Thai Baht... Why?

[philliphn]

You Farang!

You pay more!

[Naam]

Personally I see tears around the corner and an enormous slump in the economy

yawwwnnnn... that's what i hear since more than two years

[caf]

Thailand must have an enormous consumer debt.

Every man and his brother seems to have a new Toyota on 7 year finance agreements add to that the amount of credit cards out there now and you have a disaster waiting to happen.

I was here before the last crash in the currency and honestly don't see anything being done any differently to then.

Wages have certainly not kept pace with inflation here so with rising prices how are the Thai's going to maintain the payments on the debts.

Having bought many properties and assets in Thailand at fire sale prices after the 96 crash I have cashed biggest part of them in over the last 2 years .

Personally I see tears around the corner and an enormous slump in the economy

I agree if we are talking baht.

But of course everything is relative. Are other currencies in a worse predicament. And it is this relative difference that affects the exchange rate

And do you have views on how many bucket loads of currency are being thrown around to protect the baht?

caf

[Naam]

And do you have views on how many bucket loads of currency are being thrown around to protect the baht?

where do these buckets of cash come from? is it raining like manna from heaven?

[Meridian007]

yawwwnnnn... that's what i hear since more than two years

I agree, they've been smarter since `97. I think they're just waiting this one out. Alternatively, I've heard that Canada has been tying its rate to the American dollar, which I think is hurting it.

As to bath/baht, as Bina said, the spelling has changed because of rules of transliteration. If you transliterate "directly", the word บาท is broken down into traditional transliterations of each letter. บ=b, า=a, and ท=th which sounds like a short, hard "t" sound. Therefore, "bath". This obviously has problems, as then people make jokes about washing, so I guess that it was decided to transliterate it phonetically to baht because the า tends to make an "ah" sound.

I don't know if the above is correct, it's just my interpretation of why they changed the spelling. If you go to smaller towns, you'll still see it transliterated as bath in many places. Don't worry Bartlaz, you had it correct, just an old spelling!

Edited February 6, 2010 by Meridian007

[Naam]

yawwwnnnn... that's what i hear since more than two years

I agree, they've been smarter since `97. I think they're just waiting this one out. Alternatively, I've heard that Canada has been tying its rate to the American dollar, which I think is hurting it.

source = National Enquirer?

[Heng]

Ditto yawn. I've been hearing that for 10+ as well.

[Naam]

Ditto yawn. I've been hearing that for 10+ as well.

12 years ago i arrived in BKK and changed some dollars @THB >55. the next day when i changed some cash at a money changer's booth in Pattaya a friendly American (who was queuing up with me) told me "soon 100 Baht for one Dollar!"

since then i am waiting. only exchanged Deutsch Marks and EURos keeping my Dollars...

[Meridian007]

source = National Enquirer?

I'll admit, I heard it from my parents. I didn't check out its veracity because frankly, economic issues in the west still depress me enough to make me keep my head in the sand. I assume it's not true then? I heard that Canada was trying to keep the Canadian dollar below the American, so to not hurt our exports there too much. It sounded like something that Harper would do, so I didn't question it.

[Gary A]

Ditto yawn. I've been hearing that for 10+ as well.

12 years ago i arrived in BKK and changed some dollars @THB >55. the next day when i changed some cash at a money changer's booth in Pattaya a friendly American (who was queuing up with me) told me "soon 100 Baht for one Dollar!"

since then i am waiting. only exchanged Deutsch Marks and EURos keeping my Dollars...

A hundred to a dollar. What were you doing in that bar. That sounds very much like beer talk. I was VERY lucky during the crashed economy time. The Thai company I was working for was paying me quite well. I could see the business dropping off and accepted a job in the US. Of course since I was moving back to the US, I changer all my baht into dollars before the big crash. Sometimes I do things right but not knowing it at the time.

[davidrkw]

valid question and 80% nonsense posts... *sigh*

answer to the OP:

It is not that Thai Baht that is strong, the western currencies are weak.

