lead to more inflows if it improves a country creditworthiness.

- Finally, since all the previous alternatives have shortcomings, the country can introduce controls on capital inflows, especially short-term hot money inflows that are potentially dangerous as such hot money can rush out as fast at they rush in. Such controls on short-term inflows is what countries such as Chile, Colombia, Brazil (and, effectively, even China) introduces as a way to minimize the risks of hot money inflows. And this is what Thailand tried too.

given the dilemas above what do you think they should have done??

[Old Man River]

given the dilemas above what do you think they should have done??

No, no, no. You have completely missed my point. I appreciate the history and know you mean well, but I was here in the 1990's and am more than just a little familiar with what went on and why it went on during that period.

Keeping the discussion to the present, Asst. Governor Nitaya's most recent comments are difficult to understand and unlike some, I do have a high regard for the people at the BOT. The 30% RR provides no psychological barrier to foreign capital inflows into the SET as the Asst. Governor contends. Please recall that when the 30% RR covered the equity markets it resulted in the Dec. 2006 stock market crash which the BOT admitted was a mistake on their part. Why then keep the 30% RR? It no longer has any value as it relates to foreign inflows into the debt markets since they now have to be fully hedged. Also, what is the big concern about foreign capital inflows into the equity markets anyway? This is simply business as usual. Things just don't add up.

[cclub75]

Italy is a great nation. They gave to the world Michelangelo, the Plaza San Pietro, Venezia, pizzas and of course Cosa Nostra.

But they gave to the world something else : the italian investors. The proof ?

Italian investors await settled politics

Italian investors in Thailand are slowing the pace of their investments here and are awaiting clarification regarding the country's political future in the face of continuing political turbulence, Italy's ambassador Ignacio Di Pace said Tuesday, before they take further investment steps.

http://www.bangkokpost.com/breaking_news/b...s.php?id=118755

I'm wondering what are thinking all the other western business men...

Anyway, it's good to see that foreign embassies are puting pressure in public, via medias.

Edited May 15, 2007 by cclub75

[Mid]

given the dilemas above what do you think they should have done??

engage brain prior to putting mouth into gear .................................

[palm]

>>Lehman Brothers forecast Thai economy has bright future

Hey, what do Lehman Brothers know compared to the doom-and-gloom brigade on TV, some who would call even Rockerfeller a dumb investor?

Surely Lehmans should go down a few cheap beer bars and get their economic advice there instead?

[cclub75]

>>Lehman Brothers forecast Thai economy has bright future

Hey, what do Lehman Brothers know compared to the doom-and-gloom brigade on TV, some who would call even Rockerfeller a dumb investor?

Surely Lehmans should go down a few cheap beer bars and get their economic advice there instead?

Ah ah ah, you are so naive.

In march 2000, Lehman, Goldman and all the "analysts" were saying about Nasdaq : "go for it, it's going up". Do you remember ? I guess no.

And Enron ? Just before the collapse, it was still "go for it baby". When Enron share had already dropped 99%, only 1 of 14 analysts rated it a sell, and 5 still rated it a buy or a strong-buy (source Thomson Financial/First Call).

So for myself, as a good contrarian, when Lehman Brothers "forecast Thai economy has bright future", well it's obvious, it's really time to go out !

You should know that. Especially if you admire Rockefeller.

This very wise man... decided it was time to liquidate his Wall Street holdings in October 1929 when he was given... a share tip by his shoe-shine boy ... Just before the big crash.

So don't mix apples with bananas please.

Edited May 15, 2007 by cclub75

[Mid]

>>Lehman Brothers forecast Thai economy has bright future

Hey, what do Lehman Brothers know compared to the doom-and-gloom brigade on TV, some who would call even Rockerfeller a dumb investor?

Surely Lehmans should go down a few cheap beer bars and get their economic advice there instead?

we are all familiar with a messenger attack ,

not so sure what your post could be classified as though ,

a**kissing comes to mind .