Liquidity In Banking System Begins To Decline Markedly

[george]

Liquidity in banking system begins to decline markedly, says BOT

BANGKOK: -- Bank of Thailand’s Governor M.R. Pridiyathorn Devakula on Tuesday conceded a stiff competition among commercial banks in offering competitive deposit rates indicated liquidity in the banking system had markedly declined.

He said the current liquidity in the system had begun to drop to such a level that interest rates could edge up.

However, he believed major banks’ move to offer more attractive deposit rates would not affect the performance of small banks, which are believed to adapt to more competitive environment.

Asked to comment on the economic direction, he said no matter whether Caretaker Prim Minister Thaksin Shinawatra would step aside or not, the country’s exports would continue to expand.

The exports in February continued to grow around 23.3 per cent.

Still, he said, the premier’s decision not to accept the post in the next government would bring about the national reconciliation, which could restore investor confidence.

The BOT chief added he could not yet assess the overall economic direction because he had not seen latest economic figures.

--TNA 2006-04-05

[warriors]

Looking at the above comments it looks to me that the big boys are pulling there money out of Thailand. Hence the rates going up to try and keep the outflow from becoming a rout.

I do not think I would want to be sending much money in to any Thai Banks at this moment in time.

[jdinasia]

If the baht bags .... i'll be buying a chunk! Then reconvert or just hold until it goes back up.

[usatrader]

Maybe buying Bhat if it tanks is a good move but where do you keep the Bhat your buying if the amount your buying is in significant amount to make any real profit that is?

The issue is bank Liquidity and a decline in it. Systemic bank liquidity, dependent the extent and its affect on the Banks ability to borrow and then loan monies, combined with their default rates, are issues that are not mutually exclusive and or unrelated to Bank solvency you know.

As it declines the ability to loan drops and loans rates increase as do savings rates in near correspondence.

To which, as commercial loans on the banks books become due, the new rates tend higher thusly creating inflation pressure that may eat away at Currency appreciate or not.

Likewise, the amount the Bank can and will be willing to refinance maybe less than before or less than that which is needed, causing the borrower to add his liquidity from his own sources.

All this can impact growth and decrease the opportunity to raise capital for business growth. Likewise, in uncertainity panic runs on banks can accelerate bank insolvency.

Of course this is a worst-case scenario NOT LIKELY TO HAPPEN though there are circumstances at play they were in part in the game during the Asian flu monetary era not long ago.

Another liquidity impact of some minor consequence is Thaskins $1.9 billion. Will it be or not be in Thai banks, given the current situation and potential for some to try to take it from him once he is out of power. That is, if, in fact and practice, he really is going to be really “out of power”?

Personally, In Rob Kop anticipation, the economic uncertainty is more risky than I care to take. Especially knowing that as things and people, appear to change, in reality, the more they stay nearly the same. Sometimes getting worst sometimes getting better.

In this regard, I close, in wire transfer in USD, on all my holding, including stocks, except for a couple of family homes today Thursday. Most of that I am selling I have owned or invested in since the late 70’s.

Rob Kop verse Mai Rob Kop hey?

Chok Dee!!

[LaoPo]

Where did the cash go?

Not a real comforting message from BOT...

LaoPo

[otherstuff1957]

Ok, I'm just posting from memory, not looking things up, but couldn't the Shin selloff be part of this?

1) Themmasak borrowed a large percentage of the money they used to purchase the shares from a Thai bank - I think it was SCB.

2) Thaksin put the proceeds of the sale into a British(V.I. I think) Bank.

If I'm remembering these transactions correctly, that's one huge chunk of money that just left Thailand's Banking system. Then, of course, on top of that, quite a few wealthy people are probably quietly moving their money offshore due to the current political unrest.

[Losangels]

Ok, I'm just posting from memory, not looking things up, but couldn't the Shin selloff be part of this?

1) Themmasak borrowed a large percentage of the money they used to purchase the shares from a Thai bank - I think it was SCB.

2) Thaksin put the proceeds of the sale into a British(V.I. I think) Bank.

If I'm remembering these transactions correctly, that's one huge chunk of money that just left Thailand's Banking system. Then, of course, on top of that, quite a few wealthy people are probably quietly moving their money offshore due to the current political unrest.

