Bank Of Thailand Alert As Economy Heats Up

[webfact]

BOT alert as economy heats up
Sucheera Pinijparakarn,
Petchanet Pratruangkrai,
Nakarin Srilert
The Nation

Central bank and rating agencies watch for bubbles in real estate, SET

BANGKOK: -- Despite comforting signs of continuing growth, there were words of caution yesterday about possible overheating in the economy - and "bubbles" in the financial and property markets.

"Foreign money flows in because of the higher interest rate. If a bubble bursts, everything that we see as good will come to an end or will not happen," Virabongsa Ramangkura, chair of the Bank of Thailand, warned yesterday.

The massive inflow of foreign capital has caused the stock market index to approach the 1,600-point mark. Also, more than 15 per cent of government bonds are now held by foreign investors, said Virabongsa, who is also chairman of the government-appointed Strategic Committee for National Reconstruction and Development.

All parties should work together to find a way to prevent an economic bubble from forming, given Thailand's exposure as an open market.

However, the central bank would probably not lower the policy interest rate to stem the flood of foreign capital, he said.

Fitch Ratings said that despite recently upgrading Thailand's sovereign rating, it will keep a close watch for overheating of the economy without prompt corrective policy action, as well the possibility of renewed serious political instability.

At the company's "Global Economic Briefing", Andrew Colquhoun, head of Asia-Pacific Sovereigns, gave an overview of the Thai economy.

He said the upgrade of the sovereign rating to "BBB+" from "BBB" on March 8 reflected macro resilience underpinned by a strong policy framework and greater confidence in the area of political stability.

The global sovereign-credit picture remains one of a narrowing differential between the higher-income economies and emerging markets. This reflects both a deterioration in high-income sovereigns' credit profiles and fundamental improvements in many emerging markets, he said.

There was always a debate about the correct policy path for Thailand, but if Fitch saw that inflation was continuing to accelerate, the trade deficit was expanding, lending increasing very rapidly, and that asset and stocks prices were rising, the economy could be overheating, he said.

Overheating without appropriate corrective action from the regulators would affect economic stability and the financial sector, he warned.

Yet, if the government could manage the public debt better than expectations, the country's ratings would benefit as well, Colquhoun said.

Rebalancing was important, he said, adding that economic growth with an imbalance in terms of higher inflation, higher lending growth and an increased trade deficit would put pressure on the country's rating.

Colquhoun said that even though Fitch was upbeat about Thailand's public finances, macroeconomics and external finances, which are its strengths, the status of the Kingdom's structural issues was still a weakness.

Structural issues include the per capita income, the health of the banking system and tangible political instability, he said, adding that he did not think that political tension in Thailand would go away completely.

Finance Minister Kittiratt Na-Ranong said he saw no signs of foreign investors speculating in the property market. He was responding to a concern by the Asian Development Bank over possible bubbles in the sector following an influx of funds.

Sompop Manarungsan, president of the Panyapiwat Institute of Management, said the baht could strengthen to 25-26 against the US dollar within a couple years due to strong fundamentals. He was speaking at a seminar on the "Baht's strengthening: impact and solution", hosted by Charoen Pokphand Group.

Sompop said the baht was expected to be stronger this year. Thai enterprises should invest more overseas to offset lower returns due to the baht's strength, as well as ensure competitiveness with strong inflow of investment from Chinese and Japanese investors. To offset losses from the baht, he suggested: more value-added products, more variety in products, more markets, more investment-based, and more currencies for trade.

-- The Nation 2013-03-19

[Locationthailand]

Fairly certain the housing will hold up as Thai's don't care if the market falls. They still hold as many large complexes were built on laundered funds thus they have nothing to lose. There could be larger percentages of default of course by families but I don't think it will affect the 'system' greatly.

Edited March 19, 2013 by Locationthailand

[NeverSure]

"All parties should work together to find a way to prevent an economic bubble from forming, given Thailand's exposure as an open market."

Uh, All parties should work together with hope against hope to try to deflate the bubble that's already overheated.

15% of debt held by foreigners. They'll want out.

The rice scam is big enough to break Thailand. So is a couple of tril for a high speed rail, most of which money would be siphoned off due to corruption but the country would still owe it.

