Vietnam Moving Toward Forex Crisis, May Devalue Dong

[samran]

didnt the crisis in 1997 start with a certain former asian tiger? it will be interesting to see the impact on LOS (on top of the potential coup part deux)

something wicked this way comes.........

Vietnam Moving Toward Forex Crisis, May Devalue Dong

BANGKOK -(Dow Jones)- Vietnam is veering toward a currency and banking crisis that could force a massive devaluation of the dong and trigger a rerun of East Asia's 1997 financial meltdown, an analyst at investment bank Morgan Stanley has warned.

http://www.fxstreet.com/news/forex-news/ar...90-873b53817174

no dominios to fall around asia bingo.

Unlike last time, other asian countries aren't artifically keeping their currencies strong with high interest rates on shore, while people are borrowing cheap money overseas and investing it in Thailand into non-productive initiatives, and who are doing it unhedged.

If VN is doing that, then so be it, but you haven't got the same story this time to make it spread further.

Now, China maybe.....

[Naam]

Vietnam Faces Growing Inflation Rates

who the eff cares about inflation in Viet Nam?

[bingobongo]

i know delusion is some of the reasons folks deny reality, but i thought i'd pass this along, pertaining to Vietnam

Vietnam Faces Ratings Downgrade Amid an Overheating Economy

• Fitch lowered credit outlook from 'stable' to 'negative', BB- foreign currency rating on rising inflation, trade deficit, declining currency, inadequate policy responses and risks to banking sector; S&P also lowered foreign currency debt rating to 'negative' earlier on rising
  
• Central bank raising interest rate, curbing bank lending to control credit growth (from FX intervention, capital inflows, expansionary fiscal policy); govt imposing price/export controls, cutting import tariffs, spending - but with little success
  
• Stock market down by over 50% ytd, foreign investor sentiment weakened amid growing risks to growth
  
• Morgan Stanley (Via Bloomberg): Vietnam's stance to let currency appreciate to control inflation amid external deficit, low forex reserves will make it vulnerable to devaluation, currency crisis
  
• IMF: Increasing internal/external imbalances; import-led external deficit financed by portfolio inflows rather than FDI; global slowdown will impact growth and exports; need exchange rate flexibility, control of off-budget/pubic sector spending, supervision of bank lending
  
• Fiscal and monetary tightening, capital outflows on growing risk aversion will weigh down on growth
  
• Economist: Govt policies are raising prices in short-term but will make the economy more competitive in the long-run; higher interest rates, weaker export demand may overtime help reduce overheating pressures
  
• JP Morgan: Domestic /foreign investment-led growth; current a/c deficit will be financed by capital inflows; risks: impact of infrastructure and other spending on fiscal deficit, limited institutional capacity
  
• Other Risks: Weak banking sector w/ large dollarization, NPLs; capital inflows challenging monetary policy and dollar-pegged exchange rate
  

[samran]

i know delusion is some of the reasons folks deny reality, but i thought i'd pass this along, pertaining to Vietnam

Vietnam Faces Ratings Downgrade Amid an Overheating Economy

• Fitch lowered credit outlook from 'stable' to 'negative', BB- foreign currency rating on rising inflation, trade deficit, declining currency, inadequate policy responses and risks to banking sector; S&P also lowered foreign currency debt rating to 'negative' earlier on rising
  
• Central bank raising interest rate, curbing bank lending to control credit growth (from FX intervention, capital inflows, expansionary fiscal policy); govt imposing price/export controls, cutting import tariffs, spending - but with little success
  
• Stock market down by over 50% ytd, foreign investor sentiment weakened amid growing risks to growth
  
• Morgan Stanley (Via Bloomberg): Vietnam's stance to let currency appreciate to control inflation amid external deficit, low forex reserves will make it vulnerable to devaluation, currency crisis
  
• IMF: Increasing internal/external imbalances; import-led external deficit financed by portfolio inflows rather than FDI; global slowdown will impact growth and exports; need exchange rate flexibility, control of off-budget/pubic sector spending, supervision of bank lending
  