Then why is the Baht still strong? Is it partly due to that a lot of foreign money is coming into the banking system? I've been shorting the Baht since the political crisis began.

[usatrader]

Being in No way an expert, yet in Rob Kop, having sold out of all my investments in Thailand just yesterday in USD. I think your answer is more external than internal as the Bhat as a long pegging relationship to the USD.

The below forecast are from a paid service and offer some insight in the change of the Thai Bhat against other currencies since Early March up and until now. Noting the 3 month forecasts where a tad advanced but trended correctly.

.

USD Forecasts

Forecasts: EUR/US$

Currency Spot (13/03)--1.1925

1-month--1.2050

3-month--1.2450

6-month--1.2900

Thai Bhat Forcasts

Forecasts: US$/THB

Currency Spot (15-03)--39.1

3-month--38.5

6-month--37.5

12-month--36.8

I suppose your decide.

[lukamar]

I think your answer is more external than internal as the Bhat as a long pegging relationship to the USD.

I suppose your decide.

We have been holding off transferring money into Thailand. We feel that the value of the Baht will decline because of the current political unrest. Although things like the USD holds the baht rate steady, so do things like the Shin Sale.

[xyz]

Then why is the Baht still strong? Is it partly due to that a lot of foreign money is coming into the banking system? I've been shorting the Baht since the political crisis began.

When liquidity in banking system begins to decline markedly, the interest rates will rise. When interest rates rise, foreign money will come in to take advantage of the higher rates. Usually the currency will get stronger when a lot of foreign money is coming into the banking system.

[Johpa]

Many of you are braver than myself in your willingness to use the Thai Baat as an investment vehicle. Many Thais I know try to get their profits out of the country. Those with smaller amounts prefer to switch baat into gold, where it is accumlated by gold trading concerns and then moved into hard currency.

But I do take advantage when the baat has one its inevitable cyclical falls. That is the time to send hard currency over to Thailand and upgrade the family home or purchase a lightly used car for the family.

So Thaksin is heading to London. He would not be the first high ranking miscreant son of the Thai Nation to seek temporary asylum in that metropole for dastardly deeds.

[usatrader]

Below is an excellent article in the AsianTimes about the topic we are discussing.

Asian Times on Thailand finacial situation

Some important highlights from my personal persepective that caused me to bail back to USD in US deposit protected banks and SPIC protected brokerage accounts.

They may of may not be of importance to you. Keep in mind though the impacting issue and potential effect of decreasing Bank Liquidity combined with an apparantly continued political uncertainity even though Kon T has resigned or will not lead.

Are the assumptions and suppostions laid out correct who knows? All I know is I am a big admirer of this conceptual Rob Kop mentality.

In the first three months of 2006, Thailand's benchmark SET equity index advanced by 3%, while the baht appreciated against the US dollar by almost 5%. To a certain extent, the US$1.8 billion sale of Shin Corp to Singapore's Temasek underpinned therise in both the stock market and exchange rate. That has contributed to a certain complacency among foreign and domestic investors about growing political and social instability and the adverse impact this will ultimately have on economic growth[

In 2005, strong foreign investment flows provided more than adequate funds to finance the current account deficit. Net foreign direct investment reached $3.3 billion - the highest level since 2001. But alarmingly, net foreign portfolio investment soared to $4 billion and short-term external borrowing by Thailand's private sector jumped by nearly $5 billion. The last time net foreign portfolio investment and short-term external borrowing increased by such magnitudes was in 1997 - the year before capital flight induced the devaluation of the baht, provoking a crippling economic recession.

These realities will also make it difficult for Thailand's private sector to roll over its mounting short-term external liabilities, which amounted to $17 billion, or 33% of total external debt at the end of 2005. With foreign inflows increasingly scarce in 2006, Thailand will be forced to draw down its foreign exchange reserves by as much as $15 billion to finance net outflows of foreign portfolio investment and its larger current account deficit. This implies that a significant depreciation of the baht is probable in 2006.

Baht depreciation could be intensified by domestic capital flight if concerns arise about possible capital controls. In May 1997, the Bank of Thailand implemented capital controls to contain building devaluation pressure on the baht. These measures severely limited the ability of Thais to shelter assets offshore in foreign currencies.

