Confidence in the Thai Economy?

[Stickman]

At the time of posting this the Thai stock market is down by 12% in todayâ??s trading, a phenomenal amount.

 

If you missed the news, this dramatic drop in the value of the Thai stock market came about due to a new regulation announced yesterday by the Bank of Thailand concerning the in-flow of funds from abroad into Thailand and the delays that investors would face repatriating the funds without penalty.

 

This new regulation appears to be a response to the increased value of the Thai baht this calendar year. The baht has increased in value against the US dollar at approximately 15%, but it should be noted that it hasnâ??t increased in value against other major currencies by nearly as much.

 

It seems to me that Thailand has a habit of implementing extreme measures, such as this one, when things do not appear to be going the way they want / like. The problem is that the implementation of such extreme measures / regulations / laws / actions can result in an extreme reaction in itself, as we have seen with the market crashing today.

 

Over the past few years we have seen a number of extreme or semi-extreme policies and laws put in place such as the war on drugs, the coup, the change in visa regulations and the banning of alcohol advertising amongst others.

 

Obviously when there is an issue it has to be solved, but I have to wonder why the fix has to be something so seemingly heavy-handed.

 

I have never really considered buying property in Thailand because I just wasnâ??t confident in the future, but these actions further damage what confidence I had in making any investment in Thailand. Iâ??m sure I am not the only one.

 

What do you make of all of these so-called heavy-handed laws, sometimes knee jerk reactions to things? Do you have the same level of confidence now that you had in the past?

 

As an aside, it makes me wonder just what is wrong with the strong baht. I understand the relative advantages and disadvantages of a strong currency, and I often think back to the period when the Thai economy was one of the strongest in the world between 1985 and 1995, back when the baht was pegged at 25 to the dollarâ?¦

 

[Old Hippie]

For the last few years, people on this board and others, have been saying that LOS is headed for another 1997 style crash...not sure how/why, as it seems the Thai economy is going well (or am I missing something?).

 

This deal with the U.S. dollar seems more a reflection of the U.S. Economy than the Thai economy. That said, I supose to many foreigners trying to cash in on the slide could in some way hurt the Thai economy in the short/long run. But not really sure. I am sure the "big financial dicks" on the board will be along shorty to inform us...

[Khun004]

new regulation announced yesterday by the Bank of Thailand concerning the in-flow of funds from abroad into Thailand

Excellent topic and worth careful thought by anybody with a long-term interest in Thailand.

 

That regulation is result of short-term desperation, without long-term understanding.

Developing countries are -- a priori -- starving for investment capital.

This regulation rejects in-coming capital.

Plus, it adds uncertainty and friction into risk assessment here.

Capital runs away from uncertainly and friction.

 

Clearly, the regulators are not aware of Ludwig von Mises, Human Action.

It explains everything about this topic.

Imagine trying to build an airplane without first studying the principles of aerodynamics.

 

The baht has increased in value against the US dollar at approximately 15%, but it should be noted that it hasnâ??t increased in value against other major currencies by nearly as much.

Exactly.

And therein lies the clue to understanding.

News reports about a "stronger" baht are deceptive.

No, the baht is certainly not getting stronger.

The baht is getting weaker.

To confirm, just look around.

Compared to last year, now it takes more baht to buy a litre of petrol or a kilo of fruit.

One year ago, I could buy a coconut -- with the top cut off and a straw put in -- for 10 baht.

Yesterday, an identical coconut -- from the same vendor in the same soi, using the same old machete to chop the top -- cost 12 baht.

What changed?

Only one variable: The baht is weaker, so it takes more baht to buy an identical coconut.

 

What is really happening is quite different than described in news reports.

The baht is getting weaker in terms of buying the things everybody wants and needs, like petrol, food, and coconuts.

The US dollar is also getting weaker, but the USD is sinking faster than the baht.

The appearance of a stronger baht is merely an illusion.

Both currencies -- baht and US dollar -- are getting weaker, just at different rates.

 

I have never really considered buying property in Thailand because I just wasnâ??t confident in the future, but these actions further damage what confidence I had in making any investment in Thailand.

Smart thinking.

"Buying" property here is not really buying, because buyers don't have property rights.

A buyer may have a piece of paper that looks like a deed, but, in practice, property rights here are ephemeral.

Buying property here like giving a large gift to the country.

With buyer gambling that, maybe, in the future, he might get a gift in return.

