Thai Baht Weakens On Concerns Over Renewed Violence: BoT

[henryalleman]

Baht weaken? Bull.....

1 EURO=39.755 at 08.13 am

1 EURO=39.398 at 09.39 am

one month ago its was still

1 EURO=43.377

the £ getting weaker

the $ gettingweaker

Baht getting stronger every day.

[Thaihog]

I don't know why the Hedge Fund boys don't short the Thai baht, they seem to be doing a good job with Sterling.

If the Bank of England with all their money (on paper) can't afford to prop up the pound how on earth can Bank of Thailand do so?

The Thai ministry keeps harping on about how exports are greater than imports. Apparently the rice crop has been very poor this year, and as rice is the countries biggest export why isn't the economy effected.

I hope their creative accounting comes back to bite them in the ass big time

Edited May 17, 2010 by Thaihog

[Forkinhades]

It certainly does not make sense. I know every time money gets pumped into an economy, that currency goes down, thats why the pound is so weak, and with the euro getting extra funding last week, only way to go is down. Pound this morning 46.534, now that is starting to hurt. Who is holding all the baht? even toxins frozen billions should not account for that much?

[stingray]

I don't know why the Hedge Fund boys don't short the Thai baht, they seem to be doing a good job with Sterling.

If the Bank of England with all their money (on paper) can't afford to prop up the pound how on earth can Bank of Thailand do so?

The Thai ministry keeps harping on about how exports are greater than imports. Apparently the rice crop has been very poor this year, and as rice is the countries biggest export why isn't the economy effected.

I hope their creative accounting comes back to bite them in the ass big time

most of farmers protest in BKK, therefore not rice export

[maxjay]

Thai Baht, Stocks Decline, Bond Risk Rises as Clash Worsens

May 17, 2010, 5:10 AM EDT

By Yumi Teso and Anuchit Nguyen

May 17 (Bloomberg) -- Thailand’s baht fell to a seven-week low, stocks slumped and bond risk climbed after at least 36 people were killed in fighting between the military and anti- government protesters.

The baht declined 0.3 percent to 32.49 per dollar as of 3:48 p.m. in Bangkok and touched 32.50, the weakest level since March 26, according to data compiled by Bloomberg. The cost of credit-default swaps insuring government debt rose the most in more than a year, while the benchmark SET index dropped to a two-week low following the largest withdrawal by foreign funds from stocks in almost three years.

“The situation is getting worse than expected and it will definitely have a negative impact on the economy,” said Emmanuel Ng, a strategist at Oversea-Chinese Banking Corp. in Singapore. “The political situation is probably going to add to arguments for a weakness in stocks. We will look for the dollar to move higher against the baht.”

Foreign funds were net sellers of 14.7 billion baht ($453 million) of Thai equities last week, the most since the five days ended Nov. 23, 2007, as the nation’s worst political clash in two decades escalated. More than 255 were injured since the military moved in last week to seal off an area as large as New York’s Central Park occupied by demonstrators. Among those killed include Major-General Khattiya Sawisdipol, an active-duty soldier supporting protesters, who was shot in the head.

Hurting Earnings

“The political unrest has severely affected the economy and consumer confidence this quarter, hurting earnings of companies such as banks and property developers,” Sasikorn Charoensuwan, the head of research of Phillip Securities (Thailand) Pcl, said today.

Thai credit-default swaps jumped 23 basis points to 170, according to BNP Paribas SA, suggesting deteriorating perceptions of creditworthiness. The increase is the biggest since March 2, 2009, according to CMA DataVision in New York.

The SET dropped 2 percent to 753.26, the lowest since April 29. The stock exchange closed at 3:30 p.m. Bangkok time today, about an hour earlier.

The benchmark measure may fall to 720 this week as the death toll from the political clash rises, said Win Udomrachtavanich, chief investment officer at Asset Plus Fund Management Co. in Bangkok, which oversees about $700 million. That would be lowest level for the gauge since March 9, three days before the start of the anti-government protests in Bangkok.

More Selling

“Foreign investors will sell more Thai shares as the political unrest worsens,” said Win, whose fund beat 97 percent of 234 Thai equities funds tracked by Bloomberg in the past year. “They will stay out of the Thai market for some time because the confrontation will continue for a couple of days.”

Protesters failed to disperse after Prime Minister Abhisit Vejjajiva offered to cut short his term, prompting the military action last week. The government’s first attempt to disperse the protesters on April 10 killed 25 people.

Thailand’s investment may slow as prolonged political tension hurts sentiment, Kim Eng Tan, a credit analyst at Standard & Poor’s, said today. The rating company has a negative outlook on its BBB+ rating on Thailand, he said. S&P’s forecast for 3 percent to 4 percent economic growth this year takes into account a 2 percentage-point drop due to the turmoil, he said.

Fitch Ratings may review the country’s debt rating if the political crisis worsens, Associate Director Vincent Ho said.

Losses in the baht may be limited because the central bank controls speculative trading and limits transactions from corporations and investors, according to Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo.

