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Another Bonanza for Tourists ? Will the Baht take a Fall??


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Remember when the Baht plummeted from 25 to the dollar to 57 to the dollar in July of 1997. A windfall for tourists, but a disaster for anyone living, working and getting paid in Baht in Thailand (including Farangs.) Although crystal ball grazing is hazardous, my guess is that 2003 will see a replay of that same cycle, but on a smaller scale.

 

Private reports have been coming out for months, but now its in today?s Asian Wall Street Journal. Growth predictions are being drastically cut and foreign investment is at its lowest level since the Thai government started keeping statistics.

 

Growth over the last year was driven by government stimulus measures and consumer spending, but that is not sustainable when less than 3% of the population earns less than US$353 a month. Interestingly, the biggest drivers of consumer spending last year were cars and new mobile telephones.

 

Every notice how all the BGs now have mobile telephones? And, of course, many, if not most, of those are subsidized or directly paid for by Farang boyfriends. Keep those checks coming because I think we?re in for a bumpy ride.

 

The spending that wasn't fueled by overseas boyfriends apparantly came from credit debt (OK - a slight over statement.) Seriously, the minimum monthly salary requirements for credit cards were lowered to THB7,500 per month and the results now are predictable. Consumer credit defaults are now up and spending is way down.

 

I am waiting for my retirement fund (all in Baht because I am not connected enough to move large sums out before the dive) fall again. In 1997, my savings were reduced by nearly half. I don?t think the replay will be as bad, but it won?t be pleasant. As for you tourists, book your tickets now and plan on getting more bang for your Baht.

 

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[color:"red"]The spending that wasn't fueled by overseas boyfriends apparantly came from credit debt (OK - a slight over statement.) Seriously, the minimum monthly salary requirements for credit cards were lowered to THB7,500 per month and the results now are predictable. Consumer credit defaults are now up and spending is way down.[/color]

 

Gadfly,

 

Interesting point about the credit cards. I wonder how many middle-class Thais use them as a form of 'bridge financing' near the end of the month when they (habitually) run short on funds.

 

Harlequin

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Gadfly said:

"I am waiting for my retirement fund (all in Baht because I am not connected enough to move large sums out before the dive) fall again. In 1997, my savings were reduced by nearly half. I don?t think the replay will be as bad, but it won?t be pleasant."

 

Don't wait for it to fall.

 

If you think the baht will fall, transfer your retirement fund account (800k in baht I assume) back to a bank in your native country's currency. There is no requirement that retirement funds be maintained in a Thai bank account once you have met the retirement requirement (ie the financial req't is a letter from the Thai bank stating that you have the 800K funds on account).

 

 

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Not this year. Too soon. There are some stops to pull out before that happens and there are still "sources" of funds yet to be tapped.

 

I don't agree with it, but there is a reason why Thailand is on positive credit watch. Don't believe everything you read. WSJ is in the process of selling papers. While I agree with the general tone of the article, I don't agree with the timing that you indicated.

 

Another thing to think about, while foreign investment may indeed be down, it could very well slide. Why? Foreign companies are tapping into the excess liquidity in the Thai market place by issueing debentures here through subsidiaries or joint ventures.

 

<<burp>>

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You guys have been talking about foreign investment and maybe there is something to worry about there. Countries have tended to climb a technological ladder where they start by offering cheap manufacturing, then move to bigger and better things. Japan did this long ago and more recently countries like Korea, Taiwan, and so on down the line. Today companies are looking to mainland China and Indonesia as key sources of cheap labor. So now it is Thailand's turn to step up to the next technological rung on the ladder. If it doesn't happen (I don't see it) and all they can do is offer cheap manufacturing, things may back peddle again like '97 where I gather it was a case of foreign investment dollars kept coming in, but nothing more was coming out and it eventually resulted in the huge correction.

 

 

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Says gummigut:

I don't agree with it, but there is a reason why Thailand is on positive credit watch. Don't believe everything you read.

 

<<burp>>

 

Don't believe a rating agencies rating either. After the whloesale rating changes(or should I say cover their ass corrections) in the past 2 years I have completely lost faith in Moody's and S&P. Those guys are were way too late to the party when it came to making changes and lately they are way too early. After Enron the rating agencies seemed to base their ratings more on market perception rather than fundamental analysis.

 

I wouldn't be surprised if the lead rating analysts for Thailand derived their rating while staying at a suite in the Oriental, chauffeured by numerous officials and businessmen and taken to the finest members only clubs in Bangkok.

 

Maybe I should apply for the job of a sovreign or country specific analyst.

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The conventional international wisdom, overwhelmingly, is exactly the opposite -- i.e. that the baht will strengthen noteably over the next year or so.

 

While the factors you cite are not inconsequential, the most important medium term consideration for the baht is the continuing weakness of the US dollar and the strength of the yen. Most FX anaysts expect both to continue on their current courses for a while, or at the very least, not to change course abruptly. If that is so, then the baht will unquestionably remain at the upper end of its 42-44 trading range or even break out on the upside.

 

Of course, the old saw is that no one ever got rich going short against the US dollar, but......

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...." less than 3% of the population earns less than US$353 a month."

 

Huh? Do you mean less than 3% of the people earns more than $353 US; as surely far more than 3% of the population earn _less_ than than $353 US (14,000-Bt)

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"Every notice how all the BGs now have mobile telephones? And, of course, many, if not most, of those are subsidized or directly paid for by Farang boyfriends. Keep those checks coming because I think we?re in for a bumpy ride."

......................................................................

Mobile phones for BG's is not a waste of money. Its good business sense! A mobile these days is not a sign of wealth any more..

 

I wouldn't expect a fast fall in the Thai economy. There is nothing new which should affect the Thai economy more than others. If I am not wrong they have even strenghtened vs. dollars in the last year or so. Where would you move your money into? US dollars is much more risky on a shortterm basis...Hold on until the Iraq situation is clearer.

 

Cheers!

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This is silly I have to say but if you want the baht to collapse there is a easy but hard way to do it. You would need to get a large number of tourists to postpone their trip by a year. Given that tourism is one of the country's major foreign exchange earners, a massive decline in tourism would surely cause the baht to collapse. This could probably be organised over the net. I suspect that a major chunk of tourist revenue comes from sex related tourism and that most of these tourists use particular sites related to it and could organise a coalition to postpone their trips. The downside is a longer period away from LOS but the upside is that you could get 2 for 1 long times with gains you have made from the depreciation of the baht.

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