Thailand is like a rocket going straight up, about to run out of fuel.

[siampolee]

Seems as if reality is beginning to nibble at the chairman of the Central Bank, Virabongsa Ramangkura sage words indeed,

However the comments from his esteemed colleague Kittiratt Na-Ranong seem to indicate he is severely myopic and plainly in need of both a white stick and a guide dog.

Are the finance ministers comments emanating from the puppet master who is indeed desirous of making a financial killing as he and his cronies did in 1997, or is perchance just ''a little white lie '' that finance ministers have to tell ?

Thailand is an open market and thus is vulnerable to the capricious whims of the financial conglomerates. Those nice foreign funds are so welcome when they roll in.However when profit taking starts it's all due to those nasty foreigners taking their profits away from Thailand.

It's called international banking and it is not a fools game, the sooner the finance minister wakes up to the reality of the current situation and grasps what that situation may develop into the sooner the better.

Storm cones are being hoisted and as I've said before.. ''Life jackets and seat belts on folks and get ready for the upcoming white knuckle financial roller coaster ride of lifetime.

[up-country_sinclair]

It's nice to finally see a government official express some concern, and not just paint a rosy picture.

[rubl]

Can't be true! Our local economical guru on TV forum has confirmed repeatedly that all is peachy rozy :-)

[bunnaag]

from BBB to BBB+ not much of an upgrade nothing to be exited about.

[IMA_FARANG]

Not being a Economist i perpose that this new idea called "Taxation" should be used to discourage short term investments and at the same time encourage long term investmnts in Thailand.

That means to me, that any investement held for any period shorter than a minimum of 90 days should be taxed at a higher rate than any investment of more than that period.

Furthermore, in the housing industry.... houses (yes even condos purchased by foriegners) whose owners do NOT actually reside in those propeties but purchased them for rental puposes, should be taxed at a rate higher than those who purchse the same property to actually reside in it themselves.

But i realise for International Bankster Criminals (the Greeks invented that term from the words Bank and Gangster Criminals) .... oh I'm sorry the polite term for them is "foriegn investors".... should not br allowed to hold short term real estate purchases without paying in the Tax rates for their speculative short term investments.

For one thing, that would either kill the foriegn investment that is driving the bibble, or at least raise tax revenue for the Thai government on that speculative bubble producing investment.

[Thai at Heart]

How much of the GDP growth is attributable to this boom in construction?

[jamhar]

Hub of Bubble?

[siampolee]

Just another pearl of wisdom from the current Minister of Fiasco Finance, he is contemplating lowering the corporate tax rates to around 20%.

Now we see increased governmental spending all round yet a decrease in taxation income.

One wonders who is going to benefit from this proposed action and where is the money going to be coming from to cover the shortfall in taxation income and who is going to provide those shortfall payments? .

Increased spending, decreased income ?

Hmm,

Seems a very peculiar form of financial prudence to my mind and I am sure I am not alone with that train of thought either.

Edited March 19, 2013 by siampolee

[Pimay1]

Just another pearl of wisdom from the current Minister of Fiasco Finance, he is contemplating lowering the corporate tax rates to around 20%.

Now we see increased governmental spending all round yet a decrease in taxation income.

One wonders who is going to benefit from this proposed action and where is the money going to be coming from to cover the shortfall in taxation income and who is going to provide those shortfall payments? .

Increased spending, decreased income ?

Hmm,

Seems a very peculiar form of financial prudence to my mind and I am sure I am not alone with that train of thought either.

It appears to me they are pulling all the stops out to enrich themselves to the max while they have the chance. I would suspect many of the MPs and cabinet members have large investments in corporations.

[jamhar]

OK Maybe i was a bit too flippant.

Watching Cyprus going through its ordeal,

being prudent may be a good thing.

and banks should always be conservative.

[15Peter20]

Just another pearl of wisdom from the current Minister of Fiasco Finance, he is contemplating lowering the corporate tax rates to around 20%.

Now we see increased governmental spending all round yet a decrease in taxation income.

One wonders who is going to benefit from this proposed action and where is the money going to be coming from to cover the shortfall in taxation income and who is going to provide those shortfall payments? .