Daily Cap

The Bank of Thailand sets a daily cap of 300 million baht for trading accounts held by non-residents, such as overseas corporations, funds and banks, for investments in securities and other financial instruments. A similar limit is also set for non-investment accounts.

“The authorities’ way to control speculative trading is working quite well under this kind of conditions,” Soma said. “Still, this kind of violence is definitely negative for the baht and stocks because that will further damage tourism, which is an important sector for their economy.”

The protesters, drawn mostly from poor rural areas and support former premier Thaksin Shinawatra, say they are ready to die in a fight for democracy. They have defied a state of emergency since April 7. Pro-Thaksin parties have won the past four elections. Abhisit took power in a December 2008 parliamentary vote after a court disbanded the ruling party for election fraud. His Democrat party hasn’t won a nationwide vote since 1992.

“Of course, you don’t want to buy the baht under this kind of serious crisis,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp., who expects the baht to trade between 32.30 and 32.50 over the next few days. “The baht market is dominated by domestic players who are facing a crisis situation and so we don’t know how much they will aggressively trade under this kind of situation.”

--With assistance from Katrina Nicholas in Singapore, Sophie Leung in Hong Kong and Daniel Ten Kate, Supunnabul Suwannakij and Suttinee Yuvejwattana in Bangkok and Katrina Nicholas in Singapore. Editors: Linus Chua, Sandy Hendry

To contact the reporter on this story: Yumi Teso in Bangkok et [email protected]; Anuchit Nguyen in Bangkok at [email protected]

To contact the editors responsible for this story: Sandy Hendry at [email protected]; Linus Chua at [email protected]

http://www.businessweek.com/news/2010-05-1...sh-worsens.html

[roamer]

I don't know why the Hedge Fund boys don't short the Thai baht, they seem to be doing a good job with Sterling.

If the Bank of England with all their money (on paper) can't afford to prop up the pound how on earth can Bank of Thailand do so?

The Thai ministry keeps harping on about how exports are greater than imports. Apparently the rice crop has been very poor this year, and as rice is the countries biggest export why isn't the economy effected.

I hope their creative accounting comes back to bite them in the ass big time

Actually its manufacturing that provides the largest slice of the pie at around 45% I recall, and that is more vulnerable to the present crisis than rice is to the weather. What is happening is starting to seriously spook some of the foreign parent co's, NEC for example have banned any of their execs travelling to LOS at present. If you think the currency markets crave stability you should see how nervous some of these companies get at the lack of political stability in Thailand. Vietnam for one must be looking a very attractive proposition.

I said months ago that despite the current woes of sterling and the $ these nations have firmly embedded democracies that will pull them through, institutions that work. Thailand is a factory, maybe its had its brief shining moment. Long term, where is the investment in basics like education that can elevate it beyond the factory stage ? It was an agrarian economy, it might go back to being just that.

[Gambles]

I don't know why the Hedge Fund boys don't short the Thai baht, they seem to be doing a good job with Sterling.

1) It's not really possible - not allowed onshore as such and offshore market too small and illiquid

2) it doesn't make sense - baht should strengthen not weaken so why would you want to be short??? - Mr. Campbell said that since April last year, there has been a significant rebound in Asian currencies.

''Currency is a barometer of political risk and the Thai baht has been pretty much flat since last year,'' he said. ''If the political risk gets sorted out, then you'll see the Thai baht appreciate just to catch up with what everything else has done.''

The fundamentals for the whole Asian region are still very positive but Thailand could lag because of political instability, he added.

[roamer]

I don't know why the Hedge Fund boys don't short the Thai baht, they seem to be doing a good job with Sterling.

If the Bank of England with all their money (on paper) can't afford to prop up the pound how on earth can Bank of Thailand do so?

The Thai ministry keeps harping on about how exports are greater than imports. Apparently the rice crop has been very poor this year, and as rice is the countries biggest export why isn't the economy effected.

I hope their creative accounting comes back to bite them in the ass big time

Actually its manufacturing that provides the largest slice of the pie at around 45% I recall, and that is more vulnerable to the present crisis than rice is to the weather. What is happening is starting to seriously spook some of the foreign parent co's, NEC for example have banned any of their execs travelling to LOS at present. If you think the currency markets crave stability you should see how nervous some of these companies get at the lack of political stability in Thailand. Vietnam for one must be looking a very attractive proposition.

I said months ago that despite the current woes of sterling and the $ these nations have firmly embedded democracies that will pull them through, institutions that work. Thailand is a factory, maybe its had its brief shining moment. Long term, where is the investment in basics like education that can elevate it beyond the factory stage ? It was an agrarian economy, it might go back to being just that.

Seems I'm not the only one to have the above views. These excerpts from Canadianbusiness.com. Expect a flood of similarly themed articles. Short term they can keep the baht high, long term forget it. The damage has been done and the caravan has moved on. When you get people like Control Risks, an enormously well respected risk consultancy saying publicly that which they have been advising their clients privately then the game is really all but over.