In July 1997, the baht was devalued by 20% and by the end of that fateful year the depreciation of the baht against the US dollar exceeded 80%. As Thailand's political and social crisis deepens in the months ahead, and with it confidence in the economy, a new financial and balance of payments crisis cannot be ruled out.

[Johpa]

Below is an excellent article in the AsianTimes about the topic we are discussing.

Asian Times on Thailand finacial situation

"Baht depreciation could be intensified by domestic capital flight if concerns arise about possible capital controls. In May 1997, the Bank of Thailand implemented capital controls to contain building devaluation pressure on the baht. These measures severely limited the ability of Thais to shelter assets offshore in foreign currencies."

[/font]

Measures to limit sheltering or transfering profits offshore have never been effective. There are countless ways to transfer money and avoid such laws. For an excellent description of how both individuals and corporations easily avoid such laws track down a copy of Capitalism's Achilles Heel : Dirty Money and How to Renew the Free-market System by Raymond W. Baker. The folks in Bangkok know how to play this game quite well.

Just look at all the Thai restaurants that have opened up across the US and elsewhere over the past two decades. The vast majority of those businesses were funded from Bangkok at an average startup price of well over $100,000. The owners then buy houses also funded from Thailand. They then sponsor relatives to come and work who also purchase homes that are funded from Thailand. I only choose the restaurant business because of the concentration of Thai capital in that industry and because of personal knoweldge about that industry.

[usatrader]

Measures to limit sheltering or transfering profits offshore have never been effective. There are countless ways to transfer money and avoid such laws. For an excellent description of how both individuals and corporations easily avoid such laws track down a copy of Capitalism's Achilles Heel : Dirty Money and How to Renew the Free-market System by Raymond W. Baker. The folks in Bangkok know how to play this game quite well.

Just look at all the Thai restaurants that have opened up across the US and elsewhere over the past two decades. The vast majority of those businesses were funded from Bangkok at an average startup price of well over $100,000. The owners then buy houses also funded from Thailand. They then sponsor relatives to come and work who also purchase homes that are funded from Thailand. I only choose the restaurant business because of the concentration of Thai capital in that industry and because of personal knoweldge about that industry

As a has been Financial Forensic consultant at various times, I am well aware of the methods, practice and most if not all that was included Baker’s book. He actually, I suspect, possible willfully, left some means and methods out completely.

I could not agree with you more as to your premise of peoples, not merely from Thailand, but, as well, from all sorts of countries having the ability and means in circumventing established governances systematic infrastructure that attempts to prohibit such practices. Its diversity of methods and means and corresponding Counter methods and means are in fact similarly self employing as is the evolution of the anti-Virus, Spam and pop up blocker industries.

The systematic perfecting of the art of moving dirty money around the world is prevalent. It uses means such as bribery, Government collusions, willful institutional conveyances via countries and or institutions specifically existing for that purpose, the use of false documentation, transfer pricing, cash for Barter exchanges, disguised corporations, shell bank and corporations, tax havens/ shelter schemes , and other tricks of the trade. These process have been around forever since even biblical times.

My first experience in hunting dirty money was in Vietnam where the US used a currency call MPC and would randomly recall it and change it physically thusly requiring a conversion of old monies for new . Thereby forcing the holders of the old money from the under ground markets to either eat it or lose it if they did not change it. Opening the door for getting an idea who had the monies and how much they had of it. Allowing for some query of those that held execessive amounts as to how they obtained it.

You do note the recent systemic oddly different and diverse changing of US currency supposed in counterfieting prevent which is in part a real reason for it don’t you?

However, I would add that most of the 1 to 2 Trillion of under current economies are in general traceable and in area and often in accounts. The issue is there is no will for measures of enforcement by many nations as often as much that goes out, comes right back in, in the same under ground economies. Truthfully, the US economy alone maybe as much as 20 %to 25% under estimated .

It is currently officially estimated at 12.47 Trillion but is likely as much as 15.6 Trillion. Thailand is as likely as well to have an under valued economy as are many countries with robust economies.

The real issue of the article is not the illicit movers as they are fairly consistent in numbers and amounts. It is, if another more pervasive number begin similar exodus. A point that was but one minor point in the entirity of the article relating to what we were discussing.