Stop Press ! Baht Drops, Sudden Depreciation

[JackFrost]

Speaking of "informed" information - these pieces might help some ...

Thailand baht

http://www.investorsinsight.com/otb.aspx

http://www.safehaven.com/article-6561.htm

http://www.safehaven.com/article-6556.htm

US Housing

http://www.safehaven.com/article-6563.htm

http://www.safehaven.com/article-6548.htm

Don't necessarily agre with 'em all but ...

jack

[quiksilva]

The correct question is can the average Thai policeman, nurse, doctor, cab driver, afford reasonable living conditions given the pricing of the housing market. My guess is no but I could be well wrong. A four million baht loan would cost 32,000 baht per month to service. That would require an income of about 60,000 baht per month. That seems rather steep for general wages in Bangkok, perhaps I am wrong.

No I think you are absolutely correct, but the types of profession you listed have never been able to afford 4M Baht homes, different sectors within the market.

You may have underestimated demand too. There were something like 80,000 work permits issued in 2005.

How many retirees here? How many people on various other types of visas, how many Permenant Residents? How many work but dont have work permits? How many regularly travel on holiday here and want a condo instead of paying hotel rates? How many Thais in the middle class and upper classes? Who else buys?

Okay nobody really has the answers to that question (if you do post up it would be good to see) but even then, I think its safe to say that those numbers will be insubstantial when compared to the whole residential market, after all there are 60 something million people here and 12 million in Bangkok. Fair point.

However, Thailand is a developing country so the supply of units in the grade A and B markets is absolutely miniscule in comparison with the whole population. CBRE reckon there are 47,000 grade A & B condo units (freehold and leasehold) in Bangkok - Im happy to accept their figures, as I have never counted them myself and they have been here for 15+ years. But that doesnt really scream massive oversupply, or does it?

Source: http://www.cbre.co.th/cbrecontent/e_lpub/r...?WT.mc_id=20025

If we are talkig taxi drivers etc lets also look at the other grades of housing and condos. Consider Baan Uaathorn. Tens of thousands of houses priced at less than 1M Baht many are just 500K and they literally cant build enough of them. How about L&H's condos priced at less than 1M? They recently (last six months) built a project on Rachadapisek Road with 1000 units and they sold out in 7 DAYS! Of course they will build more.

I wonder if that has anything to do with those population numbers and that phenomenon known as Urbanisation, which is still very much alive and well today?

To investigate whether there is any evidence of a so called "bubble" you have to compare apples with apples not the whole population.

Edited December 22, 2006 by quiksilva

[PeaceBlondie]

Yahoo Finance shows the baht for the last five days, starting Monday. The value of the dollar keeps climbing, every day.

[backflip]

"I sometimes wonder if it is regrettable that that ThaiVisa do not include an IQ test as part of the sign-up process... "

As evidenced by your posts, a test you would have failed miserably.

[LaoPo]

Posted this in another thread as well:

""""

GBP-Thai Baht Bungy Jumping in past 2-3 hours between 69.00 and 71.50 (now 71.77500)

http://newsvote.bbc.co.uk/2/shared/fds/hi/...78/intraday.stm

US $-Thai Baht here:

http://newsvote.bbc.co.uk/2/shared/fds/hi/...78/intraday.stm

EURO-Thai Baht here:

http://newsvote.bbc.co.uk/2/shared/fds/hi/...78/intraday.stm

LaoPo

""""

[Mighty Mouse]

Thailand's Rash 'Lock-Up' Move

Wednesday, December 20, 2006

By George Friedman

In an action aimed at ending more than a year of political instability, the Thai military staged a coup Sept. 19, stripping then-Prime Minister Thaksin Shinawatra of his office. Unlike in most countries, coups in Thailand -- though relatively common -- are not particularly disruptive. In fact, they tend to function as safety valves whenever the civilian government begins to break down. As such, while most observers -- including Washington and Wall Street -- watched with a wary eye, they withheld judgment and indulged in calming platitudes that Bangkok should soon get back to whatever Thais consider "normal." No firms were nationalized, no opposition (or former government) officials were shot, and life more or less went on.

In fact, outsiders' votes of confidence in the Thai system were so firm that investors -- after a few-week retreat -- came back in droves as technocrat after technocrat was appointed to positions of economic importance. The Bank of Thailand (BoT), the country's central bank, estimates the net investment inflows in November were steady at $300 million -- a respectable level for a country of Thailand's size. By December, however, the inflows had reached $950 million, a level far above Thailand's ability to handle safely.

The Thai government feared that such inflows were "hot money," cash placed by investors looking to make a quick buck by betting on short-term changes in stocks, bonds or other investments. Of late such hot money has been particularly active because of the falling dollar. If a foreigner uses U.S. dollars to invest in a Thai asset that increases by 10 percent, and then the Thai baht increases versus the U.S. dollar by 10 percent (as the baht has done since mid-October), then the net gain is more than 20 percent in a very short period of time.

