How Will The Crash Affect Cm?

[SoloFlyer]

Markets down again today.

Thai's keep asking me about this crisis. My Thai isn't quite good enough to go into the details... but I'm telling them that this is gonna drag out for months and months, and it may be a year or more before the hardest effects are felt by Jo Somtum.

Interested to hear some thoughts.

[K2K]

Which crisis - the domestic one or the global (US triggered) sub-prime/CDS/CDO one?

SET is down in line with MSCI Asia (~30% YTD) so not really suffering additionally from domestic political uncertainties.

Unemployment rising from tourist homelands will no doubt hit tourism - so perhaps something like 20-30% less tourist, in line with the market falls and if the is mass repatriation of money invested here that could cause a weakening of the THB. However near term THB being held up by strong JPY on carry trade unwind.

For average Khun Somchai this is one of the better places to be to ride out the international crisis.

Edited October 7, 2008 by K2K

[CobraSnakeNecktie]

Which crisis - the domestic one or the global (US triggered) sub-prime/CDS/CDO one?

SET is down in line with MSCI Asia (~30% YTD) so not really suffering additionally from domestic political uncertainties.

Unemployment rising from tourist homelands will no doubt hit tourism - so perhaps something like 20-30% less tourist, in line with the market falls and if the is mass repatriation of money invested here that could cause a weakening of the THB. However near term THB being held up by strong JPY on carry trade unwind.

For average Khun Somchai this is one of the better places to be to ride out the international crisis.

Good analysis K2K. Sounds like you might be a trader. I would add that nobody really knows the result of the credit crisis in the US/EU yet because its just unfolding now. Anything from a mild global recession to full on depression complete with chaos and martial law is a possible result. At this point nobody really knows for sure.

Another significant change for Thailand could be pressure on export volume and price if there is a global recession/depression. Exports btw are a far larger contributor to GDP than tourism. After the orgy of real estate development spurned by negative real interest rates then it's possible the inflated real estate market could experience a crisis if exports, investment and tourism contract.

[Ulysses G.]

Both of you guys could be right. K2K seems to me to be a tad optimistic, while CobraSnakeNecktie is less so, but perhaps more more realistic. If this turns out to be a Global Depression, one would think that tourism in Thailand would almost come to a stand still and that exports would go way down.

I would guess that if banks fail, it is very possible that the funds that support many pensions would dry up, meaning that a good number of retirees would end up having to go home.

On top of all these international problems, this nonsense in Bangkok is hurting Thailand badly in the shortrun as the few tourists that are still around will watch the BBC and avoid Thailand like any other war zone. "High season" for this year is looking more and more like a pipe dream.

Edited October 7, 2008 by Ulysses G.

[SoloFlyer]

And anybody know to what extent Thai banks will guarantee deposits? - and does anybody have any evidence as to whether or not this includes accounts held by foreigners??

[lannarebirth]

And anybody know to what extent Thai banks will guarantee deposits? - and does anybody have any evidence as to whether or not this includes accounts held by foreigners??

At the present time, Thai bank accounts are guaranteed for all deposits, no matter how large. There is a plan in place to reduce those protections incrementally over the course of the next few years. Yes, foreigners accounts are included in the guarantee scheme. As you can imagine, if they ever had to make good on these guarantees, the baht would be worth about as much as the toilet paper we wipe our mouths with.

Edited October 7, 2008 by lannarebirth

[Slogger]

Markets down again today.

Thai's keep asking me about this crisis. My Thai isn't quite good enough to go into the details... but I'm telling them that this is gonna drag out for months and months, and it may be a year or more before the hardest effects are felt by Jo Somtum.

Interested to hear some thoughts.

I don't often praise Thailand's institutions, and won't now, but can't Thailand now laugh at the western economies? After we all scorned Thailand for having such a shit financial system with so much cronyism, corruption and unsecured loans that led to the 1997 crash. We all thought the western system was so much more sound - "it couldn't possibly happen in the US or Europe 'coz our system is so well regulated and the people who run it are so honest". Good on yer Thailand - have a good laugh at us while you can!

[Gravelrash]

And anybody know to what extent Thai banks will guarantee deposits? - and does anybody have any evidence as to whether or not this includes accounts held by foreigners??

