Thai opinion: It seems like 1997 all over again

[indyuk]

Sadly, all this movement of money and recessionary fallout seems to be perfectly timed in favour of the Shinwatra govt. He's always been on the lucky end of the economic growth here, and the only time it went flat in the last decade (2009 recession) was when he was out of power briefly, the last 18 months have seen false boosts here from this dollar movement, that is now about to change. And with the rice subsidy debt and other borrowing, he might be on the cusp of a huge wake up call. Poor Yingluck, it will be on her watch and she'll be out of her depth to deal with it.

Excuse my limited understanding of all things financial, but isn't a drop in Baht value a very good thing for the Yingluck administration at this point? It devaluates the rice pledging debts, AND gives them a better chance to sell off their overpriced rice on foreign markets.

And makes imports more expensive, including oil and fuels inflation. But don't get too excited, that supposed drop in the Baht is some way off and may well never happen. One of the big differences between today and 1997 is that the BOT has USD 172 billion in foreign currency reserves, that's more than the UK or the US and it isn't spending any of it defending its currency!

But isn't that 172 Billion wiped out by the 300 Billion that Kittiratt buried in the Bank of Thailand?

[indyuk]

I agree with just about every word in the press report, yet I doubt that the Baht will ever see 70+ Bahts to the GBP again.

[RubbaJohnny]

ah all those experts

making big bucks

but none can forsee / predict the big dips that we seem to get

so a lot of money came into thailand and made our euro / pound 20% less worth in a few weeks/months time

living here with no assests or real estate in my home country, sold everything because my family is here, i sure lost a lot of money converting euros into baht... just a few months too late, when we were out of the country

What most not versed in the finer points of carry trade,derivitives and arbitrage fail to appreciate the big money and their brokers can forcast (read bet ) on any outcome.

Knowledgeable smaller players can mitigate losses get out of certain areas,stocks,bonds,currencies or trades but the majority i.e those with little or zero equity(or what they do have is in illiquid property/pensions) are if you'll pardon the expression stuffed,fleeced,shorn and hung out to dry.

For those who do not believe bubles burst just hang on.

[bkk_mike]

Soros had nothing to do with 1997:

http://en.wikipedia.org/wiki/George_Soros_conspiracy_theories

And to compare Brazil's economy against Thailand's is a bit far fetched don't you think Nation!

Try telling that to the majority of Thais.

Only last week was I talking to a group of Thais who still blame Soros for the economic collapse.

I worked on the FX Options system at Chase Manhattan bank back in 1996, and remember a discussion late that year where the head trader was saying that the Thai Baht position needed to be reduced, because too many people were assuming the fixed exchange rate was there to stay, but if you looked at Thailand's history, something as basic as the number of coups since World War 2 suggested the country wasn't stable enough for that assumption.

I know it was 96 because I left Chase in January 97, but that's one trader that I believe earned his bonus.

[VegasVic]

You had better get that camera dusted off there Chiang Mai, I'd hate to think that you miss a good snapshot of those flying piggies Don't worry though you have plenty of time, the move in U.S. interest rates will be a gradual one over the next 12 months or so, however after that the move will be much more pronounced, much to the chagin of the U.S. multinationals and the U.S. government as a larger and larger percentage of the U.S. GNP is eaten up by service on the debt

Your words have been recorded for posteriety and can be recalled at a moments notice, my camera is in its case, waiting - I note however that I have plenty of time and I read that to mean that I have plleeeennnnntttttyyyyyyy of time

It's not just Thailand, hedge funds and large private investors are in the begining stages of an exodus from most emerging markets. Keep your eye on what happens in India, because Thailand will surely follow. The flight to safety is just getting started, there will be a strong inverse relationship between a slowdown in emerging markets and the rise of the U.S. bond rates and this will likely continue for the remainder of this decade so plan accordingly

[Thai at Heart]

You had better get that camera dusted off there Chiang Mai, I'd hate to think that you miss a good snapshot of those flying piggies Don't worry though you have plenty of time, the move in U.S. interest rates will be a gradual one over the next 12 months or so, however after that the move will be much more pronounced, much to the chagin of the U.S. multinationals and the U.S. government as a larger and larger percentage of the U.S. GNP is eaten up by service on the debt

Your words have been recorded for posteriety and can be recalled at a moments notice, my camera is in its case, waiting - I note however that I have plenty of time and I read that to mean that I have plleeeennnnntttttyyyyyyy of time

It's not just Thailand, hedge funds and large private investors are in the begining stages of an exodus from most emerging markets. Keep your eye on what happens in India, because Thailand will surely follow. The flight to safety is just getting started, there will be a strong inverse relationship between a slowdown in emerging markets and the rise of the U.S. bond rates and this will likely continue for the remainder of this decade so plan accordingly

India is way along that road. 60 rupee to the USD.

