Drop in the Baht not necessarily a portent

In the last issue we noted a recent Bloomberg report stating the Thai Baht had fallen the most of major currencies vis-à-vis the United States dollar in a three week period leading up to the middle of August.

If there’s one glaring comparison to be made between the world of economics and politics is that both can find a cogent contrarian argument and turn one set of statistics on its head by employing the use of an opposing set.

So, was the Bloomberg analysis being too negative? Perhaps it was if some recent statistical measures are examined. For example, the Stock Exchange of Thailand (SET) reached a 16-year peak in early September.

Cast your mind back to 1996 and the economic world was looking in amazement at the apparent strength of the so-called Southeast Asian ‘Tiger’ economies, which included Thailand. That’s the last time the SET was so high and, despite the Asian Financial Crisis which burst the bubble big time soon after, there are now far more stringent controls in place which makes a repeat of that gloomy period less likely.

So, the SET’s strength surely is a long-term positive for the Thai economy. According to another source, foreign trading on the SET has jumped to over four billion baht since 1 August.

Perhaps as good an economic indicator is indeed the strength of the baht, pretty much against all currencies. In relation to the US dollar, the baht has held its line at around 31 for a very long time, both before, during, and now after the 2008 Global Financial Crisis (GFC).

There are also claims that the number of work permits being issued are at their highest level since 2010. The Amata industrial complex on the Eastern Seaboard is attempting to expand and, at the same time, the long-established B Grimm group of companies have said they want to construct no less than 10 power plants in the same region.

Expansion is not something major companies want to do if they feel the economic future might be one of increasing uncertainty. Amata and B Grimm clearly believe the Thai economy is fundamentally sound and will continue to derive interest and investment from overseas.

Locally, car sales since July have increased and the export market for vehicles is also sound. Think about how many cars you see on the roads these days with the tell-tale red number plates. Anecdotally, it looks a lot more than it was even a year ago.

Finally, CP All Plc which runs a chain of 7-Eleven convenience stores, are suggesting their net profit will grow by a whopping 25 percent this year. No doom and gloom in that sector at least.