nomad4ever

What an earthquake @ Asian Stock Exchanges around the region, after yesterdays announcement! The Thais suffered the most of course. I monitor a few stocks and funds over there, mainly an ABN Amro Certificate (covering the SET50 candidates), which lost about 25% yesterday, with Siam Commercial Banking, Krung Thai Bank and Bangkok Bank all around 19-30% in the red.

On average, it was a 15% crash at the SET, the Stock Exchange of Thailand and a single digit decline in its currency – the Thai Baht.

A blood bath!

Not even 24 hours later the Thai Central Bank had to announce, that they will take back their ‘draconian measures’ of a speculation tax aka Germany or Chile and currency trading restrictions. What an embarrassement and loss of face for the Thai Central Bank, the ‘new government’ of Coupsters and surely a loss of trust in the Thai Economy and Stock Market.

Thailand, after 1997, setting of another Asian Financial Crisis?

Of great concern was yesterday, if other Asian Countries will follow step and allow their Central Banks to introduce similar measures. This was completely out of question after that enormous plunge at the local stock markets. Mr Nor Mohamed Yakcop, Second Finance Minister for Malaysia – said: “We will not do it. Period.” The same Mr Yakcop was responsible for last year’s scrap of the ringgit’s peg to the greenback.

However, despite yesterday’s plunge, most analysts didn’t think that a repeat of the Asian crisis is on the cards. The economies around the region are much more stable and better financed, effectively having trade surpluses instead of deficits, as back in 1997.

Okay, most of the losses were regained today at markets around the region, but I wonder, if it was worth that shocking exercise by Thailand’s Central Bank. The Thai authorities’ flip-flop showed quite a level of desperation with a world awash with money.

I wonder, if Thai Central Bank Governor Tarisa Watanagase will still have her job in about 1-2 months time!

That maneuver was surely everything but wisely planned and executed. As Andy Mukherjee of Bloomberg Asia put it:

“If Thailand had persisted with capital controls on equity investments, its economy may also have lost the benefits of cheaper capital and deeper markets that come with financial globalization.

Before any of that could happen, the authorities blinked. The carnage on the stock market must have convinced them that in the process of stemming inflows, Thailand could end up encouraging capital flight. Thailand ‘s immediate requirement is stability. The country is in a flux: It doesn’t even have a permanent constitution at the moment. The last thing it needs is financial turmoil.

But since global investors have no aversion for risk right now, they won’t allow Thailand to have any, either.”

So, does it mean, we won’t get more value for our money, when buying the Thai Baht?

Don’t bet on it yet!

The trust in the Baht and the policies of it’s authorities can be seriously shattered. Who wants to invest his/her hard earned money in a country, where policies change over night? Your money can be locked in the next morning or you can lose a third of your invested wealth, as happened yesterday. Worst case: you sold out with some losses yesterday and missed the rally today – meaning, you are sitting today on a big, fat loss. I bet you want to shoot the officials, responsible for that disaster!

So, let’s see what will happen over the next 1-3 months. I wouldn’t be surprised, if both – the Thai Stock Market and its currency, the Baht – will come back significantly, with other Stock Exchanges in the region to follow suit.

Who said 2007 will be an easy growth year for Stocks and Equity?

Technorati : 1997, SET, asia, asian crisis, atm, bangkok bank, bank of thailand, currency, equity, finance, krung thai, money, politics, siam, speculation, speculators, stock exchange, thai baht, thailand, travel

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written by Chris