Thailand hasn't been hit very hard by the financial crisis.

You will find that exchange rates to baht of currencies from western countries that were not hit as strong by the financial crisis have remained more or less unchanged: for example Switzerland, Canada, Australia.

EDIT: gambles and I posted at the same time, refer to his excellent post from more detailed information.

The pound is weak due to uncertainty over the direction of the British economy and how a new government will deal with the deficit, this makes investing in the UK fairly risky and why take a risk when interest rates are so low in the UK? When interest rates return to 'normal' (maybe 4%) or are on a trend upwards, the pound will recover against the Baht (Thai rates are at 2% and may increase soon). There are many reasons why the UK can not increase rates now, and anyway, it is helpful for the pound to weaken as it helps exporters and makes debt more affordable.

[longstebe]

So, once the U.S and the U.K get back on there feet the exchange rate will get back to something reasonable?

[chiang mai]

How do you define "reasonable" in terms of GBP/THB?

[manarak]

valid question and 80% nonsense posts... *sigh*

answer to the OP:

It is not that Thai Baht that is strong, the western currencies are weak.

Thailand hasn't been hit very hard by the financial crisis.

You will find that exchange rates to baht of currencies from western countries that were not hit as strong by the financial crisis have remained more or less unchanged: for example Switzerland, Canada, Australia.

EDIT: gambles and I posted at the same time, refer to his excellent post from more detailed information.

The pound is weak due to uncertainty over the direction of the British economy and how a new government will deal with the deficit, this makes investing in the UK fairly risky and why take a risk when interest rates are so low in the UK? When interest rates return to 'normal' (maybe 4%) or are on a trend upwards, the pound will recover against the Baht (Thai rates are at 2% and may increase soon). There are many reasons why the UK can not increase rates now, and anyway, it is helpful for the pound to weaken as it helps exporters and makes debt more affordable.

I mostly agree but I would like to rephrase the first sentence from

The pound is weak due to uncertainty over the direction of the British economy ...

to

<<The pound is weak due to certainty on the weakness of its economy ...>>

[a2396]

Thailand must have an enormous consumer debt.

Every man and his brother seems to have a new Toyota on 7 year finance agreements add to that the amount of credit cards out there now and you have a disaster waiting to happen.

I was here before the last crash in the currency and honestly don't see anything being done any differently to then.

Wages have certainly not kept pace with inflation here so with rising prices how are the Thai's going to maintain the payments on the debts.

Having bought many properties and assets in Thailand at fire sale prices after the 96 crash I have cashed biggest part of them in over the last 2 years .

Personally I see tears around the corner and an enormous slump in the economy

I wonder about this as well. One would think the country has been hit some with the decline in exports that is related to the USA and European economic slump. But, all this has seemed to have no negative impact on BHT value.

[roamer]

Here is a pretty reasonable summary of the reasons for things being the way they are in spite of what would seem to be pretty daunting prospects for Thailand, and a few possible scenarios. Also worth remembering that in an ever changing world economy you have to run to keep up. I know of one major engineering company in the heavy cable business that even up until a few months ago had Thailand firmly in its sights for major investment in a new plant. They have now decided that the situation in Thailand is too risky for the long term investment this would require. They are not alone.

http://www.reuters.com/article/idUSSGE62B07L20100312

SCENARIOS-Will Thailand's government ride out the storm?

Fri Mar 12, 2010 5:46am EST

By Martin Petty

Financials

BANGKOK, March 12 (Reuters) - Thai "red shirt" protestors began a series of demonstrations on Friday aimed at overthrowing the government, a scenario that has hit consumer confidence and may force the central bank to keep interest rates in Southeast Asia's second-biggest economy at a record low [iD:nSGE62B0AZ].

Analysts say the protest by the United Front for Democracy Against Dictatorship (UDD), which backs former Prime Minister Thaksin Shinawatra, could lead to more instability that could impact growth and dent Thailand's investment image. (For the main story [iD:nSGE62B017] and Q+A [iD:nSGE62B059])

Following are possible scenarios:

GOVERNMENT RIDES OUT PROTESTS; STOCK MARKET RISES

The protests could deliver a strong message of public discontent but fail to topple a government with sizable backing from the powerful military and establishment elite.