• Fiscal and monetary tightening, capital outflows on growing risk aversion will weigh down on growth
  
• Economist: Govt policies are raising prices in short-term but will make the economy more competitive in the long-run; higher interest rates, weaker export demand may overtime help reduce overheating pressures
  
• JP Morgan: Domestic /foreign investment-led growth; current a/c deficit will be financed by capital inflows; risks: impact of infrastructure and other spending on fiscal deficit, limited institutional capacity
  
• Other Risks: Weak banking sector w/ large dollarization, NPLs; capital inflows challenging monetary policy and dollar-pegged exchange rate
  

yeah, but you still haven't articulated the transmission mechansims that makes this an asia wide problem bingo....

[Misty]

i know delusion is some of the reasons folks deny reality, but i thought i'd pass this along, pertaining to Vietnam

Vietnam Faces Ratings Downgrade Amid an Overheating Economy

• Fitch lowered credit outlook from 'stable' to 'negative', BB- foreign currency rating on rising inflation, trade deficit, declining currency, inadequate policy responses and risks to banking sector; S&P also lowered foreign currency debt rating to 'negative' earlier on rising
  
• Central bank raising interest rate, curbing bank lending to control credit growth (from FX intervention, capital inflows, expansionary fiscal policy); govt imposing price/export controls, cutting import tariffs, spending - but with little success
  
• Stock market down by over 50% ytd, foreign investor sentiment weakened amid growing risks to growth
  
• Morgan Stanley (Via Bloomberg): Vietnam's stance to let currency appreciate to control inflation amid external deficit, low forex reserves will make it vulnerable to devaluation, currency crisis
  
• IMF: Increasing internal/external imbalances; import-led external deficit financed by portfolio inflows rather than FDI; global slowdown will impact growth and exports; need exchange rate flexibility, control of off-budget/pubic sector spending, supervision of bank lending
  
• Fiscal and monetary tightening, capital outflows on growing risk aversion will weigh down on growth
  
• Economist: Govt policies are raising prices in short-term but will make the economy more competitive in the long-run; higher interest rates, weaker export demand may overtime help reduce overheating pressures
  
• JP Morgan: Domestic /foreign investment-led growth; current a/c deficit will be financed by capital inflows; risks: impact of infrastructure and other spending on fiscal deficit, limited institutional capacity
  
• Other Risks: Weak banking sector w/ large dollarization, NPLs; capital inflows challenging monetary policy and dollar-pegged exchange rate
  

It would seem with 20-25% inflation that the real exchange rate of the dong is essentially depreciating relative to others already, whatever the official rate may be...(purchasing power parity)

But I agree with Samran--no reason to see contagion at this point. The dynamics are different in other Asian countries, and that includes Thailand. Additionally Thailand does not have a "crawling peg" to the USD as does Vietnam.

[bingobongo]

the little blue pill with that begins with "v", the bar girl in your lap, and a plate of som tham may help dull the pain temporarily, but then that would just postpone the reality...........

Vietnam: First domino in asia?

“I think (we could see) a much deeper and more prolonged slowdown than people are currently anticipating that lasts until the end of 2009, rather than being done shortly,” said Bill Belchere, regional economist with Macquarie in Hong Kong.

http://economictimes.indiatimes.com/Invest...how/3090987.cms

[samran]

the little blue pill with that begins with "v", the bar girl in your lap, and a plate of som tham may help dull the pain temporarily, but then that would just postpone the reality...........

Vietnam: First domino in asia?

“I think (we could see) a much deeper and more prolonged slowdown than people are currently anticipating that lasts until the end of 2009, rather than being done shortly,” said Bill Belchere, regional economist with Macquarie in Hong Kong.

http://economictimes.indiatimes.com/Invest...how/3090987.cms

and the last line of said article says:

"While stronger economies in the region will probably see their currencies, and exports, hit to some extent by the weakness in other countries, the region will avoid anything like the 1997 financial crisis."