[chiang mai]

You had better get that camera dusted off there Chiang Mai, I'd hate to think that you miss a good snapshot of those flying piggies Don't worry though you have plenty of time, the move in U.S. interest rates will be a gradual one over the next 12 months or so, however after that the move will be much more pronounced, much to the chagin of the U.S. multinationals and the U.S. government as a larger and larger percentage of the U.S. GNP is eaten up by service on the debt

Your words have been recorded for posteriety and can be recalled at a moments notice, my camera is in its case, waiting - I note however that I have plenty of time and I read that to mean that I have plleeeennnnntttttyyyyyyy of time

It's not just Thailand, hedge funds and large private investors are in the begining stages of an exodus from most emerging markets. Keep your eye on what happens in India, because Thailand will surely follow. The flight to safety is just getting started, there will be a strong inverse relationship between a slowdown in emerging markets and the rise of the U.S. bond rates and this will likely continue for the remainder of this decade so plan accordingly

The hedge fund exodus is an old story, they've been and gone many weeks ago since they are always the first out, you're reading old material.

[giggles]

its strange that the US QE has been boosting asian economies and back home theyre facing collapsing demand and a vanishing middle class ,vanishing industry ,the very problems QE was supposed to solve .QE is helping everyone but Americans !bizarre

[ExpatOilWorker]

Sadly, all this movement of money and recessionary fallout seems to be perfectly timed in favour of the Shinwatra govt. He's always been on the lucky end of the economic growth here, and the only time it went flat in the last decade (2009 recession) was when he was out of power briefly, the last 18 months have seen false boosts here from this dollar movement, that is now about to change. And with the rice subsidy debt and other borrowing, he might be on the cusp of a huge wake up call. Poor Yingluck, it will be on her watch and she'll be out of her depth to deal with it.

Excuse my limited understanding of all things financial, but isn't a drop in Baht value a very good thing for the Yingluck administration at this point? It devaluates the rice pledging debts, AND gives them a better chance to sell off their overpriced rice on foreign markets.

And makes imports more expensive, including oil and fuels inflation. But don't get too excited, that supposed drop in the Baht is some way off and may well never happen. One of the big differences between today and 1997 is that the BOT has USD 172 billion in foriegn currency reserves, that's more than the UK or the US and it isn't spending any of it defending its currency!

What was the Thai foriegn reserves at the start of the 1997 crises?

[chiang mai]

Sadly, all this movement of money and recessionary fallout seems to be perfectly timed in favour of the Shinwatra govt. He's always been on the lucky end of the economic growth here, and the only time it went flat in the last decade (2009 recession) was when he was out of power briefly, the last 18 months have seen false boosts here from this dollar movement, that is now about to change. And with the rice subsidy debt and other borrowing, he might be on the cusp of a huge wake up call. Poor Yingluck, it will be on her watch and she'll be out of her depth to deal with it.

Excuse my limited understanding of all things financial, but isn't a drop in Baht value a very good thing for the Yingluck administration at this point? It devaluates the rice pledging debts, AND gives them a better chance to sell off their overpriced rice on foreign markets.

And makes imports more expensive, including oil and fuels inflation. But don't get too excited, that supposed drop in the Baht is some way off and may well never happen. One of the big differences between today and 1997 is that the BOT has USD 172 billion in foriegn currency reserves, that's more than the UK or the US and it isn't spending any of it defending its currency!

What was the Thai foriegn reserves at the start of the 1997 crises?

Ten cents? But get rial, I dinar have a clue and to be franc, I'll bet my my WAG is not far off the mark.

[Thai at Heart]

Sadly, all this movement of money and recessionary fallout seems to be perfectly timed in favour of the Shinwatra govt. He's always been on the lucky end of the economic growth here, and the only time it went flat in the last decade (2009 recession) was when he was out of power briefly, the last 18 months have seen false boosts here from this dollar movement, that is now about to change. And with the rice subsidy debt and other borrowing, he might be on the cusp of a huge wake up call. Poor Yingluck, it will be on her watch and she'll be out of her depth to deal with it.

