Thai baht decline due slowing economy

BuffHello · June 13, 2006

Thai Baht May Decline on Signs Economy Slowing, Survey Shows

June 12 (Bloomberg) -- The Thai baht may decline this week on signs the economy is slowing, prompting global investors to exit from the nation's shares, a Bloomberg News survey shows.

Among 11 investors, strategists and traders surveyed from Singapore to Seoul on June 8-9, seven suggested selling the baht against the dollar this week. Two advised buying it and two had a hold recommendation.

The baht in June has extended the worst monthly drop in almost a year in May as stock exchange data show investors sold equities for the past 19 days in 20. Reports last week showed consumer confidence fell in May to the lowest in four years and the government's economic advisory agency cut its growth forecast after a constitutional court annulled April's election result because it was boycotted by opposition parties.

``We've got a weak economy coupled with sentiment to sell stocks and that's weighing on the currency,'' said Joseph Yap, a senior currency analyst at CFC Seymour Ltd. in Hong Kong. ``We've also got a lame-duck government who aren't doing anything apart from worrying if they'll have a job tomorrow.''

The Thai baht finished the week at 38.42 per dollar at 5 p.m. in Bangkok June 9, close to its lowest in two weeks, according to data compiled by Bloomberg. It may drop to 39 this week, a level not seen since March, said Yap.

The University of the Thai Chamber of Commerce's index, published June 8, fell to 75.5 from 76.7 in April in a survey of 2,244 respondents nationwide, on higher fuel prices and the political stalemate will damp growth. Crude oil has climbed 15 percent this year.

A Bloomberg News survey published June 5 correctly predicted the Philippine peso would slip in the week through June 9. The currency fell 0.7 percent and touched 53.25 on June 8, the lowest in more than five months.

Snap Election

A snap election April 2 was called by Prime Minister Thaksin Shinawatra in the face of mounting criticism of his leadership, including grievances over his family's tax-free sale of its stake in telecommunications group Shin Corp. to investors led by Singapore's Temasek Holdings Pte.

The elections, which failed to fill all the seats in Parliament, were annulled for breaching the constitution. A new poll may be held Oct. 15.

The National Economic and Social Development Board June 6 cut its 2006 growth forecast to between 4.2 percent and 4.9 percent, from a 4.5 percent to 5.5 percent range. ABN Amro Bank NV cut its forecast for the economy's expansion in 2007 the same day and UBS AG cut its 2006 prediction.

`Investors Will Return'

Losses in the currency may be limited by speculation investors will buy government bonds to take advantage of higher yields after the central bank raised interest rates June 7 for the ninth time, to 5 percent to curb price increases.

Inflation unexpectedly accelerated in May to a seven-month high of 6.2 percent because of costlier fuel, the government said June 1.

The yield on the Thai government 10-year bond has climbed 10 basis points this year to 5.50 percent after averaging 4.94 percent last year.

``Investors will return, it's just a case of when,'' said Hong Kong-based Sebastien Barbe, a senior economist at Calyon, the investment banking arm of France's Credit Agricole SA. ``We're getting closer to attractive levels to get back into Asian currencies.''

Thailand's stock market, at its lowest in six months, has slumped in line with other emerging markets on concern rising inflation will lead to higher interest rates in the U.S. and stifle global economic growth, damping demand for the nation's exports, which make up about half of Thailand's gross domestic product.

`Major Issue'

Fed Governor Donald Kohn June 8 said a recent increase in gauges of inflation is ``troubling'' and raises a warning flag for the U.S. central bank, even as the economy slows. His comments follow those June 5 from Fed Chairman Ben S. Bernanke, who said price increases were too fast for his comfort.

``There are flows back to the U.S.,'' said Uwe Parpart, head of fixed income and currency research for Asia at Cantor Fitzgerald & Co. in Hong Kong. ``Risk aversion has become a major issue.''

The latest survey also predicted declines for other Asian currencies, including the South Korean won, Taiwan dollar and Indonesian rupiah.

