Thailand Emergency, EM currency weakness
Bloomberg: Thai Baht, Stocks Slump; Samak Imposes Emergency Rule
Thailand’s baht fell to the lowest level in more than a year and stocks dropped to a 19-month low after Prime Minister Samak Sundaravej declared a state of emergency.
Overseas investors sold $3.1 billion more Thai stocks than they bought this year.
“People simply have to understand Thailand is essentially a political mess,” investor Marc Faber said.
Few months ago, several folks (Fidelity, Templeton) were going long Thailand in the wake of a correction and attractive valuations. They must today be reminded of what happened in 1997: A lesson from History Thailand’s stock and currency market compared with 1997
. . . on July 2, 1997, all hell broke loose. In one fell swoop, Thailand gave up and allowed its currency to float. The baht immediately plunged almost 20% in value and interest rates surged.
Within a few weeks, the country’s stock market was plunging. The Bangkok SET index ended the year with a whopping 55% loss!
Giving the Baht company - in terms of potential weakness - are the Korea won, Vietnamese dong & of course, the Indian rupee (today at almost 44.5). Why? High inflation, slower growth, large deficits, dependence on capital inflows, high imports (esp. crude oil), . . .
PS: Trouble in Korea - Rumors of September Crisis Rattle Markets
Rumors of an impending financial crisis in September are sweeping through Korea’s financial markets. On Monday, the first day of the month, the Korean stock market dropped more than 4 percent to the lowest in a year and 6 months, while the Korean currency weakened past the W1,100 barrier against the U.S. dollar for the first time in three years and 10 months.
PPS: The Investment Banks Turn on Korea
. . . the economic problems have to be placed in the context of situations elsewhere – be it the US, India, Spain, UK, Australia etc. It has not had a house price boom anywhere near the proportions of much of the US, UK and elsewhere. For a country wholly dependent on imports of energy and many other commodities, its external position has actually been better than could have been expected and government debt as a percentage of GDP gives some room for stimulus.
In short, the so-called Korean crisis may seem to some a construct of western institutions trying to distract attention from the financial disasters they have created at home and which continue to cause huge casualties among the ranks of the “experts” as the London employees of investment bank Dresdner Kleinwort (just taken over by Commerzbank) are about to find out.
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