"From Stephen Wright, May 18, 2010 - 06:07 AM

Risky business: Deadly Bangkok violence has foreign companies more than frowning

By Stephen Wright

BANGKOK (AP) - Deadly street battles that have turned parts of the Thai capital into urban war zones are threatening to chill foreign investment for years, hobbling a nation once among the region's fastest growing but now losing its edge over rivals like Vietnam.

Some companies that can transfer operations easily — in industries like services and light manufacturing — have already started moving operations out of the country, and longer-term investors are seriously rethinking making new commitments.

Foreign businesses once thought of Thailand as immune to political instability, as images of sun-kissed beaches and warm, smiling people glossed over a widening divide between the haves and the have-nots.

But nearly three years of unpredictable twists of politics have marred that view. Now, with the death toll rising by the day and miles of downtown Bangkok a no-man's land, a picture of Thailand as an ungovernable, failing state is gaining the upper hand.

At least 66 people have died and more than 1,600 have been wounded since so called "Red Shirts" began their latest protests in March, seeking to oust the government of Prime Minister Abhisit Vejjajiva. The toll includes 37 killed since Thursday as an army crackdown sparked street battles in the city of more than 10 million.

Business attitudes toward Thailand appear to be undergoing a sea change.

"Companies are now studying really hard whether to make new investments in Thailand. The attitude has changed from before when Thailand was always seen as a nice, attractive place to come to," said Jacob Ramsay, Southeast Asia analyst at Control Risks, a political risk consultancy in Singapore.

"They are seriously doing their due diligence and wanting to see what unfolds in the next couple of months," Ramsay said. "It's affecting companies across the board from manufacturing to heavy industry."

Tourism, already battered by three years of increasingly violent protests, is now on its knees with five-star hotels and some of Asia's glitziest malls shuttered since early April by the Red Shirt occupation of a 1-square-mile (3-square-kilometer) area of Bangkok's commercial district.

Tourism, which makes up 6 percent of Southeast Asia's second-biggest economy, can quickly bounce back if the violence ends — but investor faith in Thailand's stability has received a body blow that will be harder to recover from.

No one is yet predicting that manufacturers from General Motors to Japanese industrial conglomerates who've invested tens of billions in factories in Thailand's eastern seaboard industrial zone will suddenly pull up stakes. They are in a sense stuck in Thailand because of the scale of their investments.

But companies that can easily reduce their operations are doing so, while pouring more money into Thailand with new factories is becoming increasingly hard to justify. There already was bitterness about the country's unpredictability after a court banned 65 projects at one of Thailand's largest industrial estates on environmental grounds.

Finance companies such as banks and brokerages are also likely to scale down their operations, said Andrew Yates, an executive at Asia Plus Securities, which is the Thai affiliate of Royal Bank of Scotland.

Some were forced to spread their staff over several locations across the city when backup sites became engulfed by the sudden escalation in the violence.

Chang, the fruit exporter and president of the Thai-Taiwan Business Association, said Taiwanese businesses from shoe to furniture manufacturers have been shifting operations to Vietnam over the past year despite it being more prone to labor strikes than Thailand. His own company, Thai Bonanza, moved some of its business to Vietnam and began exporting from there last year, aiming to reduce dependence on an increasingly unstable Thailand.

More telling, he says, is that in 2009 Taiwanese manufacturers pledged billions for building factories and other facilities in Vietnam compared to just $200 million for Thailand.

More companies are doing feasibility studies for relocating operation to other cities in the region, said Nandor G. von der Leuhe, chairman of the Joint Foreign Chambers of Commerce in Thailand. And, he warned, the potential damage will grow each day the violence continues.

"Law and order must be restored or Thailand will suffer," he said. "We cannot have a situation in which we don't know what will happen in a couple of months time."

http://www.canadianbusiness.com/markets/ma...DL01&page=3

[pokpokkrup]

That was nearly 20 years ago, so many people have retired to Thailand more recently, when the GBP was 70's and USD was mid 40's and based their income on those rates and are now struggling, it's a hard pill to swallow, but some will not have the amount of pension required to remain in Thailand on a retirement visa, if they rely on Pension alone.

My opinion is, that has nothing to do with the Thai baht, but piss poor money management throughout their lives. Really, if people can't afford to survive in Thailand because the baht went up a couple points, how do they ever expect to survive in England?

I don't mind if the baht goes up a bit here and there, because regardless, living in Khon Kaen is a WHOLE lot cheaper than living in downtown Vancouver. Although I will admit, Thailand isn't some cheap paradise to live in, like many people seem to think. It still costs a decent penny to live a good standard of living.

75 down to 46 against £ is almost a 40% drop, add that to all time low interest rates and it isnt 'piss poor money management' as you so elequently put it.

Example 2006

£200,000 at a rate 5.3% after 20% tax deducted = £10,600

10,600 x 75 = 795.000/12 = 66,250 baht a month

2010

£200,000 at a rate of 2.3% after tax deducted = £4,600

4,600 x 46 = 211,600/12 = 17,633 baht a month.

Hardly a couple of points but this is the reality many English are facing.