The "red shirts" failure would prolong an uneasy status quo that has proved favourable to financial markets in the short term, with investors continuing to pour money into Thailand and other regional markets for the time being.

However, a massive rally would still highlight the deep polarisation that has made investors think twice about longer-term expansion in Thailand, reinforced by the likelihood that another pro-Thaksin party will eventually return to power and face protests, or another intervention by the military or the courts, raising the risk of public anger and an uprising.

While foreign investors are piling into Thailand's stock market .SETI, foreign companies are less enthusiastic, cutting investment pledges this year by 15 percent from last year [iD:nSGE622072].

This scenario is most likely, according to most analysts, and Thailand's stock market .SETI, one of the cheapest in Asia, would likely stay in positive territory in the short term.

VIOLENCE ERUPTS BUT QUELLED; NEAR-TERM MARKET VOLATILITY

Tensions are high and violence breaks out, either triggered by "red shirts" or outside agitators keen to stir-up trouble to discredit the movement. This could cause near-term volatility in Thai stocks with likely selling from local retail investors.

Any selling may be offset by buying on dips from foreign investors focused on longer-term economic fundamentals in a region bouncing back from the financial crisis. Foreign investors helped to drive a 63 percent rise in Thai stocks last year -- a period that saw violent riots in April.

Bond yields TH5YT=RR would likely fall on expectations the Bank of Thailand would keep its benchmark rate at a record low of 1.25 percent until June or later, causing economists to change their current forecasts calling for a rate rise soon.

The likely scenario would see security forces breaking up the rally, handing a public relations victory to the government and denting the reputation of "red shirts", who were already vilified after riots last year.

Short-term political stability would prevail, with a perception that the UDD might lose some support or struggle to find funds to continue its campaign.

A measured response by the government could bring confidence to investors in the short term but, again, political divisiveness would likely prevail and continue to cloud an uncertain long-term investment outlook, particularly with an election scheduled to take place by the end of next year.

RALLY GATHERS STEAM, COALITION CRUMBLES; MARKETS TAKE HIT

A robust rally and huge opposition to the government could raise questions about whether it can survive, sparking a flurry of behind-the-scenes negotiations and deals among political parties and factions, with Thaksin likely involved.

Prime Minister Abhisit Vejjajiva's already disgruntled coalition partners could break away, with money politics prevailing, leading to pledges of switches of allegiance to the pro-Thaksin opposition, the Puea Thai Party, which remains popular in the vote-rich countryside.

In this scenario, Puea Thai would table a no-confidence motion against Abhisit and cabinet ministers, which gets the backing of the house, forming a new alliance led by Puea Thai.

Markets would fall on concerns about instability that could prevail given the likelihood that a Puea Thai-led government would anger the potent "yellow shirts" movement, increasing the risk of another pro-Thaksin government being toppled and the prospect of a backlash by backers of the new administration.

This scenario remains unlikely due to the staunch backing Abhist enjoys from Thailand's army, royal advisors and business elites. Coalition partners may not be entirely happy with Abhisit but the likely promise of bigger budgets will keep them onside.

PROTESTS TURN VIOLENT, PM DISSOLVES PARLIAMENT; MARKETS FALL

Violence ensues, security forces are unable to control the crowd and a state of emergency is declared. Bangkok is paralysed, government buildings are targeted. A crackdown by the military leaves many casualties.

Abhisit is no longer able to govern and announces parliament has been dissolved. He serves as a caretaker until new elections.

This scenario, highly unlikely, would prompt mass selling by local and foreign investors fearful of heightened instability and potential for more stalemate and unrest.

