Economic Guru Warns Of Bubble Burst In Thailand's Property And Stock Markets

[webfact]

Economic guru warns of bubble burst in property and stock markets

BANGKOK, Nov 4 – Thailand's property and stock markets run a risk of facing a bubble burst if foreign capital continues flowing into Asia in large amounts because many countries in the region remain under inflationary pressure, according to a leading economist.

Speaking at a seminar on “In-depth Analysis of the Economic Direction in 2011,” Supavud Saicheua, managing director and head of research of Phatra Securities, said should the United States Federal Reserve inject US$500 billion more into the economic system under the much-anticipated second round of the Quantitative Easing (QE2) measure, it would encourage the foreign capital inflow into Asia because economies of the countries in the region are expected to grow 7.7 per cent on average this year.

But with the inflationary pressure still high in the region, the property and stock markets run a risk of experiencing the bubble burst if the foreign capital continues overwhelming the region.

Mr Supavud said the Stock Exchange of Thailand (SET) composite index is likely to continue rallying, driven by external liquidity inflow, but stock prices would be higher than their fundamentals because the price/earnings (P/E) ratio would rise to 15 times, the same with those of other stock markets in the region.

In addition, the measure, if implemented, would make the US dollar weaken further against the baht. So, he supported the Bank of Thailand (BoT) plan to issue more measures to contain foreign capital inflow although some might affect the stock market.

Mr Supavud said the rapid appreciation of the baht by 7 per cent in three months had an adverse impact on business performance by the private sector.

He suggested three measures be implemented to rein in the baht surge including taxation on trading in the bond and capital instrument markets like that adopted overseas and a tax levy on capital flowing into the country as the 30 per cent capital reserve requirement issued in the past. Still, the amount collected should be less than 30 per cent to prevent the repetition of panic selling of stocks by foreign investors.

Moreover, the Bank of Thailand should impose specific supervisory measures such as a call for cooperation by securities companies to report overseas investment transactions.

“The baht is likely to continue strengthening for many more years because the US wants to weaken the greenback in a bid to ease the trade deficit. As a result, the central bank needs to control the capital inflow through various measures including the resumption of the capital reserve requirement,” he said.

In late-breaking news the Fed acted late Wednesday in Washington to inject $600 billion, not $500 billion, in a dramatic, unconventional move to try to energise the US recovery by buying vast quantities of Treasury bonds by mid-2011. (MCOT online news)

-- TNA 2010-11-04

[bkkjames]

All one has to do is look at the classifieds section on here or any thai property website to realize the bubble is in fact a balloon. But at 20K+ a month rental or 100,000K sqm resale asking prices for a 35sqm closet close to some bts station, I call it self-inflicted.

[Canada]

All one has to do is look at the classifieds section on here or any thai property website to realize the bubble is in fact a balloon. But at 20K+ a month rental or 100,000K sqm resale asking prices for a 35sqm closet close to some bts station, I call it self-inflicted.

It doe seem insane. I live in Chiang Mai and I've been looking for something to buy for quite some time now. Prices seem high to me. But....things are selling. I guess some people do buy at the top end of the upswing don't they? It reminds me of where I come from but on a smaller scale. Vancouver....it seemed like it should stop...but it didn't. It has slowed down now. Actually it came to a grinding halt. But it went far beyond what people expected I think. Will that be what happens here?

[LivinLOS]

All one has to do is look at the classifieds section on here or any thai property website to realize the bubble is in fact a balloon. But at 20K+ a month rental or 100,000K sqm resale asking prices for a 35sqm closet close to some bts station, I call it self-inflicted.

It doe seem insane. I live in Chiang Mai and I've been looking for something to buy for quite some time now. Prices seem high to me. But....things are selling. I guess some people do buy at the top end of the upswing don't they? It reminds me of where I come from but on a smaller scale. Vancouver....it seemed like it should stop...but it didn't. It has slowed down now. Actually it came to a grinding halt. But it went far beyond what people expected I think. Will that be what happens here?

There aint much moving on Phuket.. Just saw a 38m baht villa that 'had to be sold' go pretty much bidless.. In the end a bangkok Thai picked it up for 12m, not to live in it, but just to bank as at 12m it was about 50% under actual build cost.

[trogers]

All one has to do is look at the classifieds section on here or any thai property website to realize the bubble is in fact a balloon. But at 20K+ a month rental or 100,000K sqm resale asking prices for a 35sqm closet close to some bts station, I call it self-inflicted.

Bank reports say newly launched projects are being taken up 60% by self-occupiers, 30% by investors looking to rent out, and 10% by speculators.

I would like to see how many of those 30% will turn sour when they cannot be rented out to supplement mortgage repayments.

[Chunky1]

They misspelled C h u n k y 1

[craigt3365]

All one has to do is look at the classifieds section on here or any thai property website to realize the bubble is in fact a balloon. But at 20K+ a month rental or 100,000K sqm resale asking prices for a 35sqm closet close to some bts station, I call it self-inflicted.

It doe seem insane. I live in Chiang Mai and I've been looking for something to buy for quite some time now. Prices seem high to me. But....things are selling. I guess some people do buy at the top end of the upswing don't they? It reminds me of where I come from but on a smaller scale. Vancouver....it seemed like it should stop...but it didn't. It has slowed down now. Actually it came to a grinding halt. But it went far beyond what people expected I think. Will that be what happens here?

There aint much moving on Phuket.. Just saw a 38m baht villa that 'had to be sold' go pretty much bidless.. In the end a bangkok Thai picked it up for 12m, not to live in it, but just to bank as at 12m it was about 50% under actual build cost.

Wow...wish I would have seen that one when I was looking around in Phuket last year! I got my house here at about 45% off asking price. But I am living in it!