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

[JJsushi]

Like I said the rating agencies SUCK!!!! Just in case anyone forgot my point in all this high finance talk!!!

 

BTW- Economists suck too! They are almost always wrong. Anyone who buys or sells on an economists view goes broke. The only economists that can move markets are at the FED.

[Redbaron]

Thanks guys, now it's twice as clear as it was before. (double nothing's still nothing right.)

 

Gadfly, I think I do know Gummigut, although I know nothing about these financial matters, my job's to spend it.

 

Gummi, you still going to the Friday night meetings, if so, see you in a few weeks. Have you learnt to play pool yet?? Last time you were struggling against a few oponents. (I think).

 

OK, as you were...

[rookie]

..'Thanks guys, now it's twice as clear as it was before....'

 

So you got it...good for you. The more I read of this thread the more you can color me ...confused. But then I was confused even before reading this thread... ;-)

[Guest]

>>>Thanks guys, now it's twice as clear as it was before. (double nothing's still nothing right.)<<<

 

not that i know anything about economics (basically i know fuck all about that ), but my guess is, if it would be so easy to predict those things we all would not need to work anymore, just listen to our brokers and make a killing in the market.

 

 

[Searcher]

Baron,

"In the long run we are all dead." I wish I could claim to be so clever as to of thought of saying that, but John Maynard Keynes beat me to it by about 70 years or so.

 

I can hear you now saying to yourself, " I'm asking about the future value of the baht and this wanker is telling me we're all gonna be dead anyways......so it doesn't matter!"

 

Naaaah, what I'm working my way up to saying is that Gadfly and Gummigut are argueing about the value of the baht in two different timeframes. Gadfly is making a very persuasive case that the baht will, in the long run, most likely decline (e.g with respect to the US $, Euro, and other hard currencies) because there does not appear to be any factor that will increase the demand for baht relative to the demand for the $ or Euro. At the same time certain economic policies of the Thai government will likely lead to an increase in the supply of baht (as all governments are want to do, but that is a topic for another thread). The only logical conclusion of these two trends (stable or even decreasing demand for the baht while the supply of baht is growing relatively faster than the supply of hard currencies is growing) is that the baht will eventually futher decline against the world's hard currencies such as the $ and the Euro.

 

Gummigut, on the other hand, is making an equally persausive case that the baht will not significantly depreciate in the near term (in the next 12 months or so) because the Thai central bank still has sufficient foreign exchange reserves and other means at hand to prop up the baht in the event of any shocks to the baht (speculative attack, oil price spikes, etc).

 

In short, Gadfly and Gummigut are talking about the same issue, but not about it in the same time frame. And, "timing is everything." Damn, I wish I could claim to of said that too : ::

 

Now to answer your question (at long last). If you are hoping for a quick (sometime in the next 12 months or so) baht windfall due to the baht's value falling against the $ or Euro; Gummigut is saying that you will probably be disappointed or, at best, might see a minor weakening of the baht.

 

However, if you are asking if you should keep all of your retirment savings in baht or $/Euro; Gadfly is saying that your long term funds should be in hard currency, such as $ or Euro, and not baht since long term trends do appear to definitely indicate a weakened baht not a stronger baht. Of course, if you die before you get a chance to retire then this argurement becomes irrelevant, which brings me back to my first statement: In the long run...........

 

Searcher,

What hurts, is not that you lied to me, but that I can no longer trust you

 

 

 

 

[gummigut]

Nice summary.

 

Timeframe though I think is to the end of the current calendar year. That is the original timeframe set by Gadfly and which I've based my argument on.

 

I just think the current gov't may luck out in the timing as the war has begun. If things go smoothly, there will be a slight detraction and then growth in the general world economy. Whether this can be sustained is a different story. In any event, growth (barring any terrorist attacks that play on the world psyche) will happen in the fourth quarter, and the results will be seen early next year. Timing looks good for elections.

 

I'm trying to remember a presentation yesterday. I believe total private investment is actually up (I forgot about foreign investment). If that's the case, and the war free's up capital for foreign investment as well, Gadfly's view get's flushed even further down the drain (albeit I think I flushed it atleast twice. A third time doesn't hurt

 

As for where you should keep your money? Baht is still much more risky than the Euro or $, so I wouldn't really move any money into Baht. I'd only depart from this view if you plan on living over here. Especially if you don't believe you will go home. Setup a proper investment strategy that diversifies your portfolio in Baht denominated investments. You can even hedge yourself by investing in companies that derive most of their revenue from overseas. The ratio of baht to $/Euro investments would be based on the % chance you would move back outside of Thailand, how much wealth you have, risk tolerance level, blah blah blah.

 

<<burp>>

[Guest]

> If things go smoothly, there will be a slight detraction and then growth in the general world economy.