So I'll be ordering some more of that som tham that you deride so much there, bingo.

[PhilHarries]

Vietnam Faces Growing Inflation Rates

who the eff cares about inflation in Viet Nam?

Oddly enough Naam I do. but I'm not planning a condo dive over it yet.

Everyone seems to be quoting stats about expats in VN using HCMC as their database. There's more to Viet Nam than HCMC and I know quite a few expats on this project living central and north VN and not one of them is rushing to get out of the country. I guess those that choose Viet Nam as their base are a different breed to those that sweat over a one Baht fall in the value of the dollar.

I don't know how they calculate the rate of inflation but as far as I can see the rate is nowhere near the 25 or 35% quoted (depending who you believe) here in the centre of the country unless you look at building materials. These are rising at a hel_l of a rate and if a property market crash in HCMC brings about a slowdown it can't be all bad.

Whether any financial crisis in Viet Nam triggers a wider regional meltdown as in '97 is anybody's guess but, although I'm no economist, I'd think not. But if China were to topple I think the ripples would spread far further.

[Loom]

In the official stats, food prices account for 43% of the CPI. The optimists expect food prices to eventually stabilize and bring down inflation rates later this year. The authorities also seem to believe current inflation rates to be a one-off.

In any event, the foot is on the brakes and things are slowing from a high level. Bank credit increased 50% last year. I believe, Morgan Stanley is pointing out that foreign reserves are relatively low so if the source of FDI gets nervous due to slumping asset values, the currency could come under pressure.

Other economies in the region have racked up larger forex reserves in the past few years, their currencies have been relatively strong, inflation isn't as large a problem and can better weather a slowdown in external demand.

I don't buy the contagion theory.

[Misty]

Vietnam: First domino in asia?

“I think (we could see) a much deeper and more prolonged slowdown than people are currently anticipating that lasts until the end of 2009, rather than being done shortly,” said Bill Belchere, regional economist with Macquarie in Hong Kong.

http://economictimes.indiatimes.com/Invest...how/3090987.cms

I have no problems with those comments. But the "deeper and more prolonged slowdown" is not because of Vietnam, Vietnamese inflation, or contagion from Vietnam, and is not limited to just Thailand or even just Asia. If you want to be worried, than be worried about a whole host of other more global issues that have been going on for awhile, not just Vietnam....

the little blue pill with that begins with "v", the bar girl in your lap, and a plate of som tham may help dull the pain temporarily, but then that would just postpone the reality...........

huh?

[Misty]

Whether any financial crisis in Viet Nam triggers a wider regional meltdown as in '97 is anybody's guess but, although I'm no economist, I'd think not. But if China were to topple I think the ripples would spread far further.

Agreed, I think I'd be more worried about high inflation inside China sparking instability. I'm told that's China's main worry--internal social unrest. In some ways, China's stuck between a rock and a hard place, with the choices being: 1) Let the yuan appreciate to stave off inflation, thus making exports less competitive and sparking social unrest, or 2) Don't let the yuan appreciate and suffer high inflation thus sparking social unrest. Apparently these are the negative consequences of keeping the country's currency undervalued for so long.

[quiksilva]

I also cant see any linkages between Vietnam and the rest of Asia today.

Thailand's collapse in '97 unveiled problems which were rampant throughout the region and the 'Asian Miracle' bubble was well and truly popped. ( eg. poor lending practices, over valuation, problems with dollar pegging, and speculation)

Vietnam today can tick the box on just about all of those points, so I can see the similarities to Thailand of 1997, but crucially the same can't be said for all of its neighbouring countries (no matter how much some wish it was so).

I agree that all economies will go through a period of depressed growth, I certainly think that interest rates will rise. This is unfortunate but it's nothing new, its a natural business cycle. Inflation happens, deal with it.

I personally believe that no matter how tough it will be on us all corrections like this are healthy for an economy, it helps markets to mature by forcing companies to adopt better business practices, or perish.

Take the industry I know best as an example: Inflation may well drive interest rates higher later in the year, which may force many of those who have purchased condo's as investments to actually cut their losses this time around.