I totally agree with you, nothing to do with "piss poor management" You would have needed one hel_l of a Chrystal Ball to have predicted this huge fall in the £ from 75 to currently 46. I did a similar calulation as above last week. Gutted !! May have to send the wife out chopping Sugar Cane !! if this gets any worse.

[roamer]

Crystal ball ? I think a TV would suffice at the moment. Its not only tyres that's going up in smoke out there.

Edited May 18, 2010 by roamer

[thaibeachlovers]

Good report Roamer.

Now, can you tell me when the baht is going to go down, as really need a better outlook for Sterling, if I'm not having to go looking for a big cardboard box to set up home in.

Anyone know of a nice bridge we can live under?

[inthepink]

I don't know why the Hedge Fund boys don't short the Thai baht, they seem to be doing a good job with Sterling.

If the Bank of England with all their money (on paper) can't afford to prop up the pound how on earth can Bank of Thailand do so?

The Thai ministry keeps harping on about how exports are greater than imports. Apparently the rice crop has been very poor this year, and as rice is the countries biggest export why isn't the economy effected.

I hope their creative accounting comes back to bite them in the ass big time

Why do people keep repeating this disinformation? Thailand used to be the world's largest exporter of rice. Rice is not their largest export. I believe vehicle transporters are actually.

Regarding trading of foreign currencies mentioned by earlier people. They can be traded anytime you like if you have access to a counterparty. There is no central exchange so no reason why trading cannot occur over the weekend (and it does, albeit in much thinner volume). Have you never withdrawn any cash from a foreign bank account over the weekend?

As far as the BOT official's comments about the baht both strengthening and weakening, this is par for the course around the world. People who stand up and make long term predictions on exchange rates are frequently proved to be fools. It is not the job of the central bank to make predictions on exchange rates (not accurate ones anyway!) but to manage the situation to the best of their ability as it unfolds.

Edited May 19, 2010 by inthepink

[mommysboy]

I don't know why the Hedge Fund boys don't short the Thai baht, they seem to be doing a good job with Sterling.

If the Bank of England with all their money (on paper) can't afford to prop up the pound how on earth can Bank of Thailand do so?

The Thai ministry keeps harping on about how exports are greater than imports. Apparently the rice crop has been very poor this year, and as rice is the countries biggest export why isn't the economy effected.

I hope their creative accounting comes back to bite them in the ass big time

Why do people keep repeating this disinformation? Thailand used to be the world's largest exporter of rice. Rice is not their largest export. I believe vehicle transporters are actually.

Regarding trading of foreign currencies mentioned by earlier people. They can be traded anytime you like if you have access to a counterparty. There is no central exchange so no reason why trading cannot occur over the weekend (and it does, albeit in much thinner volume). Have you never withdrawn any cash from a foreign bank account over the weekend?

As far as the BOT official's comments about the baht both strengthening and weakening, this is par for the course around the world. People who stand up and make long term predictions on exchange rates are frequently proved to be fools. It is not the job of the central bank to make predictions on exchange rates (not accurate ones anyway!) but to manage the situation to the best of their ability as it unfolds.

poppycock

[Forkinhades]

poppycock

agreed

[Gambles]

I totally agree with you, nothing to do with "piss poor management" You would have needed one hel_l of a Chrystal Ball to have predicted this huge fall in the £ from 75 to currently 46. I did a similar calulation as above last week. Gutted !! May have to send the wife out chopping Sugar Cane !! if this gets any worse.

It's not so much to do with having a crystal ball as basic financial planning and matching assets and income to liabilities and expenditure

Any currency mismatch is a risk and having taken the risk and lost the consequences must be very uncomfortable and I sympthise.

That said, the appalling terrorist events should create a window of opportunity to try to match these better. However that's not much of a consolation for today's terible events which will hang like a big black pall over Bangkok for a very long time.

[Gambles]

I totally agree with you, nothing to do with "piss poor management" You would have needed one hel_l of a Chrystal Ball to have predicted this huge fall in the £ from 75 to currently 46. I did a similar calulation as above last week. Gutted !! May have to send the wife out chopping Sugar Cane !! if this gets any worse.

It's not so much to do with having a crystal ball as basic financial planning and matching assets and income to liabilities and expenditure

Any currency mismatch is a risk and having taken the risk and lost the consequences must be very uncomfortable and I sympthise.

That said, the appalling terrorist events should create a window of opportunity to try to match these better. However that's not much of a consolation for today's terible events which will hang like a big black pall over Bangkok for a very long time.

[Randee]

I hope the baht crashes through the ground at the speed of light.

Come mon U Reerrrreds.

hahaha

[Beardog]

thank goodness....i long for the days of 42 to the dollar

Man I was wondering what the he_l was holding it up.. come on 42.

the summer of 2004 , the US $ was 42 exactly. that was parties time.

Aah I remember it well. Would love to see the 04 return again!

[roamer]

Good report Roamer.

Now, can you tell me when the baht is going to go down, as really need a better outlook for Sterling, if I'm not having to go looking for a big cardboard box to set up home in.

Anyone know of a nice bridge we can live under?