 

Hi - had to butt in here; interesting subject matter. I'm less optimisitic about postwar economic growth; I don't see how the fundamental issues in the real economy (e.g. low capacity utilization, overbuilt infrastructure) are really all that related to Iraq at all. The uncertainty over the war was creating edginess in the markets, but frankly I think the markets were still overvalued on a fundamental basis even at the recent lows. My guess is that the hoped-for post-war boom will in fact not develop, and that's going to push the markets down further, creating downstream negative effects on the Thai economy. Frankly, though this will be painful, I think it would be better for Thailand than a quick recovery. That's because, as you mentioned, a recovery would pretty much cement the current leadership, whose longer-term goals (to the extent that I surmise them based on his previous political actions) are frightening.

 

As for your other questions, private investment was indeed up in 2002, by some 8% I believe; but is projected to fall this year by the NESDB (though the PM disagrees). Foreign direct investment (FDI) was far down, but the meaning of this is unclear, it may be a measurement issue. FDI in the past was measured by total capital investment, which was appropriate for large manufacturing operations; but as FDI is moving to more service industries, the capex is lower even though the "quallity" of FDI is (supposedly) better. There's no real good way to measure FDI quality that I'm aware of, so this is just speculation. I'll be spending this weekend re-writing a report on FDI in Thailand with input from a number of economists from some major multinational institutions, so if you want to hear more about FDI than you ever wanted to know, feel free to ask!

 

Cheers,

 

Scuba

[Guest]

> consumer spending has fallen sharply. No one disputes

> these facts. This is why many people - not just me - are

> asking this one very fundamental question: where will the

> growth in Thailand come from this year?

 

Hi - Here's some data:

 

Projected Thai GDP Growth, 2003 (as of Jan 2003, from BK Post):

 

DBS Vickers: 5.0%

Goldman Sachs: 4.5%

HSBC: 4.2%

Standard Chartered: 3.5%

Bank of Thailand: 4.0%

NESDB (yesterday): 4-5%

CLSA (last week): 6.8%

Merrill Lynch (last week, and that's your pal Supavud): 3.6%

 

Clearly there is disagreement as to the degree of growth, along with some public fighting between the NESDB and the PM (who claims 6%); but there does seem to be a pretty strong consensus for continued growth. Do you know something all these fellows missed?

 

As for where growth will come from, the NESDB's Chairman, "Mr Chakramon said the 4-5% growth forecast this year was based on an upward trend in private consumption, expansion of export volumes in the first two months of this year, and an increase in farm product prices" (BK Post)

 

Further, "investment in the construction sector is still expanding strongly, due to low interest rates and the increase in government housing projects." and "Mr Chakramon said positive factors for the Thai economy included low interest rates which would help spur private consumption and investment."

 

Whether you believe it or not, that's another story, but there certainly is no consensus pointing to recession.

 

Cheers,

 

Scuba

 

[Guest]

> I don't agree with it, but there is a reason why Thailand is on positive credit watch.

 

The other possibility is that people are so starved for good news that they're not properly examining the data. Follow the logic - rating agencies get most of their data from where? In a data-poor environment like Thailand, you're pretty much stuck with government figures and whatever you can patch together through primary research - secondary private sector research such as industry consortia with solid data collection is rare. From what I've see, Thailand is too small for international agencies, i-banks, etc. to do much primary research, so that brings us back to the government. Now, I have no clue how the government gets its data, but from what I've seen of some the >ahem< better government departments, I wouldn't put that much stock in whatever they tell me.

 

For example, remember how Mr. Gadfly quoted the 63% capacity utilization level to argue about investment dropping off? Well, the Ministry of Commerce claims that that's an accounting error- that it's based on asset values that were not written down after the crisis; therefore, post-revaluation, the actual capacity utilization is more around 74%, close to a "magic" 80% number when all sorts of new capex is required. Are they correct? Who the hell knows - but Goldman Sachs buys it, and I can tell you how much primary research they're doing here (hint: it's a very ROUND number!).

 

Remember the talk we had about foreigners being fooled by Thais? It's stuff like this that makes me think that the >cough< "legitimate" >cough< financial world isn't all that different from the bar scene!

 

Cheers,

[Guest]

> Given that tourism is one of the country's major foreign exchange earners

 

Not given. Tourism is about 6-7% of Thailand?s GDP; total exports are over 60%.

 

> a massive decline in tourism would surely cause the baht to collapse.

 

No, see above.

 

> This could probably be organised over the net.

 

Maybe someday, but not now. Most tourism is not conducted over the net, especially to Thailand. Largest numbers of tourists come from Japan, China and ASEAN; and many on package tours, not solo net-ticket buyers.

 

> I suspect that a major chunk of tourist revenue comes from sex related tourism

 

Doubtful. Other peoples? comments on this point are sound.

 

> and that most of these tourists use particular sites related to it

 

No. See TAT data on origin of tourists ? it?s on the web, do a google search.

 

> and could organise a coalition to postpone their trips.

 

A mass internet-based sanuker moratorium on travel to Thailand, eh? No, that doesn?t sound farfetched at all.

 

> 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.

 

Ah, the payoff ? we all organize to ruin Thailand?s economy, plunging millions of people into poverty, so we can get cheaper sex. Excellent idea, not at all cruel and nasty. You?ve got my vote!

 

Cheers,