Traditionally only the wealthy could afford condo's to rent out in Thailand, these were cash buyers, so they could afford to leave units sitting empty, and ride the market cycles. Those players are still active today and they will no doubt have no reason to change their modus operandi. However, new players have also entered the market, players who have leveraged their acquisitions. Sure a large portion may have done this with family help, but not all.

I think this correction could introduce a new dynamic into the property markets in Thailand, it may not be as widespread as some hope, but I believe it will affect rents and perhaps even resale prices. However, this dynamic will be driven by local conditions, indirectly caused by a global economic slow down brought on by high energy costs causing local inflation, as opposed to anything that may happen to little old Vietnam.

Thailand remains an attractive destination for manufacturers throughout a wide range of industries and I believe it will continue to attract FDI, which is far more important than most people give credit to.

[midas]

I also cant see any linkages between Vietnam and the rest of Asia today.

Thailand's collapse in '97 unveiled problems which were rampant throughout the region and the 'Asian Miracle' bubble was well and truly popped. ( eg. poor lending practices, over valuation, problems with dollar pegging, and speculation)

Vietnam today can tick the box on just about all of those points, so I can see the similarities to Thailand of 1997, but crucially the same can't be said for all of its neighbouring countries (no matter how much some wish it was so).

I agree that all economies will go through a period of depressed growth, I certainly think that interest rates will rise. This is unfortunate but it's nothing new, its a natural business cycle. Inflation happens, deal with it.

I personally believe that no matter how tough it will be on us all corrections like this are healthy for an economy, it helps markets to mature by forcing companies to adopt better business practices, or perish.

Take the industry I know best as an example: Inflation may well drive interest rates higher later in the year, which may force many of those who have purchased condo's as investments to actually cut their losses this time around.

Traditionally only the wealthy could afford condo's to rent out in Thailand, these were cash buyers, so they could afford to leave units sitting empty, and ride the market cycles. Those players are still active today and they will no doubt have no reason to change their modus operandi. However, new players have also entered the market, players who have leveraged their acquisitions. Sure a large portion may have done this with family help, but not all.

I think this correction could introduce a new dynamic into the property markets in Thailand, it may not be as widespread as some hope, but I believe it will affect rents and perhaps even resale prices. However, this dynamic will be driven by local conditions, indirectly caused by a global economic slow down brought on by high energy costs causing local inflation, as opposed to anything that may happen to little old Vietnam.

Thailand remains an attractive destination for manufacturers throughout a wide range of industries and I believe it will continue to attract FDI, which is far more important than most people give credit to.

I wish I could share your continued enthusiasm and optimism about the prospects for the

Bangkok property market but I cannot! While we continue to watch the deterioration of

the economy of Vietnam and debate to what extent other countries in this region will be

affected, it seems potential problems regarding the economic stability of the Asian countries are coming

from all directions.

I am keeping a very close eye and listening every opportunity at the potential geopolitical problems

between Iran and Israel. This started recently when I heard the political commentator in the USA

Dick Morris sounding incredibly confident that Israel will soon have Benjamin Netanyahu as

its Prime Minister once again. Simultaneously because he knows Barack Obama would not

attack Iran there is a worrying consensus growing in many quarters that Benjamin Netanyahu

will do so before George Bush leaves office.

I am very pessimistic about this potential war and how it will affect world economies because

then we are definitely likely to see 200 dollars per barrel for oil and how would Thailand cope with that ?.

This is quite apart from the unknown

and unpredictable consequences of this looming conflict ( which has been brewing for a long time )

two countries that vehemently hate each other.

One with an estimated arsenal of 150 nuclear warheads and the other with who knows what

but also with a number of powerful neighboring allies.

What I'm saying is I fear we need to be ready for a period of further global chaos not just financially

the geopolitically and in those conditions

talking about to what extent property investments in Bangkok will be affected seems

superfluous

[PattayaParent]

I hope they devalue soon as I've got a payment to make on my apartment coming up.