Supposedly all deposits are guaranteed, but how long would a foreigner have to wait if things went bad? Definitely would be at the back of the queue me thinks. Little pre-planning never hurts in life.

Most of my money is in rental properties, if some lost tenants in a bad scenario others would still have them, so income may drop, but can't lose the farm.

My brother and I had the real estate vs stock market discussion about 18 months ago, at the time he was getting a higher return than my slow and steady 9%, but I fear he has taken a caning but hopefully not lost too much. Suspect the "never invest one baht in Thailand" mob have or will be taking some hits as well.

[JimsKnight]

This is pretty much across the board guys, Thailand just feels the effects and fallout a bit later in the day so to speak.

I know Chiang Mais Pantip Plaza was a lot quieter early this year than the previous years, more shutters down, the top floors deserted and some of the middle ones have more vacant areas.

I nearly got burned from a supposedly 'safe' bank in Iceland's Icesave account (landski).

I pulled my cash just in time as now you can't withdraw anything at all from them or deposit it.

Now it will be a UK bank that farms my money. For how long who can tell?

I know that I'll probably take an ounce of gold with me to LOS, just-in-case the banks in the UK I draw my money from go tits up

Edited October 7, 2008 by JimsKnight

[ThaiPauly]

Markets down again today.

Thai's keep asking me about this crisis. My Thai isn't quite good enough to go into the details... but I'm telling them that this is gonna drag out for months and months, and it may be a year or more before the hardest effects are felt by Jo Somtum.

Interested to hear some thoughts.

I don't often praise Thailand's institutions, and won't now, but can't Thailand now laugh at the western economies? After we all scorned Thailand for having such a shit financial system with so much cronyism, corruption and unsecured loans that led to the 1997 crash. We all thought the western system was so much more sound - "it couldn't possibly happen in the US or Europe 'coz our system is so well regulated and the people who run it are so honest". Good on yer Thailand - have a good laugh at us while you can!

Thailand will definatley be affected, it will just take time before it trickles down.

Thailand is heavily dependent of exports to the USA, orders are already falling, and the powers that be have openly stated that exports WILL be significantly down as the credit crunch bites harder in the west...right now there are no signs whatsover of the sitaution changing.

Also tourist numbers will be well down on previous years, notwithstanding the fact that people can't afford to come because of the aviation fuel prices skyrocketing, the fact that they have less disposable income, maybe lost their jobs or living in fear of losing them, paying their mortgage is a higher priority. They can holiday in their own country or certainly somewhere a lot closer to home.

Add to that the fact that most western countries have increased the warning levels to Red for those thinking of holidaying here....you don't have to be Einstein to work out just how bad things are going to get here for people that have to earn a living to survive.

[K2K]

ThaiPauly right in saying trickle down effect yet to hit Thailand severely ...yet. Korea now heavily hit with Won taking a hammering and Indonesian Rup not even quoting NDF prices this morning.

Thailand not in focus yet - but how long can it be before risk premium on Thailand soars - 10 year Thai bonds at 4.45% cannot last much longer:

http://www.thaibma.or.th/yieldcurve/YieldTTM.aspx

In fact the whole yield curve does not price in any risk at all - in fact real rates are negative (inflation is running at 6%). Thailand 10 years ago when risk mattered used to trade at something like 300-400bp over US - so thats potential for some whopping rate hikes to come in due course.

Argument is Thailand (and rest of SE Asia) has become like the '1st world' .... as we now know - making daft asumptions on risk premiums can do devistating damage and I only consider it a matter of time before that realisation dawns on Thai asset holders who will demand a much greater premium to carry such risk.

More over - considering the political situation - I'd expect to see a 700bp premium over US to hold Thai denominated bonds.

On a more basic level - those who booked holidays here earlier this year - will of course come, they paid for flight and accomodation already, but other than Americans - these tourists will be paying ~20% more (when they get here) than they would have 2 months ago due to the enourmous falls in their currencies.

With the real Main St recession yet to bite and resultant soaring unemployement to levels in excess of 10% in '1st world' - expect next year bookings to be on the meagre side - the worst is yet to come.