Faced with the possibility of a pro-Thaksin government winning the election, and the strong chance of another intervention by Thaksin's powerful opponents, foreign investors would target other regional markets with recovering economies and shun Thailand long-term. (Editing by Jason Szep and Alex Richardson)

Financials

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[lovelomsak]

because

Thai sovereign debt is reasonable in relation to GDP and other measures

Fx reserves are solid

Trade and capital accounts are relatively healthy

Thai growth is much higher than western growth (in fact unindebted countries growth is higher than indebted countries)

Invisible earnings are improving

All of the above mean that there is more capital flow into Thailand than out of

In other words there is more net demand in all forms (from American institutions buying Thai equities to Chinese tourists using ATMs) for Baht than there is additional supply relative to demand supply in the countries whose currencies are weakending against Baht

Political and state risk are moderately priced in right now - if anyone saw Jeremy Charlesworth talking on BBC on Monday "emerging economies take part in a beauty parade for western capital and Thailand would do much better if a government could hang around here a bit longer than some of them have been doing" - i.e. the Baht and equity markets would both be stronger if those risks hadn't been there

Looking forwards (excepting any increase in political and/or state risk) you should expect that Baht will strengthen significantly longer term against indebted currencies like USD, GBP, AUD and currencies which may become more indebted (I'd expect the strong countries to bail out the weaker Euro members for political reasons). However any periods of economic weakness/stress in the west will initially support the USD and short-term bouts of Dollar strength are likely to recur.

I like SGD as a compromise

Ultimately China holds most of the currency cards

PG

Gambles I really wish you would post more I agree with you on this post pretty well 100%. And China does hold the the cards and I feel Thailand will be their broker for trade.

[StreetCowboy]

I guess a lot of Thailand's agricultural output goes to other Asian countries; similarly manufactured output.

The tourist industry seems as thick skinned as the old codgers you see in Soi Seven and it seems like half the expats in Saudi have a weife anbd girlfriend here, while the rest come over every other weekend anyway. (possible exaggeration, there...)

SC

[Thongkorn]

May be Thailand has not put all its cards on the table like Europe,

[whiterussian]

They didnt do the hedge fund tango like the rest of the west, having experienced the wrong end of it in 1997.

Having said that, Im sure they will have another go soon.

Suspect the chinese might support the baht. just a hunch. I hope so anyway.

Distrust of the west is growing, even the japs want the yanks out. Then comes reunification of Korea, then Taiwan must negotiate... then of course China and Russia take over from the US as masters of the east! yipee!

Edited March 12, 2010 by whiterussian

[Thongkorn]

I think Russia has problems of there own, Even they are are starting to hurt a little.

[smokie36]

How do you define "reasonable" in terms of GBP/THB?

65/1

[roamer]

because

Looking forwards (excepting any increase in political and/or state risk) you should expect that Baht will strengthen significantly longer term against indebted currencies like USD, GBP, AUD and currencies which may become more indebted

PG

Gambles I really wish you would post more I agree with you on this post pretty well 100%. And China does hold the the cards and I feel Thailand will be their broker for trade.

Well right now I would say there is a significant increase in political and/or state risk. The markets are also short term, long term investors in LOS are short on the ground at present.

[lannarebirth]

because

Looking forwards (excepting any increase in political and/or state risk) you should expect that Baht will strengthen significantly longer term against indebted currencies like USD, GBP, AUD and currencies which may become more indebted

PG

Gambles I really wish you would post more I agree with you on this post pretty well 100%. And China does hold the the cards and I feel Thailand will be their broker for trade.

Well right now I would say there is a significant increase in political and/or state risk. The markets are also short term, long term investors in LOS are short on the ground at present.

Don't forget, Thailand has a futures market now. Exiting a market can be much more orderly (and profitable) when you can hedge.

[tw25rw]

How do you define "reasonable" in terms of GBP/THB?

65/1

That would be nice, but it was based on a British economy dependent on a financial system which gave the illusion of strength despite fundamental flaws. It will take a lot for investors to want to invest in sterling to that degree again, especially while interest rates are low.

[Naam]

So, once the U.S and the U.K get back on there feet the exchange rate will get back to something reasonable?

sure! it only takes a reincarnation (or two).