How To Profit From Spiraling Inflation In Thailand

[happyjune]

With a large % increase in wages in some regions promised within 90 days, the only out come can be out of control inflation, be it a spike or bubble, but once prices go up, they tend not to come down.

Any ideas as how the Thai family can profit from out of control inflation that may soon be on them? Got to be some way?

High inflation = higher interest rates = normally a stronger currency = not good for me

I am thinking, maybe can buy cheap tablets, we have already been approached for a loan promising us 3 tablets from her kids when they come for 2000b each.

I am thinking, of setting up a company to cash in on the Gov policy of,

"Pheu Thai-led government would subsidise operations of Thai firms in other countries where labour is cheap." Pheu Thai secretary-general Jaruphong Ruengsuwan said.

This would = more Thai unemployment.

There may be some nice Thai Gov hand outs to set up shop or relocate to Cambodia, then maybe an idea is to set up a Employment agency for the Thai unemployed people to get work in Cambodia, at least it's a job right. Source: http://www.thaivisa....licy-jaruphong/

Any other legal ideas?

Edited July 7, 2011 by happyjune

[cloudhopper]

Out of control inflation is hardly the only possible outcome of promised minimum wage hikes and would not result in a stronger currency if that does happen.

[ExpatJ]

Invest in stocks- over time they traditionally beat inflation.

[kennalder]

If you do anything based on the above logic, let me know, I will do the opposite. Out of control inflation is by definition a weaker currency.

[Groongthep]

Very flawed logic IMHO. Putting more company profits into the hands of workers who are also the country's consumers might very well boost the economy rather than weaken it. Supply-side economic theories don't really apply much here in Thailand since so many workers are employed by foreign corporations who tend to repatriate their profits or invest it outside the country. Besides, the new proposed law calls for an increase in the minimum wage to only 300 baht a day from the current 215 (in the Bangkok area). That's about a two and a half US dollar a day increase. Hardly a prescription for disaster to the large employers. And as we all know, there never has been much meaningful enforcement of minimum wage requirements on small businesses in Thailand unless the business is owned by a farang. Moneies earned by the poor working class in Thailand will almost certainly result in it been spent here in Thailand. Increasing the miserably low wages of the working poor is not only a fair and just policy it makes good economic sense as well.

[btsfreak]

Large high tech cooperations producing for export might not suffer immediate death from the hikes but prices for local produced goods of companies will go up for sure. And those tile makers, cement factories, chemical companies will add it to the prices, so you can expect that your cement sack, color tin and floor tile will go up in price at least 50%.

It is always like that in any country, look at VIetnam, the inflation is choking them to death.

So at the end, the workers will practically have the same buyin power as before (well, not really, since rice prices will be subsidized, at least until the gov runs out of money).

What can you do? Buy gold (real, not certificates), get a stable income (good job or pension).

I would not advise to buy stocks (and if, only big corporations of basic necessities (food), as Nestle or Coke).

Do not herd foreign cash, you migh tbe suprised what will happen on the global finance market within the next two years. Being from Europe, I know whats brewin...

[kropotkin]

Am I the only one that has the impression that the OP is not at all trying to beat inflation, but is rather bashing the new government?

Not that I take sides, but if you want to say something, say it, and do not disguise it.

[12DrinkMore]

Invest in stocks- over time they traditionally beat inflation.

[Groongthep]

......so you can expect that your cement sack, color tin and floor tile will go up in price at least 50%.

Raise the wages of the lowest paid workers (not all workers just the very lowest paid) by only 75 baht a day and the company's products will increase by at least 50%?! Absurd.

Edited July 9, 2011 by Groongthep

[AyG]

The Thai government is about to launch its first issue of inflation-linked bonds. Seems like a pretty good way to protect against the loss of value of your savings in the event of spiralling inflation. Put overseas savings in these and you'll also protect against exchange rate risk.

http://www.reuters.com/article/2011/04/07/thailand-bonds-idUSL3E7F71SK20110407

[wolfmanjack]

......so you can expect that your cement sack, color tin and floor tile will go up in price at least 50%.

Raise the wages of the lowest paid workers (not all workers just the very lowest paid) by only 75 baht a day and the company's products will increase by at least 50%?! Absurd.

In some places the minimum is only around 150. here in chiang mai it is 171 or there about. Also some companies will use it as an excuse to raise their prices more than they need to. for those companies that base their profit margin on a % of cost then the price will not only go up by the 75 baht but by the % of the extra profit also.