Increased spending, decreased income ?

Hmm,

Seems a very peculiar form of financial prudence to my mind and I am sure I am not alone with that train of thought either.

No, you are not alone. All those other posters who are predisposed to never saying anything good about this government regardless of what it does are right behind you.

What is happening here appears to be fairly textbook expansionary fiscal policy. Its aim is to increase aggregate domestic demand ie put more money in people's pockets. Yes, we are all well aware of corruption and that big bosses get the bigger slice of any benefits, but nevertheless, if you give more cash to companies they generally seek to expand/improve their market positions to avoid being beaten by competitors and an often observed effect of this is to take on more staff - reducing unemployment - and at the very least maintaining levels of pay in line with inflation, as well as investing in plant/machinery etc.

In answer to your 'where is the money going to come from' question, it's already here. The recent capital inflows and bond buy-ups from abroad will have given further impetus to this policy. Further, the increased aggregate demand would be expected to eventually increase overall tax income to maintain the expansion. Its Keynesian economics, but if you'd rather call it an evil government ploy, then fill your boots.

As with any economic tinkering, there are risks involved, chiefly that inflation may occur and that the currency will further strengthen, but monitoring and control can take place over time to keep this in check, if desired.

The government may get it wrong - which remains to be seen - but what they are talking about doing here is completely understandable in economic terms and I don't think you bring much to this particular discussion with your entrenched and somewhat obsessive political beliefs.

Edited March 19, 2013 by 15Peter20

[waza]

"Foreign money flows in because of the higher interest rate. If a bubble bursts, everything that we see as good will come to an end or will not happen," Virabongsa Ramangkura, chair of the Bank of Thailand, warned yesterday.................Overheating without appropriate corrective action from the regulators would affect economic stability and the financial sector, he warned. Yet, if the government could manage the public debt better than expectations, the country's ratings would benefit as well, Colquhoun said."

Judging by Yinglucks governments economic abbilities so far, this is a long bow to draw. More PTP economic miracles.

Yeah, We are economic geniuses

"Finance Minister Kittiratt Na-Ranong said he saw no signs of foreign investors speculating in the property market. He was responding to a concern by the Asian Development Bank over possible bubbles in the sector following an influx of funds."

Edited March 19, 2013 by waza

[Suradit69]

Maybe the effect of Russian money fleeing other "safe havens" like Cyprus now that the European economic geniuses decided to impose a (supposedly) one-off tax on bank accounts for everyone in Cyprus. Or maybe not everyone. Not very well thought out, surprise, surprise. I hope the Euro-economists have 'round the clock body guards in case some of the Russian "savers" feel upset.

"Everybody knows that the vast majority of the deposits in Cyprus are from
Russia," he said. "They're Russian government officials, they're Russian
businessmen, it's Russian mafia – and you don't mess with the Russian mafia."

http://www.cnbc.com/id/100565542

Possibly some of the Russian "businessmen" anticipated the problem and others will now see the wisdom in diversifying their investments.

Cyprus launches probe into Russian mafia money

14.12.12 @ 07:07

BRUSSELS - Cyprus has opened an investigation into evidence that stolen Russian tax money linked to the murder of Sergei Magnitsky was laundered through its banks.

Mokas, its anti-money-laundering unit, in an email to EUobserver on Thursday (13 December), said: "At this point ... in Cyprus there is an open investigation on this matter." It noted: "Mokas is conducting the investigation, which functions within the office of the attorney general."

http://euobserver.com/magnitsky/118524

Edited March 19, 2013 by Suradit69

[muratremix]

How about exchange rates? USD is so ridiculously low, it should go up a little bit when euro goes down, but not in Thailand!

[sendbaht]

I did recieve 3% on a fixed account today (CD) not a lot but better then nothing..

[rizla]

Not being a Economist i perpose that this new idea called "Taxation" should be used to discourage short term investments and at the same time encourage long term investmnts in Thailand.

That means to me, that any investement held for any period shorter than a minimum of 90 days should be taxed at a higher rate than any investment of more than that period.