Excuse my limited understanding of all things financial, but isn't a drop in Baht value a very good thing for the Yingluck administration at this point? It devaluates the rice pledging debts, AND gives them a better chance to sell off their overpriced rice on foreign markets.

And makes imports more expensive, including oil and fuels inflation. But don't get too excited, that supposed drop in the Baht is some way off and may well never happen. One of the big differences between today and 1997 is that the BOT has USD 172 billion in foriegn currency reserves, that's more than the UK or the US and it isn't spending any of it defending its currency!

What was the Thai foriegn reserves at the start of the 1997 crises?

50 or 60bn I think I remember. They spunked most of it pretty rapidly and had to give up.

[giggles]

when they start dumping their mia nois you knows its real .some say there is a bubble out there brewing

[chiang mai]

Excuse my limited understanding of all things financial, but isn't a drop in Baht value a very good thing for the Yingluck administration at this point? It devaluates the rice pledging debts, AND gives them a better chance to sell off their overpriced rice on foreign markets.

And makes imports more expensive, including oil and fuels inflation. But don't get too excited, that supposed drop in the Baht is some way off and may well never happen. One of the big differences between today and 1997 is that the BOT has USD 172 billion in foriegn currency reserves, that's more than the UK or the US and it isn't spending any of it defending its currency!

What was the Thai foriegn reserves at the start of the 1997 crises?

50 or 60bn I think I remember. They spunked most of it pretty rapidly and had to give up.

I do not know but I'll be very surprised if it was more than10 bill.

EDIT: I l;ooked it up and the answer is here:

http://www2.bot.or.th/statistics/ReportPage.aspx?reportID=80&language=eng

For those who don't want to know, look a away now:

March 1997, foriegn reserves totalled USD 35,572 million (3.5 bill)

One year earlier it was 39,000 (3.9 bill).

Edited September 3, 2013 by chiang mai

[ExpatOilWorker]

And makes imports more expensive, including oil and fuels inflation. But don't get too excited, that supposed drop in the Baht is some way off and may well never happen. One of the big differences between today and 1997 is that the BOT has USD 172 billion in foriegn currency reserves, that's more than the UK or the US and it isn't spending any of it defending its currency!

What was the Thai foriegn reserves at the start of the 1997 crises?

50 or 60bn I think I remember. They spunked most of it pretty rapidly and had to give up.

I do not know but I'll be very surprised if it was more than10 bill.

EDIT: I l;ooked it up and the answer is here:

http://www2.bot.or.th/statistics/ReportPage.aspx?reportID=80&language=eng

For those who don't want to know, look a away now:

March 1997, foriegn reserves totalled USD 35,572 million (3.5 bill)

One year earlier it was 39,000 (3.9 bill).

I assume the $3.9 billion is a typo and they went from $39 billion in 1996 to $3.5 billion in 1997. Interesting and the smart observer could probably see the 1997 crises coming as the foriegn reserves were being depleted.

[chiang mai]

What was the Thai foriegn reserves at the start of the 1997 crises?

50 or 60bn I think I remember. They spunked most of it pretty rapidly and had to give up.

I do not know but I'll be very surprised if it was more than10 bill.

EDIT: I l;ooked it up and the answer is here:

http://www2.bot.or.th/statistics/ReportPage.aspx?reportID=80&language=eng

For those who don't want to know, look a away now:

March 1997, foriegn reserves totalled USD 35,572 million (3.5 bill)

One year earlier it was 39,000 (3.9 bill).

I assume the $3.9 billion is a typo and they went from $39 billion in 1996 to $3.5 billion in 1997. Interesting and the smart observer could probably see the 1997 crises coming as the foriegn reserves were being depleted.

No the 3.9 bill. is not a typo, it went from 3.9 bill. down to 3.5 bill. the following year, the year of crash.

[JepSoDii]

when they start dumping their mia nois you knows its real .some say there is a bubble out there brewing

haha truth!

[ExpatOilWorker]

I do not know but I'll be very surprised if it was more than10 bill.

EDIT: I l;ooked it up and the answer is here:

http://www2.bot.or.th/statistics/ReportPage.aspx?reportID=80&language=eng

For those who don't want to know, look a away now:

March 1997, foriegn reserves totalled USD 35,572 million (3.5 bill)

One year earlier it was 39,000 (3.9 bill).

I assume the $3.9 billion is a typo and they went from $39 billion in 1996 to $3.5 billion in 1997. Interesting and the smart observer could probably see the 1997 crises coming as the foriegn reserves were being depleted.