[Furbie]

Very flawed logic IMHO. Putting more company profits into the hands of workers who are also the country's consumers might very well boost the economy rather than weaken it. Supply-side economic theories don't really apply much here in Thailand since so many workers are employed by foreign corporations who tend to repatriate their profits or invest it outside the country. Besides, the new proposed law calls for an increase in the minimum wage to only 300 baht a day from the current 215 (in the Bangkok area). That's about a two and a half US dollar a day increase. Hardly a prescription for disaster to the large employers. And as we all know, there never has been much meaningful enforcement of minimum wage requirements on small businesses in Thailand unless the business is owned by a farang. Moneies earned by the poor working class in Thailand will almost certainly result in it been spent here in Thailand. Increasing the miserably low wages of the working poor is not only a fair and just policy it makes good economic sense as well.

Sorry to burst your bubble with some harsh realities, but….

SMEs in Thailand (200m Baht and below for fixed assets and under 200 employees – but changes by sector) are going to be creamed by such a drastic wage hike. As SMEs account for 99.45% of the companies in Thailand, account for something like 78% of employment, and 38% of GDP – this is a real problem. Wage increases for these businesses are not easily passed along to the consumer. For manufacturing, it will result in job loss as it becomes cheaper to automate. If it’s an export business, they become less competitive globally and many will go under. If it’s a service business, they may fair better – but the most likely result is people get fired. This is a radical policy, and one that has not been thought through.

[OriginalPoster]

The Thai government is about to launch its first issue of inflation-linked bonds. Seems like a pretty good way to protect against the loss of value of your savings in the event of spiralling inflation. Put overseas savings in these and you'll also protect against exchange rate risk.

http://www.reuters.c...E7F71SK20110407

How would one go about buying those?

[AyG]

Apply next week, Monday to Wednesday only, at HSBC, Krung Thai Bank, Kasikornbank or Siam Commercial Bank. The minimum subscription is 100,000 baht.

[ExpatJ]

Invest in stocks- over time they traditionally beat inflation.

By any chance are you one of the unfortunates who missed out on the 40% increase in the thai stock market last couple of years?

[OriginalPoster]

Apply next week, Monday to Wednesday only, at HSBC, Krung Thai Bank, Kasikornbank or Siam Commercial Bank. The minimum subscription is 100,000 baht.

Thanks. Do you now if there is a secondary market for bonds like these, or is it6 strictly a "buy-em & hold-em until maturity" proposition.

Edited July 13, 2011 by OriginalPoster

[up-country_sinclair]

I just read in a newspaper (which can't be linked to) that the sale of those inflation indexed bonds ended today, not next Wednesday.

[Naam]

Invest in stocks- over time they traditionally beat inflation.

By any chance are you one of the unfortunates who missed out on the 40% increase in the thai stock market last couple of years?

let's be fair ExpatJ. it all depends on individual perspective and time frame.

perhaps "12DrinkMore" is one of the fortunates who did not buy the SET @ 1,753 in 1993/94 and is not sitting on a loss of nearly 40% after waiting eighteen long years?

how do you define "over time"?

how long do you consider "over time" for investors who e.g. bought the Nikkei 21 years ago @ 39,xxx and look now @ 9,000 and a minus of ~75%?

shall i continue and post another dozen examples?

for the record: those who bought the SET 21 years ago have not made one single Satang profit but deal with an inflation rate in excess of 150% !

Edited July 13, 2011 by Naam

[morphic]

Buying equities to hedge against inflation might work but you need to buy the right equities ate the right price and they need to return atleast the rate of inflation. People who bought the index in the 1990's lost money because they bought into a bubble when valuations were absurdly high. Buying now would make more sense as the PE is more reasonable.

But it is also necessary to buy the right equities as opposed to just buying the whole index. Buying the index is easy enough, selecting individual equities is hard and risky. But to start with we need to understand what kind of companies will prosper in a high inflation environment.

If the inflation is driven by domestic consumption then maybe buying consumer stocks would make sense, assuming they are able to pass on increases in their input costs. So that might mean Big C for example.

On the other hand maybe buying companies that benefit from the farming sector, if they exist. After all, if the price of rice is rising then surely the farmer is getting richer and his land is worth more? And we might want to ask what those richer farmers will do with their money? One thing is homes and if you couple that with all the mega projects the new government might want to embark upon them maybe Siam Cement etc?

Areas to avoid in a high inflation economy might be utilities as they are more like bonds with constant cash flows.

All I am saying is you need to select carefully. The suggestions abovbe were just off the top of my head.

Any other ideas?

[Naam]

Buying equities to hedge against inflation might work but you need to buy the right equities ate the right price and they need to return at least the rate of inflation.

you don't say!