[pkrv]

I hope they devalue soon as I've got a payment to make on my apartment coming up.

You could always ask them to make bingobongo their Finance Minister - I can guarentee swift results

[jumnien]

You really feel for those who went long the dong!

[pkrv]

I also cant see any linkages between Vietnam and the rest of Asia today.

Thailand's collapse in '97 unveiled problems which were rampant throughout the region and the 'Asian Miracle' bubble was well and truly popped. ( eg. poor lending practices, over valuation, problems with dollar pegging, and speculation)

Vietnam today can tick the box on just about all of those points, so I can see the similarities to Thailand of 1997, but crucially the same can't be said for all of its neighbouring countries (no matter how much some wish it was so).

I agree that all economies will go through a period of depressed growth, I certainly think that interest rates will rise. This is unfortunate but it's nothing new, its a natural business cycle. Inflation happens, deal with it.

I personally believe that no matter how tough it will be on us all corrections like this are healthy for an economy, it helps markets to mature by forcing companies to adopt better business practices, or perish.

Take the industry I know best as an example: Inflation may well drive interest rates higher later in the year, which may force many of those who have purchased condo's as investments to actually cut their losses this time around.

Traditionally only the wealthy could afford condo's to rent out in Thailand, these were cash buyers, so they could afford to leave units sitting empty, and ride the market cycles. Those players are still active today and they will no doubt have no reason to change their modus operandi. However, new players have also entered the market, players who have leveraged their acquisitions. Sure a large portion may have done this with family help, but not all.

I think this correction could introduce a new dynamic into the property markets in Thailand, it may not be as widespread as some hope, but I believe it will affect rents and perhaps even resale prices. However, this dynamic will be driven by local conditions, indirectly caused by a global economic slow down brought on by high energy costs causing local inflation, as opposed to anything that may happen to little old Vietnam.

Thailand remains an attractive destination for manufacturers throughout a wide range of industries and I believe it will continue to attract FDI, which is far more important than most people give credit to.

Hi quiksilva - an interesting post - From purely a ferang perspective, I would have to say I perceive a more segmented condominium market in Thailand, especially in Bangkok (and no market in Vietnam) I note the thread

Foreigners Allowed To Own Apartments In Vietnam, But Must Meet Criteria, Government Says, Vietnam here I come!

http://www.thaivisa.com/forum/index.php?showtopic=190442

Which was just silly.

Impact would unfortunately be to the low end Thai ownership market. Ferangs who buy simply stay. They appear to:

Research

Choose beach, mega city or other

And stay put (i.e. they retire)

You have a sort of business hat on, on Thaivisa, and quite appropriately so. All I can say is that Thailand wipes the floor with all other 'offers' on the table for foreigners, I am afraid there are a lot of us planning for the future and IMO options are very limited, Vietnam as you say, is not one of them.

[bingobongo]

does anything really need to be said?

tick tick kiddies, are not the thai taxi drivers threatening to strike due to the same inflationary pressure?

Inflation Fuels Vietnam Strikes

A proliferation of labor strikes in Vietnam is dragging foreign manufacturers into the country's worsening inflation crisis, while Hanoi's Communist leaders struggle to keep rising prices under control.

Last year, foreign companies applied to invest $20 billion in Vietnam, a third more than in nearby Thailand, pushing up office rents and other costs.

http://online.wsj.com/article/SB1212404053...=googlenews_wsj

[SoCal]

Hey, a question for you gurus, on something I don't quite understand.

Everyone is calling for Vietnam to devalue the dong, but wouldn't it be better to raise interest rates, tighten liquidity, and strenthen the dong, if the concern is an overheating economy and out of control inflation?

Lastly, you guys all talk like this is something dire. If you are an expat, then what exactly is so bad about it? 1) Most expats are paid in dollars, euros, etc. 2) I still think Vietnam is cheaper than Thailand, even with our 25% inflation, which I haven't really felt. 3) If the property bubble bursts, and the dong takes a nose dive, then that spells opportunity for us, not the despair which the locals will most likely feel. How many times have I read from Thai long termers that they wish they would have bought more land in 2000, or converted more money to Baht. How is this any different?