Bridges are bad places in times of trouble, natural fighting points

I think you have to be pretty brave to predict baht movements on a short term basis given the amount of control the BOT has over it. Though how much control they have over a depositor run on the banks when they reopen will be interesting. Long term, for all the reasons I mentioned earlier it can't hold up. All that the events of the past few days have done is bring a sharper focus on the Thai "economic miracle." For it to continue growing, it needs inward investment, for a myriad of different reasons. This was never going to continue. I have never viewed Thailand over the last 20 years as being anything other than a giant factory. When companies made decisions to invest in Thailand there were sound economic and strategic reasons to do so, there are now better alternatives that simply were not there at the time of the original investment. Now you can guarantee that in boardrooms across Asia, USA, to a lesser extent Europe, the major players will be biting the bullet and looking to safeguard their production in a more politically stable environment. The truth of the matter is the new investment was already coming to a halt for a while before this happened. Those fabled reserves of BOT have only one way to go now and I suspect the Thai baht with them.

The problem is of course with this, that if you look at the Euro and Sterling we all seem to be on the same downward curve. Think I'll go off to be a South Sea islander and trade seashells.

[mommysboy]

thank goodness....i long for the days of 42 to the dollar

Man I was wondering what the he_l was holding it up.. come on 42.

the summer of 2004 , the US $ was 42 exactly. that was parties time.

Aah I remember it well. Would love to see the 04 return again!

The USD is one of the few currencies actually holding ground. You could argue it's price is actually rather high as it's strength is derived from demand as the reserve currency. If we judged it by fundamentals it might be down there with the Euro and pound, possibly worse as respectve govts. are now imposing austerity measures.

USD could actually go below 30 quite easily.

[mommysboy]

Good report Roamer.

Now, can you tell me when the baht is going to go down, as really need a better outlook for Sterling, if I'm not having to go looking for a big cardboard box to set up home in.

Anyone know of a nice bridge we can live under?

Bridges are bad places in times of trouble, natural fighting points

I think you have to be pretty brave to predict baht movements on a short term basis given the amount of control the BOT has over it. Though how much control they have over a depositor run on the banks when they reopen will be interesting. Long term, for all the reasons I mentioned earlier it can't hold up. All that the events of the past few days have done is bring a sharper focus on the Thai "economic miracle." For it to continue growing, it needs inward investment, for a myriad of different reasons. This was never going to continue. I have never viewed Thailand over the last 20 years as being anything other than a giant factory. When companies made decisions to invest in Thailand there were sound economic and strategic reasons to do so, there are now better alternatives that simply were not there at the time of the original investment. Now you can guarantee that in boardrooms across Asia, USA, to a lesser extent Europe, the major players will be biting the bullet and looking to safeguard their production in a more politically stable environment. The truth of the matter is the new investment was already coming to a halt for a while before this happened. Those fabled reserves of BOT have only one way to go now and I suspect the Thai baht with them.

The problem is of course with this, that if you look at the Euro and Sterling we all seem to be on the same downward curve. Think I'll go off to be a South Sea islander and trade seashells.

You and Gambles put together some golden posts, amongst a sea of dross.

[paddock]

When I first came to Thailand it was 25 to a Dollar and 41 - 42 for a Pound.

Later the pound was in the 36 - 37 Baht range whilst the dollar was still 25 being the baht was pegged to the USD currency at that time.

That was nearly 20 years ago, so many people have retired to Thailand more recently, when the GBP was 70's and USD was mid 40's and based their income on those rates and are now struggling, it's a hard pill to swallow, but some will not have the amount of pension required to remain in Thailand on a retirement visa, if they rely on Pension alone.

Good luck to all.

well my wife and i retired to Thailand in 2005 when the pound was at 75 to the baht.Our new home cost 7 mill and is selling now for 7.5. Thats a healthy profit with the baht at 46 today. we left Thailand last year and returned to live in the U.K. and have not regretted the move. We were burgled twice,had money stolen when my wife had her handbag snatched and in common with many falang friends, were " fined " by traffic police many many times.

Thailand is corrupt from top to bottom,there is no rule of law,it truly is a third world country where behind the smile is always a crooked hand.

[mommysboy]

Good report Roamer.

Now, can you tell me when the baht is going to go down, as really need a better outlook for Sterling, if I'm not having to go looking for a big cardboard box to set up home in.

Anyone know of a nice bridge we can live under?

Bridges are bad places in times of trouble, natural fighting points

I think you have to be pretty brave to predict baht movements on a short term basis given the amount of control the BOT has over it. Though how much control they have over a depositor run on the banks when they reopen will be interesting. Long term, for all the reasons I mentioned earlier it can't hold up. All that the events of the past few days have done is bring a sharper focus on the Thai "economic miracle." For it to continue growing, it needs inward investment, for a myriad of different reasons. This was never going to continue. I have never viewed Thailand over the last 20 years as being anything other than a giant factory. When companies made decisions to invest in Thailand there were sound economic and strategic reasons to do so, there are now better alternatives that simply were not there at the time of the original investment. Now you can guarantee that in boardrooms across Asia, USA, to a lesser extent Europe, the major players will be biting the bullet and looking to safeguard their production in a more politically stable environment. The truth of the matter is the new investment was already coming to a halt for a while before this happened. Those fabled reserves of BOT have only one way to go now and I suspect the Thai baht with them.