Furthermore, in the housing industry.... houses (yes even condos purchased by foriegners) whose owners do NOT actually reside in those propeties but purchased them for rental puposes, should be taxed at a rate higher than those who purchse the same property to actually reside in it themselves.

But i realise for International Bankster Criminals (the Greeks invented that term from the words Bank and Gangster Criminals) .... oh I'm sorry the polite term for them is "foriegn investors".... should not br allowed to hold short term real estate purchases without paying in the Tax rates for their speculative short term investments.

For one thing, that would either kill the foriegn investment that is driving the bibble, or at least raise tax revenue for the Thai government on that speculative bubble producing investment.

And all the landlords will do is raise the rent which well help visitor numbers......NOT

Leave them alone and when this all goes pear shaped i for one want them to leave in droves...help to crash the economy , equals better living conditions for many of us..

[andytime]

Fairly certain the housing will hold up as Thai's don't care if the market falls. They still hold as many large complexes were built on laundered funds thus they have nothing to lose. There could be larger percentages of default of course by families but I don't think it will affect the 'system' greatly.

Just the same as it doesn't affect anywhere else that has a housing bubble I guess sarc (just leaves people paying off overpriced properties for years to come). Thailand got out of 1997 because the currency devalued and other countries poured their money in and they were in a vastly different stage of their life. Ask Bernake whether he saw a nationwide US real estate bubble in 2006 and he said he did not buy your premise. How well is that working for him now? Here in Thailand some may "own" the building/s and my guess would be many may not and there are considerably more speculators than you may believe. Rents are falling, fewer tenants, and many empty units (have a look at Millennium in soi 16 if you are in any doubt) with more stock in the pipeline. Oh yes and no lights on.. all is fine then. Asians have balls bigger than Ben Hur (ONLY when it comes to investing ) but the vision of a blind mullet on serepax when it comes to recognizing what is happening elsewhere - just ask Japan in 1989 which planet they were headed to? You really think Thailand is any different? I bet not. The ramp up of personal credit which has been offered to mickey mouse and donald duck in thailand with car loans to those earning 12k a month one suspects the "system" may be more greatly affected than you reason for personal credit items along with real estate. Money may flow into a place at speed but I bet it flows out faster (just ask the BRIC countries how swell everything is going at the moment despite the fact that china's numbers (along with most other countries just don't add up). Whilst the dollar is a total lackey at the moment i suspect if you think the baht is a one way bet then you will have a very rude awakening. Spending and stealing borrowed money for mega infastructure projects may look and sound great at first but if you can't even keep your beaches clean then i sort of think the wave that catches you will be the one you least expect.

[belg]

oh bubbles, 1997, 2008, next one in 2019

time to start to save ?

[how241]

It's nice to finally see a government official express some concern, and not just paint a rosy picture.

+1

[dcutman]

BoT chief rejects rumours of insufficient funds

By English News



BANGKOK,
March 20 – Thailand’s central bank chief has quashed rumours of
inadequate funds available to intervene to slow the Thai currency's
rapid appreciation which hits a record high in 28 months on Tuesday.


Prasarn Trairatvorakul said the rapid strengthening of the Thai baht was
probably due to positive news on the Thai economy which has contributed
to the inflow of foreign capital.


Rumours in the money market that the Bank of Thailand (BoT) doesn’t have
the money to intervene to stem the baht rise were groundless, he
insisted.


The Thai baht appreciated to Bt29.38-29.40 against the US dollar on
Tuesday – its strongest in the past two years and four months.


The rumours led to a swaying index in the Securities Exchange of
Thailand (SET) on Tuesday as investors reacted nervously. Some were
concerned that the government may issue measures to stop the foreign
capital inflow.


The Thai stock index dropped 23.40 points to 1,568.25 when it closed on Tuesday.


Tawatchai Assawapornchai, Globex chief analyst, said the sharp decline
in the SET index was due to investors’ anxiety over the government’s
possible measures to curb the appreciation of the Thai currency which
was its strongest level in five years.


Some investors decided to make profit given the skyrocketing index in the past few months, he said. (MCOT online news)

[Soutpeel]

Not being a Economist i perpose that this new idea called "Taxation" should be used to discourage short term investments and at the same time encourage long term investmnts in Thailand.