So gurus, please enlighten me.

[bingobongo]

Hey, a question for you gurus, on something I don't quite understand.

Everyone is calling for Vietnam to devalue the dong, but wouldn't it be better to raise interest rates, tighten liquidity, and strenthen the dong, if the concern is an overheating economy and out of control inflation?

Lastly, you guys all talk like this is something dire. If you are an expat, then what exactly is so bad about it? 1) Most expats are paid in dollars, euros, etc. 2) I still think Vietnam is cheaper than Thailand, even with our 25% inflation, which I haven't really felt. 3) If the property bubble bursts, and the dong takes a nose dive, then that spells opportunity for us, not the despair which the locals will most likely feel. How many times have I read from Thai long termers that they wish they would have bought more land in 2000, or converted more money to Baht. How is this any different?

So gurus, please enlighten me.

uh, you missed the point, the dong is OVERVALUED due to inflation, the point being is that as this spreads, and the average Thai/Vietnamese/Chinese etc will take it on the chin, the credit markets will freeze, and a retrenching will occur which will cause quite a bit of pain

Vietnam May Accelerate Dong's Decline, Goldman Says

Deutsche Bank AG said the currency will weaken as much as 30 percent in the coming months, extending this year's 1.5 percent loss

``If inflation deteriorates further for a sustained period, local capital might flee into gold and the dollar, putting the domestic monetary system under stress,'' she wrote in the note.

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

[backflip]

"...even with our 25% inflation..."

The latest figures show less than 8%, so I'm not sure what you are talking about.

[Naam]

"...even with our 25% inflation..."

The latest figures show less than 8%, so I'm not sure what you are talking about.

inflation percentages do not necessarily apply to all consumers in the same way. for Somchai Pornthip earning a daily wage of 200 Baht in Isaan province the percentage might well be 25% (or even more) whereas for the wealthy it might be an insignificant percentage because they spend only a fraction of their income on food stuff which mainly caused inflation.

[Loom]

Hey, a question for you gurus, on something I don't quite understand.

Everyone is calling for Vietnam to devalue the dong, but wouldn't it be better to raise interest rates, tighten liquidity, and strenthen the dong, if the concern is an overheating economy and out of control inflation?

Lastly, you guys all talk like this is something dire. If you are an expat, then what exactly is so bad about it? 1) Most expats are paid in dollars, euros, etc. 2) I still think Vietnam is cheaper than Thailand, even with our 25% inflation, which I haven't really felt. 3) If the property bubble bursts, and the dong takes a nose dive, then that spells opportunity for us, not the despair which the locals will most likely feel. How many times have I read from Thai long termers that they wish they would have bought more land in 2000, or converted more money to Baht. How is this any different?

So gurus, please enlighten me.

I'm by no means a guru but do have some thoughts about this.

I understand in local currency conversions made for buying gold, the dong is already trading around 17,500.

The central bank has increased interest rates but it looks like a matter of being too little, too late. Growing labor unrest (work stoppages to demand higher wages) will probably cool Vietnam as a destination for FDI in the short term. FDI is nearly the only leg the dong has to stand on right now due to a large trade deficit.

The prognosis for a weaker dong implies that interest rates won't rise (or inflation won't fall) to a point where monetary policy becomes tight. In June the government has to assess the price controls it put on basic commodities late last year. So I wouldn't expect inflation to go away too fast.

But the tight policy you're suggesting is has been pursued successfully in other asian economies to keep inflation down.

Yeah, there's probably a good opportunity waiting just around the corner.

[Misty]

"...even with our 25% inflation..."

The latest figures show less than 8%, so I'm not sure what you are talking about.

Apparently there was a Vietnamese gov't report released yesterday saying the official inflation number was 25.4%.