The problem is of course with this, that if you look at the Euro and Sterling we all seem to be on the same downward curve. Think I'll go off to be a South Sea islander and trade seashells.

You and Gambles put together some golden posts, amongst a sea of dross.

But do you think there will a run on the banks?

And the thing is contrary to all sense the investment has already taken place hasn't it?; sheer madness, but the bets have been placed and the roulette wheel is already a spinning!

Staggeringly irresponsible to invest in Thailand, no doubt same people that brought us the credit crunch, wonder if they had any shares in central world?

[roamer]

A run on the banks ? more than possible, I think the gold sellers down in Chinatown are going to be doing some pretty good business. But the run on the banks is a herd mentality, something that gathers pace and then can be impossible to stop without closing the doors. We came close to it in the UK at the height of the Northern Rock debacle, the much criticised government of Gordon Brown managed to stop that particular rot by guaranteeing bank deposits. Thailand can do the same, in fact, I think they already have a guarantee for the bank deposits. The massive difference here is that although the British may well have rejected Gordon Brown at the ballot box, at the time, they still trusted the government enough so that a run on the banks was averted. Firstly, the scenario here is different, you're watching a nation's capital city go up in flames, and the Thai mindset is understandably different; even if they have voted with the government that is in power, that degree of trust is stretched too far when it comes to paper currency in times like these. And also for the more wealthy in Thailand, they may well decide that this is as good as it's going to get and make a call on the banks. Anyway, I think that is more Gambles territory than mine,and I for one will also be watching to see what he thinks of it.

The main reason that I have always had my doubts about the Thai economy, is that I've never seen the investment in the grassroots. That was necessary to see grow beyond the stage of merely providing a cheap workforce. The xenophobic attitude, particularly towards the adoption of English as an official second language in a nation where few outsiders can speak the native language was always a big negative. If you have a capital city in a country the size of Thailand, that is 40 times bigger than the next largest city,the economic and social disparities will eventually become apparent. In my view, that is what has happened today.

I honestly don't see a way back for this. The timescale is not manageable, the differences that have been ignored for so long, are just too deep. In the meantime, the foreign investment that has powered Thailand is going to move elsewhere, this really isn't crystal ball territory. You would either have to be very brave, or totally insane, to stand up in any boardroom. in any investing country, to suggest that Thailand is a good place now either to make new investments, or put further money into your existing investments. Technology moves fast, you have to decide whether or not you're going to build a new production line or if you're going to invest in a totally new plant elsewhere. Forget what happened over the last few days, the simple economic facts, the political situation,means that you are better off elsewhere. I'm not saying this is going to happen overnight, what I am saying is that the decisions being taken now will quite probably mean that the economic miracle of Thailand has moved elsewhere.

[Gambles]

Good report Roamer.

Now, can you tell me when the baht is going to go down, as really need a better outlook for Sterling, if I'm not having to go looking for a big cardboard box to set up home in.

Anyone know of a nice bridge we can live under?

Bridges are bad places in times of trouble, natural fighting points

I think you have to be pretty brave to predict baht movements on a short term basis given the amount of control the BOT has over it. Though how much control they have over a depositor run on the banks when they reopen will be interesting. Long term, for all the reasons I mentioned earlier it can't hold up. All that the events of the past few days have done is bring a sharper focus on the Thai "economic miracle." For it to continue growing, it needs inward investment, for a myriad of different reasons. This was never going to continue. I have never viewed Thailand over the last 20 years as being anything other than a giant factory. When companies made decisions to invest in Thailand there were sound economic and strategic reasons to do so, there are now better alternatives that simply were not there at the time of the original investment. Now you can guarantee that in boardrooms across Asia, USA, to a lesser extent Europe, the major players will be biting the bullet and looking to safeguard their production in a more politically stable environment. The truth of the matter is the new investment was already coming to a halt for a while before this happened. Those fabled reserves of BOT have only one way to go now and I suspect the Thai baht with them.

The problem is of course with this, that if you look at the Euro and Sterling we all seem to be on the same downward curve. Think I'll go off to be a South Sea islander and trade seashells.

Fundamentally when all the noise goes away surplus currencies should appreciate against deficit currencies and I don't think that the deafening noise of the last few days will change the deficit/surplus scenario for Thailand - however in the very short term there could be a very rocky ride with a lot if very unexpected bumps and potholes

You'd have to be a lot smarter than me to try to trade Baht in this environment (low benchmark I admit but I mean a lot, lot, lot smarter !!)

[Gambles]

The USD is one of the few currencies actually holding ground. You could argue it's price is actually rather high as it's strength is derived from demand as the reserve currency. If we judged it by fundamentals it might be down there with the Euro and pound, possibly worse as respectve govts. are now imposing austerity measures.

USD could actually go below 30 quite easily.