Of course that gain is only realized if the money is pulled out of Thailand as fast as it was put in. Neoliberal economists claim that allowing such strategies room to function encourages the most efficient use of capital, and in the long run vastly benefits countries by giving them both more access to capital and experience in dealing with foreign financing. Those on the receiving end of such capital inflows and outflows complain of the volatility caused by such flows, as well as the artificially inflated currencies that they cause, reducing the competitiveness of a country's exports. Both are right. Thailand's until-now commitment to weathering such flows has made it among Asia's healthiest, most dynamic and flexible economies -- and its currency is at a nine-year high.

In order to reduce Thailand's vulnerability to what Bangkok feared would be an eventual outsurge of capital, it sought to crimp the insurge.

So on Dec. 19 the Thai Finance Ministry announced the implementation of a "lock-up" program to limit capital flows into the Thai economy. Under the program, 30 percent of all investment dollars would be forcibly deposited into a non-interest-bearing account with the BoT, with the investor free to invest the 70 percent at his or her whim. Should the investor withdraw the funds before one year has passed, the BoT would refund only two-thirds of the money in the lock-in account. In essence, investors would be denied access to three-tenths of their monies and be subject to a new 10 percent tax should their investments prove short in duration. Officials further added that should this policy not achieve their goal of slowing inward hot money flows, they would not hesitate to take more "aggressive" action.

Investors immediately panicked.

The Thai stock market plunged at opening by 10 percent, which triggered a trading suspension. The decline renewed once trading reopened half an hour later with the exchange ending 15 percent down for the day, its largest single-day drop ever. The government quickly amended the policy after market closing so that it now applies only to bonds.

On the upside, the Thais have most certainly gotten their point across and only the bravest (or most stupid) of daredevil traders are now going to be seeking to play the market in the way they were before Dec. 19. One goal of the policy -- weakening the baht -- has also been achieved (albeit perhaps a touch too well).

The downside is clearly a bit more comprehensive. Thailand has severely damaged its reputation for being a well-run economy that shies away from investor-unfriendly actions, and in two ways. First and most obvious, even during the depths of the 1997-1998 financial crisis, Thailand never adopted a policy as restrictive as this.

Second, the policy was not just restrictive, it was ham-handed.

It is not so much that investors do not like to be told what to do with their money, but that this policy was not particularly well thought out. During the financial crisis, a number of states adopted a number of policies in attempts to cope. The most successful by far was in Malaysia, which pegged its currency to the dollar and enacted strict capital controls that prevent speculators from removing their gains until a great deal of time had passed. That offended market purists, but completely squeezed all but long-term investors out of the market.

On Dec. 19 Thailand went about it backward. Instead of restricting capital outflows, it hijacked capital inflows. Put another way, not only did it adopt a policy designed to spook a certain class of investor (speculators), it did not do it in a way that would prevent others from running. So sure, the Thais achieved their goal, but exposed themselves to a great deal of unnecessary collateral damage in the process.

That has created a double hit to market confidence in the Thai authorities, injecting immense doubt into the heretofore dominant belief that recently elevated technocrats such as Finance Minister and former BoT Governor Pridiyathorn Devakula and current BoT Governor Tarisa Watanagase have some clue as to what they were doing.

What these two policymakers do next is of critical importance. If much-needed unified statements of explanatory calm flow forth from Bangkok before and during the opening of trading Dec. 20, then the lock-in policy probably will be filed away in Thailand's "never-do-this-again" file, the lesson will be learned, investors will mellow and life will go on.

If tomorrow's news is silence -- or, worse, confusion -- then Thailand has two issues to deal with.

First, the world will find out just how much Thailand has grown since its problems in 1997, because eight years of progress would be up for grabs. It is true that Thailand has come a long way since then. Its economy has doubled, the problem is now currency strength and not currency weakness, and the financial system that contributed to the crisis' severity is largely gone. But Thailand remains dependent on foreign capital -- and the owners of that capital are spooked. Contagion à la 1997 is not likely because, like Thailand, most of the region's states (with Indonesia the notable exception) are far stronger now than then. Investors, however, have a herd mentality and a mass exodus from Southeast Asia can hardly be ruled out. After all, the Hong Kong, Indian, Indonesian, Malaysian, Philippine and South Korean markets all took their cues from Thailand on Dec. 19 and went nowhere but down.

Second, Thailand's reputation as a solid economy with questionable politics would change to a reputation of questionability on both scores. Investors did not bolt after the Sept. 19 coup because there was trust that the Thais -- not to be confused with the Thai government pre- or post-coup -- were levelheaded enough to keep their money separate from their politics. Should the events of Dec. 19 not prove a mere hiccup, then coups will mean the same thing in Thailand that they mean everywhere else.

Your hoping it's not 1998 all over again analyst,