That means to me, that any investement held for any period shorter than a minimum of 90 days should be taxed at a higher rate than any investment of more than that period.

Furthermore, in the housing industry.... houses (yes even condos purchased by foriegners) whose owners do NOT actually reside in those propeties but purchased them for rental puposes, should be taxed at a rate higher than those who purchse the same property to actually reside in it themselves.

But i realise for International Bankster Criminals (the Greeks invented that term from the words Bank and Gangster Criminals) .... oh I'm sorry the polite term for them is "foriegn investors".... should not br allowed to hold short term real estate purchases without paying in the Tax rates for their speculative short term investments.

For one thing, that would either kill the foriegn investment that is driving the bibble, or at least raise tax revenue for the Thai government on that speculative bubble producing investment.

And all the landlords will do is raise the rent which well help visitor numbers......NOT

Leave them alone and when this all goes pear shaped i for one want them to leave in droves...help to crash the economy , equals better living conditions for many of us..

How sad...you would welcome an economic crash so you can afford and extra pack of mamma noodles a week...

[waza]

BoT chief rejects rumours of insufficient funds

By English News

BANGKOK,

March 20 – Thailand’s central bank chief has quashed rumours of

inadequate funds available to intervene to slow the Thai currency's

rapid appreciation which hits a record high in 28 months on Tuesday.

Prasarn Trairatvorakul said the rapid strengthening of the Thai baht was

probably due to positive news on the Thai economy which has contributed

to the inflow of foreign capital.

Rumours in the money market that the Bank of Thailand (BoT) doesn’t have

the money to intervene to stem the baht rise were groundless, he

insisted.

The Thai baht appreciated to Bt29.38-29.40 against the US dollar on

Tuesday – its strongest in the past two years and four months.

The rumours led to a swaying index in the Securities Exchange of

Thailand (SET) on Tuesday as investors reacted nervously. Some were

concerned that the government may issue measures to stop the foreign

capital inflow.

The Thai stock index dropped 23.40 points to 1,568.25 when it closed on Tuesday.

Tawatchai Assawapornchai, Globex chief analyst, said the sharp decline

in the SET index was due to investors’ anxiety over the government’s

possible measures to curb the appreciation of the Thai currency which

was its strongest level in five years.

Some investors decided to make profit given the skyrocketing index in the past few months, he said. (MCOT online news)

Since Tuesday huh?

March 20 – Thailand’s central bank chief has quashed rumours of inadequate funds available to intervene to slow the Thai currency's rapid appreciation which hits a record high in 28 months on Tuesday.

Prasarn Trairatvorakul said the rapid strengthening of the Thai baht was probably due to positive news on the Thai economy which has contributed to the inflow of foreign capital.

Large inflow of foriegn capital, due to the positive Thai economy. Nah I dont think so...........

"CYPRUS BANK-LEVY: Euro zone finance ministers have suggested that depositors with €100K — €500K in the bank pay a 10 percent levy while those with more than €500K pay a one-off tax of 15.6 percent. But here’s the thing: The €100K and above crowd is heavily populated by Russians. Lots of them. In fact, with roughly $31 billion in the country’s banks, Russian banks and businesses account for nearly half of all Cypriot deposits, according to conservative estimates by the Moody’s rating firm. "http://www.theblaze.com/stories/2013/03/18/the-cyprus-haircut-heres-what-you-need-to-know/

Moscow's mafia finds an island in the sun: Cyprus is awash with dubious dollarsfrom Russia. http://www.independent.co.uk/news/world/europe/moscows-mafia-finds-an-island-in-the-sun-cyprus-is-awash-with-dubious-dollars-from-russia-robert-fisk-reports-from-limassol-on-the-visitors-with-private-jets-bulging-suitcases-and-a-reluctance-to-answer-questions-1381056.html

Russian Mafia money looking for a safe haven, now that sounds more likely. But Thailands wants to go legit..........

"Thailand has made significant progress in improving its anti-money laundering regulations over the past 2 years. FATF in its most recent review noted that more work still needs to be done with respect to know your customer. KYC is one of the critical aspects in identifying money laundering risk for a country."

http://tmprisk.com/thai-money-laundering-regulations/

However, someone owes some big favours.............