For all its problems, it's still the flight to safety currency and it's also still perceived as the main inverse correlation to Euro, GBP and the other majors so any weakness in them tends to be amplified in USD strength

so Euro weakness tends to be even better for USD than for other non-Euro related currencies (as a very, very general perception)

hence for a while USD could be the currency of choice - I still expect it to strengthen through H2 but one day its own problems will come home to roost and that's when Wile-E-Coyote looks down.....

IMHO but the vol in between could be extreme

[Gambles]

Good report Roamer.

Now, can you tell me when the baht is going to go down, as really need a better outlook for Sterling, if I'm not having to go looking for a big cardboard box to set up home in.

Anyone know of a nice bridge we can live under?

Bridges are bad places in times of trouble, natural fighting points

I think you have to be pretty brave to predict baht movements on a short term basis given the amount of control the BOT has over it. Though how much control they have over a depositor run on the banks when they reopen will be interesting. Long term, for all the reasons I mentioned earlier it can't hold up. All that the events of the past few days have done is bring a sharper focus on the Thai "economic miracle." For it to continue growing, it needs inward investment, for a myriad of different reasons. This was never going to continue. I have never viewed Thailand over the last 20 years as being anything other than a giant factory. When companies made decisions to invest in Thailand there were sound economic and strategic reasons to do so, there are now better alternatives that simply were not there at the time of the original investment. Now you can guarantee that in boardrooms across Asia, USA, to a lesser extent Europe, the major players will be biting the bullet and looking to safeguard their production in a more politically stable environment. The truth of the matter is the new investment was already coming to a halt for a while before this happened. Those fabled reserves of BOT have only one way to go now and I suspect the Thai baht with them.

The problem is of course with this, that if you look at the Euro and Sterling we all seem to be on the same downward curve. Think I'll go off to be a South Sea islander and trade seashells.

You and Gambles put together some golden posts, amongst a sea of dross.

kaup khun mar-na-khrap

[Gambles]

A run on the banks ? more than possible, I think the gold sellers down in Chinatown are going to be doing some pretty good business. But the run on the banks is a herd mentality, something that gathers pace and then can be impossible to stop without closing the doors. We came close to it in the UK at the height of the Northern Rock debacle, the much criticised government of Gordon Brown managed to stop that particular rot by guaranteeing bank deposits. Thailand can do the same, in fact, I think they already have a guarantee for the bank deposits. The massive difference here is that although the British may well have rejected Gordon Brown at the ballot box, at the time, they still trusted the government enough so that a run on the banks was averted. Firstly, the scenario here is different, you're watching a nation's capital city go up in flames, and the Thai mindset is understandably different; even if they have voted with the government that is in power, that degree of trust is stretched too far when it comes to paper currency in times like these. And also for the more wealthy in Thailand, they may well decide that this is as good as it's going to get and make a call on the banks. Anyway, I think that is more Gambles territory than mine,and I for one will also be watching to see what he thinks of it.

The main reason that I have always had my doubts about the Thai economy, is that I've never seen the investment in the grassroots. That was necessary to see grow beyond the stage of merely providing a cheap workforce. The xenophobic attitude, particularly towards the adoption of English as an official second language in a nation where few outsiders can speak the native language was always a big negative. If you have a capital city in a country the size of Thailand, that is 40 times bigger than the next largest city,the economic and social disparities will eventually become apparent. In my view, that is what has happened today.

I honestly don't see a way back for this. The timescale is not manageable, the differences that have been ignored for so long, are just too deep. In the meantime, the foreign investment that has powered Thailand is going to move elsewhere, this really isn't crystal ball territory. You would either have to be very brave, or totally insane, to stand up in any boardroom. in any investing country, to suggest that Thailand is a good place now either to make new investments, or put further money into your existing investments. Technology moves fast, you have to decide whether or not you're going to build a new production line or if you're going to invest in a totally new plant elsewhere. Forget what happened over the last few days, the simple economic facts, the political situation,means that you are better off elsewhere. I'm not saying this is going to happen overnight, what I am saying is that the decisions being taken now will quite probably mean that the economic miracle of Thailand has moved elsewhere.

hmm - not an easy one to answer briefly - I've done a piece for The Nation next week about THB long and short run prospects and it was impossible to get it down to 1,000 words. I'll be rehashing my recent Baht presentations again in a couple of weeks and anyone who fancies a good lunch (or breakfast) in Bkk or Pattaya (plus maybe Phuket and Hua Hin but the schedule is a bit up in air after this last week) and doesn't mind listening to me wibbling for half an hour before a good roundtable chat and Q&A should PM me and I'll try to arrange invitations..

immediately, most exports are holding up but FDI has been suffering for 5 years and will only get worse...short term the exports can paper the cracks but long term Thailand is in a relative decline - Singapore was the first to overtake Thailand and then disappear out of sight - now while Philippines, Indo, Malaysia and Vietnam play in the same pool, unless Thailand makes better use of its inherent advantages, it could find itself as the weakest member of a strong club; it became a subsidiary of Japan Inc at a bad time and therefore had little choice but to transfer that dependence to China...I'm really not sure how that would have played out even before the recent events but they certainly haven't helped.

