ECONOMIC UPDATE : 2014 Economic Outlook: Ungoverned Territory

[David48]

Sent to me by my Broker today ...

ECONOMIC UPDATE : 2014 Economic Outlook: Ungoverned Territory

The Thai economy is expected to remain sluggish in the beginning of 2014 before recovering in 2H after the political tension subsides.

However, a fully functioning government may not be formed until later this year, even if the election is held on 2nd Feb.

Hence, not only will government spending be delayed, the private sector’s confidence will also be adversely affected, resulting in softer economic growth than previously estimated.

The Bank of Thailand therefore is expected to offer a helping hand by delivering another 25bps rate cut early this year considering the weak growth amid a benign inflation outlook.

• Growth is expected to remain sluggish in 1H14...

• With private sector confidence hurt and government spending delayed due to domestic political unrest

• The BoT therefore will be forced to cut rates amid a benign inflation outlook

HERE

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[i claudius]

Which should see the baht drop further.

[mmh8]

at least if the money is not spent it is still safe from lining pockets of wealthy families/indiivduals.

I read the tablet scheme is being stopped - not sure if that is permanaet or temporary

what about the rice scheme?

[David48]

at least if the money is not spent it is still safe from lining pockets of wealthy families/individuals.

While not the intent of my OP ... I did raise my eyebrow and a quiet sigh when I read about the multi Trillion Infrastructure program (mainly financed through borrowings) that the current Government were to introduce.

Given the well discussed '30% rule' ...

That's a lot of 'commission' to go to any one Party/Family/etc

[David48]

Just reading a little further into the subject matter of the OP ...

If the unrest is prolonged/intensifies and global growth softens, GDP may

slow to 2.7% (our worst case).

The political situation remains fluid and the protests may intensify,

which could result in the formation of a fully functioning government

being delayed longer than our expectation.

If this is the case, we expect government spending to be weaker.

Some tourists may call off trips to Thailand, worsening tourism activity.

Privates pending, especially for investment, will also be softer as private sector

confidence deteriorates.

On top of that, if there is feeble global growth, Thai GDP may decelerate to as low as 2.7%.

[Naam]

Which should see the baht drop further.

Baht is presently strengthening.

[Wonka]

I think the long term view here is worth noting:

http://www.forbes.com/sites/jessecolombo/2013/11/04/thailands-bubble-economy-is-heading-for-a-1997-style-crash/

[PaullyW]

Which should see the baht drop further.

Baht is presently strengthening.

And let's see if it continues with US QE having tapered off and a myriad of other Thai government budget issues.

Check back in a couple months.

[KhunOr]

Just reading a little further into the subject matter of the OP ...

If the unrest is prolonged/intensifies and global growth softens, GDP may

slow to 2.7% (our worst case).

The political situation remains fluid and the protests may intensify,

which could result in the formation of a fully functioning government

being delayed longer than our expectation.

If this is the case, we expect government spending to be weaker.

Some tourists may call off trips to Thailand, worsening tourism activity.

Privates pending, especially for investment, will also be softer as private sector

confidence deteriorates.

On top of that, if there is feeble global growth, Thai GDP may decelerate to as low as 2.7%.

"Privates pending, especially for investment, will also be softer"

Best to hang onto your privates then?

[David48]

^^ very funny.

My fault ... I was cutting and pasting trying to get the right font because, when I cut and pasted it from the .pdf, it wasn't correct.

But, you do give solid advice ... if your privates are pending, please protect them!

For others ... Private spending, especially for investment, will also be softer as private sector confidence deteriorates.

[SheungWan]

It is well to consider that the stock you may have had your eye on earlier last year, is now going to be ~20% cheaper in sterling/dollar terms plus additional discount in baht as a result of the SET drop, so in total you may have a stock giving you a third extra for the same amount of money. There is nothing to guarantee that this 'spread' will not get wider, but there is sufficient on the table to start an investment in stocks if (and it is a big if) you have a long term commitment to and belief in the Thailand story.

[i claudius]

Which should see the baht drop further.

Baht is presently strengthening.

And now its weakening again.

[David48]

Not really related to my OP but ...

I have a broking account and they have gotten me to complete a Risk Profile, which is a fairly standard request ... the Broker in Australia requests this every couple of years for their file.

But ...

But they actually asked my political persuasion, and that of my Wife (if I had one).

Why, on Earth, they would need to know that is beyond me.

Sometimes the relaxed attitude to PC in Thailand has the opposite effect ...

[Zao]

Not really related to my OP but ...

I have a broking account and they have gotten me to complete a Risk Profile, which is a fairly standard request ... the Broker in Australia requests this every couple of years for their file.

But ...

But they actually asked my political persuasion, and that of my Wife (if I had one).

Why, on Earth, they would need to know that is beyond me.

Sometimes the relaxed attitude to PC in Thailand has the opposite effect ...

Privates pending. That's funny. My privates are pending just about every morning I wake up. (Yuck! Sorry to gross us all out.)

I hope that didn't form a visual in anyone's mind.

Thanks for this Outlook. Was it done by a local broker, or possibly the Australian one? Does it give a 2014 SET forecast?

It's great that you had some cash in Thai stocks. I had some in a SET Index. It languished forever at 750 or so, didn't it. I had completely written it off. Then, after Lehman, it touched below 450, and I jumped in. I thought it would top up to about 750 again, and would have been happy with that. Then, it broke 900, then 1000. I was shocked. Then in 2012/2013 it jumped almost to 1600. What a ride. I really should have put a lot more in after Lehman. I just never really thought it would get much beyond the 750. Finally exited last year at about 1500.