Still think there's not much to directly connect the dots between Vietnam and Thailand. I think most investors realize there's any number of differences between the current positions of the two countries economically. So if these issues are just about Vietnam, I don't see any long term problem for Thailand.

But Vietnam could be a canary in the coal mine for other important economies where our information flow isn't as good--an example being China.

If China goes pear-shaped/is going pear-shaped (even if we can't see it, yet), it would seem Thailand could only be negatively affected. As would many other places around the world.....

[junkofdavid2]

So many 'logical' arguments about a repeat of the 97 crisis... but at the end of the day, a repeat MAY occur if there is strong PERCEPTION that it will occur... and it MAY NOT occur if there is PERCEPTION that the 'fundamentals are strong'...

So who will win the PR war? We'll see....

I would benefit from a devaluation of the Baht though... my interest earnings from my farangland placements will surge.

[pkrv]

With policies such as this

"Vietnamese legislators voted overwhelmingly Thursday on the proposal which allows foreigners to own to apartments up to 50 years, the government said in an online report.

The new law, which will take effect Jan. 1, 2009, still does not extend to foreigners the right to own free-standing houses, said the report.

Under the policy, foreigners who are eligible must meet one of the following conditions: be married to a Vietnamese citizen, be recognized by the prime minister or president for having made a great contribution to the country, have made direct investments in Vietnam, or have special skills and knowledge that Vietnam needs."

Vietnam will go nowhere and is a non entity - Whilst legislators may say that home (house or condominium) ownership has no effect on the economy and is somehow 'not revenue earning' oddly people need somewhere to live. That a home cannot be directly 'milked' for its assets probably has a lot to do with the mindset in play here. And with that mindset - I would not invest.

[Misty]

So many 'logical' arguments about a repeat of the 97 crisis... but at the end of the day, a repeat MAY occur if there is strong PERCEPTION that it will occur... and it MAY NOT occur if there is PERCEPTION that the 'fundamentals are strong'...

I think whatever transpires over the next 12 mos to 2 yrs is not likely to look much like the 97 crisis--not globally, and not for Thailand. So I don't expect a repeat of the 97 crisis. The situation now is different.

On the positive side, the best case scenario as I see it is that 1) China or other major economies are not facing issues similar in scope and depth as Vietnam, or at least not problems that it/they cannot successfully deal with, 2) pressure on the global credit system has eased and liquidity gradually returns, 3) the global financial crisis causes only a gentle slowing in global demand, 4) this slowing causes an easing on pricing pressure, and 5) the global economy can continue to grow, albeit at a slower pace. 6) No major shocks to the system.

I hope so, anyway.

[shochu]

the financial crisis is easing? - interesting!

all the manufactured goods made in LOS are for what growth markets?? in what region???

i am not a doom and gloom merchant as I have always said LOS had a good long term future - but what lies ahead - well - i guess your guess is as good as mine

[Misty]

the financial crisis is easing? - interesting!

No, guess I wasn't very clear. That was a best case scenario of how things could work. Too early to even begin to say that we're actually heading down that path. I'm sure we can both guess at a variety of much worse case scenarios.

[quiksilva]

Midas,

I think you misread my post, it was not all about property, I used that as an example, in which I don't think I painted an overly rosy outlook. (At least I did not intend to, for the record I am advising friends who ask my advice to hold / sell, to do the latter, unless you live there).

In the line you highlighted I talked about FDI foreign direct investment meaning that I am optimistic that Thailand will continue to attract companies wishing to establish new ventures in Thailand, particularly in agriculture and manufacturing sectors (autos and electronics being the largest).

This positively affects the industrial real estate sector directly but also has some spill over benefits to commercial and residential too although this will be only slight, but the multiplier affect can only be good. >60% of Thai GDP is based on exports, more firms exporting from Thailand is healthy for the economy.

The reason I think that this is an even more likely scenario now is because as the cost of doing business rises at home, even more firms will be tempted to set up shop overseas, and this is really happening, I speak to these firms every day, I help them to find factories here, and now that Vietnam is looking more risky, Thailand is looking increasingly attractive.