No the 3.9 bill. is not a typo, it went from 3.9 bill. down to 3.5 bill. the following year, the year of crash.

Just checked. It was $36-38 billion all of 1996 and dropped to $24 billion in 1997.

[chiang mai]

I do not know but I'll be very surprised if it was more than10 bill.

EDIT: I l;ooked it up and the answer is here:

http://www2.bot.or.th/statistics/ReportPage.aspx?reportID=80&language=eng

For those who don't want to know, look a away now:

March 1997, foriegn reserves totalled USD 35,572 million (3.5 bill)

One year earlier it was 39,000 (3.9 bill).

I assume the $3.9 billion is a typo and they went from $39 billion in 1996 to $3.5 billion in 1997. Interesting and the smart observer could probably see the 1997 crises coming as the foriegn reserves were being depleted.

No the 3.9 bill. is not a typo, it went from 3.9 bill. down to 3.5 bill. the following year, the year of crash.

Just checked. It was $36-38 billion all of 1996 and dropped to $24 billion in 1997.

USD 37,282 million (March 1996) equalls USD 3.7 billion, there's one thousand million in a billion.

http://www2.bot.or.th/statistics/ReportPage.aspx?reportID=80&language=eng

[mikemac]

Yes because it's always terribly sad if things work in favour of a duly elected government, when they're not the party you support...

Yep, they duly paid for their votes fair and square !

[danbradster]

No the 3.9 bill. is not a typo, it went from 3.9 bill. down to 3.5 bill. the following year, the year of crash.

Just checked. It was $36-38 billion all of 1996 and dropped to $24 billion in 1997.

USD 37,282 million (March 1996) equalls USD 3.7 billion, there's one thousand million in a billion.

http://www2.bot.or.th/statistics/ReportPage.aspx?reportID=80&language=eng

It looks like you forgot how to divide by 1000. 37,282 / 1000 = 37.282

[chiang mai]

What more can be said apart from it's late in the day!

[chiang mai]

OK, we could debate the semantics of this all day and nobody would be any the better off, the fact is however that if Thailand had indeed only had 3 billion in foriegn reserves in 1997 it would not have been that unusual, given the number of countries that only have that much some fifteen years later. Clearly many countries can and do function at that level, regardless of their other attributes.

[metisdead]

Posts with messed up quotes have been removed.

[ExpatOilWorker]

No the 3.9 bill. is not a typo, it went from 3.9 bill. down to 3.5 bill. the following year, the year of crash.

Just checked. It was $36-38 billion all of 1996 and dropped to $24 billion in 1997.

USD 37,282 million (March 1996) equalls USD 3.7 billion, there's one thousand million in a billion.

http://www2.bot.or.th/statistics/ReportPage.aspx?reportID=80&language=eng

It looks like you forgot how to divide by 1000. 37,282 / 1000 = 37.282

Thanks Dan, I thought for a moment that the Thai foreign reserves were following some sort of Chiang Mai inverted quantum mathematics.

[Thai at Heart]

OK, we could debate the semantics of this all day and nobody would be any the better off, the fact is however that if Thailand had indeed only had 3 billion in foriegn reserves in 1997 it would not have been that unusual, given the number of countries that only have that much some fifteen years later. Clearly many countries can and do function at that level, regardless of their other attributes.

Thailand had 30+ billion, not 3 when the 97 crisis happened.

Thailand today has now reserves than the UK.

Doesn't mean it can't quickly be used up if there is a huge run on the baht, but still it's a significant amount with which to defend the currency if they want to.

Edited September 5, 2013 by Thai at Heart

[chiang mai]

OK, we could debate the semantics of this all day and nobody would be any the better off, the fact is however that if Thailand had indeed only had 3 billion in foriegn reserves in 1997 it would not have been that unusual, given the number of countries that only have that much some fifteen years later. Clearly many countries can and do function at that level, regardless of their other attributes.

Thailand had 30+ billion, not 3 when the 97 crisis happened.

Thailand today has now reserves than the UK.

Doesn't mean it can't quickly be used up if there is a huge run on the baht, but still it's a significant amount with which to defend the currency if they want to.

How would a run on the Baht happen to a currency that is effectively (not actually) a closed currency, step me through that process?

Edited September 5, 2013 by chiang mai

[ray23]

Well so far they seem to be keeping a pretty good grip on things, Set is up, Baht down. but, not as much as I would expect.