My guess for this year would be definitely back to 800, at least.

Separately, I'm shocked on the political persuasion question. Seriously? What flake-out approved that questionnaire. Of course, I would be happy to share my own tilt with them: in general, I favor clean shirts. But there are times when I definitely see the value of dirty shirts.

Needless to say, my wife and I don't always agree on politics.

[David48]

Thanks for this Outlook. Was it done by a local broker,

Yes, a Thai Broking House.

[Zao]

I think the long term view here is worth noting:

http://www.forbes.com/sites/jessecolombo/2013/11/04/thailands-bubble-economy-is-heading-for-a-1997-style-crash/

Wonka, well done. This a a great read. Thanks for sharing it.

I added your post to a headline thread, to help everyone see it. I hope this was ok. I put a response there.

[NeverSure]

snip-

Private spending, especially for investment, will also be softer as private sector confidence deteriorates.

Privates... will also be softer...as...confidence deteriorates.

[NeverSure]

It is well to consider that the stock you may have had your eye on earlier last year, is now going to be ~20% cheaper in sterling/dollar terms plus additional discount in baht as a result of the SET drop, so in total you may have a stock giving you a third extra for the same amount of money. There is nothing to guarantee that this 'spread' will not get wider, but there is sufficient on the table to start an investment in stocks if (and it is a big if) you have a long term commitment to and belief in the Thailand story.

Do you mean the story that banks are still sitting on empty building projects from '97 that are deteriorating, but still on the books at original value? Or maybe it's newer buildings, many of which are financed by Thai banks but are empty or virtually empty?

Or is it the story that they have borrowed almost 1 trillion baht for the rice scheme from the Ag Bank, but don't show it as a liability because they claim to have that much value in rice?

If they are doing so well, why can't they pay the farmers the current amount owed for rice?

Has anyone actually audited their books?

[David48]

I think the long term view here is worth noting:

http://www.forbes.com/sites/jessecolombo/2013/11/04/thailands-bubble-economy-is-heading-for-a-1997-style-crash/

Wonka, well done. This a a great read. Thanks for sharing it.

I added your post to a headline thread, to help everyone see it. I hope this was ok. I put a response there.

Zao ... you weren't to know that, but that article was first posted by the Thai Visa's News Guys back in November last year ... thailands-bubble-economy-is-heading-for-a-1997-style-crash ... and has been shown many times since.

Edited January 10, 2014 by David48

[MrWorldwide]

If that Colombo guys doom-and-gloom forecast is correct, it wont just be a few countries in SE Asia this time - it will be a slew of 'emerging markets' countries including powerhouses like Brazil. He strikes me as one of many pundits who cant wait for China to fail, purely to show that he was 'right' but seeminly oblivious to the flow-on effect that will have for virtually every economy I can think of. His predictions for Malaysia are almost word-for-word identical to his prediction for Thailand, built on his fervent belief that the only way for a bubble to be deflated is via a 1997-style crash : its a nihilist view of the world, but the great thing about predicting the end of the world is that sooner or later you will be proven correct. I think I'd be happier with the zombie apocalypse or a comet strike - relatively quick and I'd have the satisfaction of knowing that Mr Colombo is about to suffer the same fate

[simple1]

Not really related to my OP but ...

I have a broking account and they have gotten me to complete a Risk Profile, which is a fairly standard request ... the Broker in Australia requests this every couple of years for their file.

But ...

But they actually asked my political persuasion, and that of my Wife (if I had one). Why, on Earth, they would need to know that is beyond me.

Sometimes the relaxed attitude to PC in Thailand has the opposite effect ...

Interesting, note the following…

‘Under the FSR Act, a ‘client’s best interest’ includes psychological comfort and well-being as well as economic optimization of portfolio returns. Financial planners must pay due attention to a client’s beliefs, expectations and attitudes as an integral part of ‘best interests’.

Edited January 11, 2014 by simple1

[Zao]

Zao ... you weren't to know that, but that article was first posted by the Thai Visa's News Guys back in November last year ... thailands-bubble-economy-is-heading-for-a-1997-style-crash ... and has been shown many times since.

Oh no, I'm an over-zealous newbie! That's the worst.

Ok, thanks for letting me know. I should have searched first. It's pretty obvious an article like this would get picked up in the same month it was published, and probably the same day. I see it was kicked around a lot too. Sorry to Wonka, too, for bringing you into my frenzied world!

I'm not really convinced a "bubble crash" is in Thailand's future. I was kind of baiting believers, anyways, so it serves me right. Your point below back then was exactly right: the author has an agenda...namely, more advertising on his blog. He and I both should cut back on the espresso.

What exactly is an "anti-bubble activist" anyways?

Forbes' credential are beyond reproach.

The author's however ...

I am an economic analyst and anti-economic bubble activist who was recognized by the London Times for predicting the Global Financial Crisis. I am currently warning about growing bubbles in Canada, Australia, Nordic countries, China, emerging markets, Web 2.0 startups, U.S. higher education, and more. I believe that the popping of these bubbles will cause the next financial crisis. You can learn more about me on my Wikipedia page.

Every recent article written by the Author has the word 'Bubble' in it ...

.