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Stickman

Confidence in the Thai Economy?

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Well they've reversed part of the decision now, saying it only applies to bonds, so all is well? And the stock market rebounded 9%...storm over....back to the normal chaos...

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This is *exactly* the sort of thing I am talking about. ...[snip]... Investors' confidence has already been slashed...
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"Slashed" is an accurate description.

Billions of baht of capital value were slashed in the Stock Exchange of Thailand yesterday.

15% of total capitalization was lost.

That value will not be returning any time soon.

 

This is the start of a new collapse.

No economy can have 15% slashed off, in ONE day, without suffering very serious consequences.

 

Today, nobody in Bangkok is going out to buy a new Mercedes.

Or a new condo in a luxury high-rise.

Unseen consequence: It will be a grim New Year in some businesses, like auto dealers and real estate.

 

Within two to three months -- as working capital drys up -- we will start to see job layoffs.

And far fewer construction cranes on the Bangkok skyline.

Unseen consequence: No new jobs either. Businesses won't risk hiring additional employees.

 

Within the year, we will start to read in the news of businesses closing down -- large and small.

Unseen consequence: We won't read about all the new businesses that might have started up in Thailand, but now, investors large and small are leery of risking their capital here.

 

Sad.

I'd hoped to see a prosperous future for Thailand.

Now, after yesterday, not a chance.

Not for several years, at least.

It takes years and years for investors to build up confidence to risk their precious capital.

But, as we've just seen, only one day to slash that confidence to bits.

 

 

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Shares rebounded from the biggest drop in 16 years after a limit that would have locked up 30 percent of new foreign- currency deposits earmarked for equity purchases for a year was revoked. The SET index of stocks jumped 11 percent.

 

``The cancellation of the measures is good for the baht,'' said Hideki Hayashi, a foreign-exchange strategist in Tokyo at Shinko Securities Co. ``Economic conditions remain good and people still want to buy regional stocks. This also helps sentiment for other currencies.''

 

`Very Cheap'

 

The drop yesterday in the baht and stocks ``represents an opportunity for long-term fundamental investors such as ourselves,'' said Emil Wolter, who helps manage $2.5 billion in emerging-market assets at Polar Capital Partners Ltd. in London. ``The baht is very cheap.''

 

Lifting some of the controls may hamper the central bank's attempt to stem the baht's strength, Bank of Thailand Governor Tarisa Watanagase said today. The bank may reverse yesterday's decision to scrap limits on non-resident deposits that took effect today, she said.

 

Bloomberg

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After the government scrapped controls on foreign stock buying in a shocking, abrupt policy U-turn, the Stock Exchange of Thailand shot up 10.6 per cent in value by mid-day Wednesday.

 

The SET Index hit 688.17 after noon, after Tuesday's devastating meltdown put the Index at 622.14, a record-breaking 15 per cent fall. By mid-day Wednesday, however, the volume of trading amounted to 34.9 billion baht ($975 million dollars).

"Some foreign investors are buying back, but not so much," said Capital Nomura analyst Kavee Chukijkasem. "They're still cautious as the measures have ruined confidence. I think domestic funds may take this chance to collect shares."

 

Note last remark. Could that be what this was about? Surely the Thai's are too stupid to engineer this

TH

 

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It worked for me I have to admit - just ran out of funds in the online account! Will have to remember to keep some cash in there just for a situation like this again.

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KS - NEVER send baht to Thailand you'll be loosing at least 2% on exchange rates ALWAYS get the bank here to change it. DOG

Spot on Mr DAWG. I actually tested it once. Sent equivilent amounts from Oz to a Thai bank acc. First lot in THB and the second lot in $AU. Was about 7 barfines difference. I think most of this current situation is coming from outside thailand for the benefit of a few. Pure manipulation.

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"Billions of baht of capital value were slashed in the Stock Exchange of Thailand yesterday.

15% of total capitalization was lost.

That value will not be returning any time soon."

 

 

 

Wow.. it took almost 24 hours for most of the value to return. I just love all the "experts" out there 5555555

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"Billions of baht of capital value were slashed in the Stock Exchange of Thailand yesterday.

15% of total capitalization was lost.

That value will not be returning any time soon."

 

 

 

Wow.. it took almost 24 hours for most of the value to return. I just love all the "experts" out there 5555555

 

That's what you get for reading the Austrian School of economics :)

 

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There was absolute confusion when the edict was announced. Apparantly the BOT didn't even notify the Securities and Exchange Commission or SET.

 

There is still confusion and this will definitely damage investor confidence in Thailand. What is happening now is madness, and it may get worse.

 

To demonstrat how crazy this was, realize that there was also an obvious, easier and better way to address the Baht's appreciation - lower interest rates. Inflation is under control in Thailand and Thailand has some of the highest rates regionally. A large number of properties are coming onto the market and Thais who contracted to buy these properties when interest rates were low are now having problems getting loans because of interest rates went up.

 

But for this to work, they should have started lowering rates months ago. Everyone was expecting rates to decline (I was convinced they would do so and couldn't and still can't figure out why they didn't lower rates), but they didn't? Instead, they did this. Why?

 

The government also plans to announce planned new laws and regulations this month which are very unfriendly to investors, particularly foreign investors. Some of this seems to be driven by bureaucrats with no business or commercial sense (trying to protect the country from foreigners - I heard this at a speech earlier this week at a Thai function) and some seems to be driven by vested local Thai interests who (a hunch here) are trying to create an opportunity to acquire companies and assets on the cheap. They really don't seem to give a damn about how much harm they do to the Thai country.

 

The most troubling is the plan to change the Alien Business Law. These changes will be retroactive and make most exisiting structures - which a government official admitted yesterday are currently legal - illegal. But he claimed the law is not retroactive because companies will have 6 - 12 months to comply (by selling out their shares on the cheap to Thais or possibly the Thai government). His suggested solution: sell your business to Thais. And he wasn't joking.

 

It is absolute madness just like the recent tax on capital inflows was absolute madness, but some officials seem to think they can get away with it.

 

Incidentally, in today's Bangkok Post, the BOT refused to acknowledge they made a mistake. They blamed the investors. The market collapses because the BOT imposes draconian measures on foreign investors in the form of very high tax on in-bound investment, foreign investors do the logical thing and start to put their investments elsewhere, and the BOT blames those investors for causing the market to collapse.

 

All of this sounds like something out of Alice in Wonderland.

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