I think the BOT has intervened on the Baht, to keep things in line, hey that's thier job. I also read recently that a Thai Pension fund is buying into the SET, as prices were good. it was in the mid 1200 range when I read that.

Foreigners are net buyers one day and then net sellers the next. Kind of went that way for the past few days.

The attitude rent form to heck with exporters we will get growth from within and they did of course the household debt is now 80% of GDP I really wonder about the NPLs on all the car loans. Now it is the a weaker baht good for exporters.

Really hard o see where this is going. One thing for sure foriegn money has been driving the market. Will it be around if the FED does taper I doubt it.

Time will tell I'm waiting to go back into the market.

[chiang mai]

The thing is, BOT was intervening in the markets whilst trying to weaken the Baht, now they have no need of that intervention thus they are saving themselves lots of money by allowing that weakening to take place more naturally, since 1 July this year reserves have actually increased by USD 1 bill, it's a win win scenario for BOT.

http://www2.bot.or.th/statistics/ReportPage.aspx?reportID=94&language=eng

[Thai at Heart]

OK, we could debate the semantics of this all day and nobody would be any the better off, the fact is however that if Thailand had indeed only had 3 billion in foriegn reserves in 1997 it would not have been that unusual, given the number of countries that only have that much some fifteen years later. Clearly many countries can and do function at that level, regardless of their other attributes.

Thailand had 30+ billion, not 3 when the 97 crisis happened.

Thailand today has now reserves than the UK.

Doesn't mean it can't quickly be used up if there is a huge run on the baht, but still it's a significant amount with which to defend the currency if they want to.

How would a run on the Baht happen to a currency that is effectively (not actually) a closed currency, step me through that process?

Well in 97 it was a classic case of Thai banks borrowing a ton of USD to fund Thai baht loans to construction, with a fixed exchange rate. Problem is that, construction projects need loans over a period of maybe 3 to 10 years, and the banks from the US were lending 1 to 3 years. So, Thais were happily going along with their Thai baht loans which had been borrowed from overseas in USD, constructing along very happily.

The problem came when, instead of rolling over the principle, the foreign bank wanted their principle back, and the projects weren't finished. Hmmmm. What to do. Start paying back, and paying back, and paying back, but no cash in the bank, and of course, this started to put downward pressure on the baht, and the government started trying to sell USD and buy baht from the market to keep the value, but the amount of baht coming into the market was far beyond that the Thai government could afford to buy up, so when they had used up about 50% of their USD to mop up the excess baht in the market, it then went into freefall.

It is a perilous line when you take foreign currency loans to fund domestic projects with a fixed exchange rate. Argentina did it, and it went bang eventually also. You can't have a free national capital account and a fixed exchange rate. It will cause imbalances eventually.

[chiang mai]

OK, we could debate the semantics of this all day and nobody would be any the better off, the fact is however that if Thailand had indeed only had 3 billion in foriegn reserves in 1997 it would not have been that unusual, given the number of countries that only have that much some fifteen years later. Clearly many countries can and do function at that level, regardless of their other attributes.

Thailand had 30+ billion, not 3 when the 97 crisis happened.

Thailand today has now reserves than the UK.

Doesn't mean it can't quickly be used up if there is a huge run on the baht, but still it's a significant amount with which to defend the currency if they want to.

How would a run on the Baht happen to a currency that is effectively (not actually) a closed currency, step me through that process?

Well in 97 it was a classic case of Thai banks borrowing a ton of USD to fund Thai baht loans to construction, with a fixed exchange rate. Problem is that, construction projects need loans over a period of maybe 3 to 10 years, and the banks from the US were lending 1 to 3 years. So, Thais were happily going along with their Thai baht loans which had been borrowed from overseas in USD, constructing along very happily.

The problem came when, instead of rolling over the principle, the foreign bank wanted their principle back, and the projects weren't finished. Hmmmm. What to do. Start paying back, and paying back, and paying back, but no cash in the bank, and of course, this started to put downward pressure on the baht, and the government started trying to sell USD and buy baht from the market to keep the value, but the amount of baht coming into the market was far beyond that the Thai government could afford to buy up, so when they had used up about 50% of their USD to mop up the excess baht in the market, it then went into freefall.

It is a perilous line when you take foreign currency loans to fund domestic projects with a fixed exchange rate. Argentina did it, and it went bang eventually also. You can't have a free national capital account and a fixed exchange rate. It will cause imbalances eventually.

External debt has indeed increased:

http://www2.bot.or.th/statistics/BOTWEBSTAT.aspx?reportID=659&language=ENG