In short - I don't see a major general sustained run on the banks

The guarantee for bank deposits is still in place and is currently credible (it reduces gradually over time) as liquidity in the system looks pretty good.

I do wonder about capital flight from those associates worried about being sucked into the circle of suspicion. Half a dozen big-hitters shifting all their capital would be a de facto run (on both the bank and on Baht if they're able to ship their Baht overseas into Dollars) although you'd think that the powers that be would be alive to this??

Hard to argue with many of the general observations - Bangkok is the hub and yet exports, as Chris Bruton recently reminded us, start east of the Ban Pong River. A lot of issues need to be resolved - how much easier or harder will that now be? A point worth considering that I've read in a few places recently, is that Thai credit ratings get cut, Thai capital inflows then become more expensive (i.e. cost of capital increases because investors require higher yields for a lower rated investment).

I think that you're right in not saying this is going to happen overnight but the longer term prognosis is troubling but Fx markets don't tend to look that far ahead....once the noise has dissipated the immediate fundamentals favour all non-USD Asian currencies.

[Hurricane51]

Hope so as i will have to transfer about 8,000 gbp from my stocks and shares soon,keeping my fingers crossed

all this wining about a weaker bath. When i cam here, the bat was 25 against the dollar. When bat is waeker, you'll pay more for petrol, so transport cost comes higher and almost for every items, specialy the imported items sold in Thailand, will getting more expesive. So there is no benefits and i quite sure al the landlosrts will increase their rents as we., just to use a excuse. Some peaple work living here for a while and if they decide to go back to Eruope, they will sell their Houses or cars and they will lose money when the Baht is weaker.

The problem is, when the baht was 25 to the dollar, prices were dirt cheap, as it had been 25 to the dollar for so long merchants could set prices then not worry about them. Meanwhile, in the US average income was steadily rising for most people, so the effect was more dollars to spend. A net increase in buying power even if the exchange rate stayed the same from year to year.

When the crash came in 97 and the baht dropped to 50+ to the dollar, it took about a year or so for the common Thai merchant to realize the impact and start raising prices. Those were the glory days, but obviously short lived.

If the baht strengthens to 25 to the dollar, I can't see the Thai merchants lowering their prices to accomodate, so the effect is everything gets more costly.

And if the pensioners (like me) had planned for currency fluctuations (which is vital when retiring to any foreign country), they would have seen that a lump sum in a Thai bank was the answer. Currently 800,000 baht for complete compliance with visa requirements, but it's the combination of savings + income that immigration considers. And 800,000 baht is protected from currency fluctuations. Just don't touch it.

So if the baht strengthens enough to threaten their compliance, they only need to add a little to savings to offset the shortage.

[Gambles]

Hope so as i will have to transfer about 8,000 gbp from my stocks and shares soon,keeping my fingers crossed

all this wining about a weaker bath. When i cam here, the bat was 25 against the dollar. When bat is waeker, you'll pay more for petrol, so transport cost comes higher and almost for every items, specialy the imported items sold in Thailand, will getting more expesive. So there is no benefits and i quite sure al the landlosrts will increase their rents as we., just to use a excuse. Some peaple work living here for a while and if they decide to go back to Eruope, they will sell their Houses or cars and they will lose money when the Baht is weaker.

The problem is, when the baht was 25 to the dollar, prices were dirt cheap, as it had been 25 to the dollar for so long merchants could set prices then not worry about them. Meanwhile, in the US average income was steadily rising for most people, so the effect was more dollars to spend. A net increase in buying power even if the exchange rate stayed the same from year to year.

When the crash came in 97 and the baht dropped to 50+ to the dollar, it took about a year or so for the common Thai merchant to realize the impact and start raising prices. Those were the glory days, but obviously short lived.

If the baht strengthens to 25 to the dollar, I can't see the Thai merchants lowering their prices to accomodate, so the effect is everything gets more costly.

And if the pensioners (like me) had planned for currency fluctuations (which is vital when retiring to any foreign country), they would have seen that a lump sum in a Thai bank was the answer. Currently 800,000 baht for complete compliance with visa requirements, but it's the combination of savings + income that immigration considers. And 800,000 baht is protected from currency fluctuations. Just don't touch it.

So if the baht strengthens enough to threaten their compliance, they only need to add a little to savings to offset the shortage.

Wherever you are matching the currency of your income and assets to the currency of your expenditure and liabilities is a basic fundamenta of financial planning. No-one knows where the Baht is headed and in all probability if it is going to strengthen as I suspect then at some point that will weaken exports, boost imports and Baht will weaken again (Adam Smith's invisible hand/George Soros' reflexivity) but if you can't know that then it's even more vital that you plan for that uncertainty which everyone can do.

I don't know that I would buy Thai assets so much as buy the most attractive assets in a way that their returns are hedged into Baht. Thus is it possible to generate almost 7% return offshore in THB....but every situation is different and people need to consider their own situations very carefully before rushing into any action (or inaction!) - that must be why it's called 'planning' !