Given consistent patterns of regulations against, and general disregard for, property rights here, that's a gamble I'm not willing to take.

 

 

[junglesoup]

For the last few years, people on this board and others, have been saying that LOS is headed for another 1997 style crash...not sure how/why, as it seems the Thai economy is going well (or am I missing something?).

 

This deal with the U.S. dollar seems more a reflection of the U.S. Economy than the Thai economy. That said, I supose to many foreigners trying to cash in on the slide could in some way hurt the Thai economy in the short/long run. But not really sure. I am sure the "big financial dicks" on the board will be along shorty to inform us...

 

Well old hippie, i m back again with with my one inch cock again, before the bigs knobs arrive.

Its a double edge sword. This has hit the stock exchange hard. Usually the markets over react and history has shown that when there is a big fall in one day then the market can recover quickly also.

The bigger issue is that the stock exchange is not the thai economy, its only part of it. Infact the capital markets in recent years have been less dependent on the economy of the country.

This move was made to help the exporters so the money lost on the stock market may come back in because of more competitive export prices.

In the long run it may make the stock market more stable, and it may achieve slower but more steady growth.

 

However I think it may not be that good, because a large part of market money is speculative in nature. I know that 80% of the foreign exchange market is speculative in nature.

 

In the end it will come down to how its perceived by investors and traders.

 

the message from the thai authorities was that if you are after speculation then look somewhere else...and maybe thats what investors will do.

 

just my 2 inches worth...

 

[Old Hippie]

Wow, you are hung! er figuratively speaking.

[Guest]

Where are those big dicks when you need them eh?

 

My take...the Thai economy is doing ok, but like many around the world at present, it's flimsy, based on little...substantial consumer debt etc...and i agree that the US economy is in poor shape compared to others, hence the Bahts strength. There is considerable uncertainty in LOS at present for sure, this govt. is really not doing much...and it's supposedly shortlived, so everything is very much 'up in the air'...so i guess there's a lot of speculative type stuff going on...nothing substantial...

 

But then i'm not a big financial dick...so i know nothing really...i know nothing about financial stuff, reading palms is a serious challenge let alone big financial dick stuff!

[junglesoup]

Where are those big dicks when you need them eh?

 

My take...the Thai economy is doing ok, but like many around the world at present, it's flimsy, based on little...substantial consumer debt etc...and i agree that the US economy is in poor shape compared to others, hence the Bahts strength. There is considerable uncertainty in LOS at present for sure, this govt. is really not doing much...and it's supposedly shortlived, so everything is very much 'up in the air'...so i guess there's a lot of speculative type stuff going on...nothing substantial...

 

But then i'm not a big financial dick...so i know nothing really...i know nothing about financial stuff, reading palms is a serious challenge let alone big financial dick stuff!

 

Thats the funny thing. The US economy is all abit doom and gloom, yet the markets are performing well. The DOW made new highs. Its just shows that stock markets and economies are not so closely linked.

 

[buffalo_bill]

Stick ,

 

your friend Keith will take this as final proof that your sydicate is a major player on the local stockmarket I am sure .

 

Thailand for me would be about as attractive to invest money on the stockmarket as for example Nigeria . How could somebody ever buy Thai Air shares if a Prime Minister can tell them to promote Chiang mai as a future hub because he comes from there , as just one example . Possibly a nice place for gambling if you fancy that but never ever for long term serious investing , leave alone a source for retirement income .

 

As Khun 007 so rightly says, it is the USD that starts to show major signs of weakness ( not that anybody should be happy about that ) and the moneymarkets start to get frightened . The value of the USD nowadays is graciously supported by China/Japan/Korea as long as they like to think the Greenback has some value to them . Last year when the South - Korean financial minister thought in public to shift a third of their foreign currency into the Euro , the Dollar collapsed over night . So it is a weak Dollar , not a strong bath .

 

About investing in Thailand I would not put anything into long term ideas ( exception : Lovely Nok ) but as I said before : look at the property market . Europeans pay silly prices for seemingly well built apartments and villas . The profit is huuuuge . Bubi , he know .

 

BuBi

[keith doug]

my thai friend on msn had monies sent from b/f but she cant get to it at the moment!!!!!

[kojis]

my thai friend on msn had monies sent from b/f but she cant get to it at the moment!!!!!

 

Hhhhmmm...Wonder how people will need to justify the funds they import are for trading, so much money is moving in this country without proper invoices...might be some messy week coming up...