U.S. consumer prices may have climbed 0.4 percent in May, according to the forecast of 27 economists surveyed by Bloomberg News, making it the fifth monthly increase in prices. It averaged 0.2 percent a month in 2005. The government report is due June 14.

``High oil prices will continue to add pressure to inflation, economic growth and the current account deficit,'' said Deputy Central Bank Governor Bandid Nijathaworn June 8. ``Exports may slow in the second half from the first half on slowing global growth, especially in the U.S.''

BUY SELL HOLD

Indonesia Rupiah 2 7 2

Taiwan Dollar 2 7 2

Philippine Peso 2 6 3

South Korean Won 2 9 X

Thai Baht 2 7 2

Singapore Dollar 3 3 5

Malaysian Ringgit 3 3 5

To contact the reporter on this story:

Jake Lee in Hong Kong jlee127@bloomberg.net

Last Updated: June 11, 2006 12:09 EDT

elef · June 13, 2006

The old rule is that experts always are wrong. ::

BuffHello · June 13, 2006

Thai premier mulls doubtful popular plans

By Nareerat Wiriyapong

BANGKOK: Thai Prime Minister Thaksin Shinawatra is considering a slate of proposals to bolster the sagging economy, but analysts say many of the measures are more aimed at shoring up his political base ahead of new elections.

Top among his ideas are raising the minimum wage, lowering interest rates for farm loans, and subsidizing electric bills for the poor.

The initiatives would mainly benefit farmers and low-income consumers?Thaksin?s political base?to help them weather high oil prices, as well as rising interest rates and inflation.

The cabinet last week approved a $4.4-billion project to build three new light rail lines in the capital, which the government says will boost foreign investment and the country?s competitiveness.

But the mass transit upgrade also undoubtedly satisfies Bangkok voters.

Pornsilp Patcharintanakul of Thailand?s Board of Trade, one of the country?s biggest business groups, said none of the policies would have much impact on the economy, although Thaksin?s return to office has made the government more decisive.

?The adjustment of minimum wages might have some psychological impact, but it would be more effective politically,? he said.

?The government should instead focus on boosting consumption and investment, but I cannot think of any effective measure in the present situation. The state?s budget will likely have a shortfall, while new investors hesitate to come because of political uncertainties.?

Thaksin, a billonaire-turned-politician, took a seven-week leave from office after elections on April 2 proved inconclusive. But he returned to office last month after the courts invalidated the vote and set the stage for new polls on October 15.

The months of delay until the new elections have created a political vacuum, with a caretaker government running the country for most of the year.

The political uncertainty, combined with rising fuel and transport costs, has dampened Thailand?s economic outlook.

The National Economic and Social Development Board, the government?s think tank, last week cut its 2006 economic growth forecast to 4.2percent to 4.9 percent from an earlier estimate of 4.5 percent to 5.5 percent in the face of high oil prices.

Economist Thanavath Phonvichai questioned whether Thaksin?s proposals would boost the economy.

?Some measures being considered might not be economically viable, but clearly they are populist policies,? he told AFP.

?For example, I don?t see any need to cut interest rates for farm loans. It might or might not help inject some liquidity into the economy.?

But he said raising the minimum wage would help increase consumers? spending power, with consumer confidence mired at a four-year low.

?Currently the minimum wage still has room to rise, but the government should be very cautious because such a policy would have direct or psychological impact on rising inflation,? he said.

Inflation in May hit a seven-month high of 6.2 percent due to high oil prices, prompting the central bank last week to raise its benchmark interest rate by a quarter point to 5.00 percent.

Utt Pisarnvanich, an economics professor at the University of the Thai Chamber of Commerce, said some populist policies were needed, but only temporarily to cushion the effect of oil prices on consumers.

?Thaksin?s . . . popularity has decreased due to his political conflicts, and populist programs are the right answer to win back his declining support,? he told AFP.