"It now emerges that Thaksin indeed is facing financial difficulties. He has borrowed money from Gazprombank, a subsidiary of Russian energy giant Gazprom, and is now having a tough time servicing the debt. The amount of the loan he took from Gazprombank is not known, but it could be to the tune of US$1.5 billion.

Thaksin used this money to invest in Dubai. As we all know, Dubai is facing a financial meltdown. Dubai World, the state-owned corporation, is seeking a delay of payment in its debt, which amounts to $59 billion. Thaksin is facing huge losses after his foray into the Dubai market............Thaksin still holds a chunk of PTT shares through nominee accounts. So it comes as no surprise that Thaksin wanted to boost his connection with another huge energy firm like Gazprom...........He would also like to rely on Gazprom as a platform to help him invest in the energy sector in other countries. His interest in the oil and gas business in Cambodia is already widely known." http://www.nationmultimedia.com/2010/01/15/opinion/opinion_30120329.php

Edited March 20, 2013 by waza

[Pimay1]

Well boys and girls if you trust any Thai banks you are more trusting than I am. Every month when my pension comes I withdraw it immediatelly, bring it home and put it in my safe which is bolted to the floor.

[dcutman]

More encouraging news today.

Foreign holding in local bonds now stands at 800 billion baht, the
highest since the Thai Bond Market Association's founding in 1994.

Banyong Pongpanich, the chief executive of Kiatnakin Bank, warned of a
possible bubble in small-cap stocks with heavy speculative activity but
he said the magnitude may be less severe than that of the global stock
bubble.

[davejonesbkk]

Quick question, if any bubble did burst, would money in thai bank accounts be at risk?

[waza]

Quick question, if any bubble did burst, would money in thai bank accounts be at risk?

Depends on how much debt Thailand has, who it owes it too and if it can service the debt. At the moment you wouldnt have a worry.

But remember the golden rule, never invest more in Thailand than your prepared to loose and if in doubt gold is easily transportable wealth.

Edited March 20, 2013 by waza

[Bluenose BKK]

BoT chief rejects rumours of insufficient funds

By English News

BANGKOK,

March 20 – Thailand’s central bank chief has quashed rumours of

inadequate funds available to intervene to slow the Thai currency's

rapid appreciation which hits a record high in 28 months on Tuesday.

Prasarn Trairatvorakul said the rapid strengthening of the Thai baht was

probably due to positive news on the Thai economy which has contributed

to the inflow of foreign capital.

Rumours in the money market that the Bank of Thailand (BoT) doesn’t have

the money to intervene to stem the baht rise were groundless, he

insisted.

The Thai baht appreciated to Bt29.38-29.40 against the US dollar on

Tuesday – its strongest in the past two years and four months.

The rumours led to a swaying index in the Securities Exchange of

Thailand (SET) on Tuesday as investors reacted nervously. Some were

concerned that the government may issue measures to stop the foreign

capital inflow.

The Thai stock index dropped 23.40 points to 1,568.25 when it closed on Tuesday.

Tawatchai Assawapornchai, Globex chief analyst, said the sharp decline

in the SET index was due to investors’ anxiety over the government’s

possible measures to curb the appreciation of the Thai currency which

was its strongest level in five years.

Some investors decided to make profit given the skyrocketing index in the past few months, he said. (MCOT online news)

The Japanese have tried many times to intervene in the Foreign Exchange to weaken the Yen and make their many exports more viable,even they realised that throwing USD $90 Billion or the Yen equivalent into a market that trades USD $4 Trillion every 24 hours in volume is like using 100 boat engines to speed up the Chao Praya and reduce flooding!

Quoting the carry trade from foreign banks for higher interest rates does nothing to address the problems of Thailand's exports like rice which counts for over 12% of their GDP and must be dying rapidly now!

"However, the central bank would probably not lower the policy interest rate to stem the flood of foreign capital, he said."

Fine,watch all your exports of rice,cars,motorbikes etc. become less and less competitive on world markets then,plus tourism fall off a cliff due to the ridiculously strong Thai Baht,I see a U-Turn in the not too distant future somewhere!