Thanavath said short-term economic policies should focus on boosting tourism and exports which could suffer from a feared global economic slowdown and a stronger Thai baht against the dollar.

--AFP

manillatimes.net

David_66_UK · June 13, 2006

At least it is going in the right direction now for me.

Coss · June 13, 2006

Now that the royal celebrations are done, I expect the shit to hit the fan.

And with that, I hope a weaker baht for my trip in August.

Cynically

Coss

whosyourdaddy · June 13, 2006

Yep It has been quite a week in the markets. Watching money disappear faster than a freelancer who said she would go longtime.

unit731 · June 13, 2006

In the US, it is the M1 and the M2.

Shrink the value of the dollar to make US goods cheaper to foreign buyers.

Nixon did it. Now Bush.

AF16 · June 14, 2006

I promptly transferred money to Thailand for my next vacation. Hope I come out ahead.

BuffHello · June 14, 2006

Around Asia's Markets: Stampede from Thai market hits baht

By Jake Lee Bloomberg News

Published: June 12, 2006

The Thai baht could continue to decline on signs the economy is slowing, prompting global investors to exit from the nation's share market.

The baht in June has extended the worst monthly drop in almost a year, with data from the stock exchange showing that investors have sold equities for 19 of the past 20 days. Reports last week said that consumer confidence had fallen to its lowest level in four years in May.

The government's economic advisory agency also cut its growth forecast after a constitutional court annulled April's election result after it was boycotted by opposition parties.

"We've got a weak economy coupled with sentiment to sell stocks, and that's weighing on the currency," said Joseph Yap, a senior currency analyst at CFC Seymour in Hong Kong. "We've also got a lame-duck government who aren't doing anything apart from worrying if they'll have a job tomorrow."

The Thai baht finished last week at 38.42 per dollar, close to its lowest level in two weeks, according to data compiled by Bloomberg. It may drop to 39 this week, a level not seen since March, Yap said.

Among 11 investors, strategists and traders surveyed in the region, seven recommended selling the baht against the dollar this week. Two advised buying it and two had a hold recommendation.

The University of the Thai Chamber of Commerce's index, published last Thursday, fell to 75.5 from 76.7 in April. The survey of 2,244 respondents nationwide suggested that higher fuel prices and the political stalemate could damp growth. Crude oil prices have climbed 15 percent this year.

A snap election was called in April by Prime Minister Thaksin Shinawatra, in the face of mounting criticism of his leadership, including grievances over his family's tax-free sale of its stake in telecommunications group Shin to investors led by Singapore's Temasek Holdings. The elections, which failed to fill all the seats in Parliament, were annulled for breaching the constitution. A new poll could be held Oct. 15.

The National Economic and Social Development Board last week cut its 2006 growth forecast to between 4.2 percent and 4.9 percent, from a 4.5 percent to 5.5 percent range. ABN AMRO Bank cut its forecast for the economy's expansion in 2007 the same day, and UBS cut its 2006 prediction.

Losses in the currency may be limited by speculation that investors would buy government bonds to take advantage of higher yields after the central bank raised interest rates last week to 5 percent.

Inflation unexpectedly accelerated in May to a seven-month high of 6.2 percent because of costlier fuel, the government said June 1.

The yield on the Thai government 10-year bond has climbed 10 basis points this year to 5.50 percent, after averaging 4.94 percent last year.

"Investors will return, it's just a case of when," said Sebastien Barbe, a Hong Kong-based senior economist at Calyon, the investment banking arm of France's Credit Agricole. "We're getting closer to attractive levels to get back into Asian currencies."

Thailand's stock market has slumped in line with other emerging markets on concern that rising inflation could lead to higher interest rates in the United States and stifle global economic growth, which would dampen demand for the nation's exports, which make up about half of Thailand's gross domestic product.

"There are flows back to the U.S.," said Uwe Parpart, head of fixed income and currency research for Asia at Cantor Fitzgerald in Hong Kong. "Risk aversion has become a major issue." $@