How About Long Term Military Rule ? Fx Thoughts
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My friend sent me some fresh photos from Thailand yesterday.
He is not local but he thinks perhaps military rule could last a bit longer than we, from the outside, think. What is the point of electing another leader when the losing side will try to derail things ?
And so I checked with my dad this morning while we were stuck in the usual Singapore immigrations jam. Military = Yellow shirts, oops. Farmers won’t be too happy.
This is not an attempt to analyse the political situation over there in Thailand but a rationalisation of the effects on portfolios.
A fund manager friend was busy trading Thai bonds a couple of days ago and I expressed surprise that he was that eager(and greedy) to get into the Ukraine and Greece recovery trades.
He informed me that he was SELLING and not buying. So much for all the feel good theories we are getting from big wigs like Mark Mobius that the junta government is good for the country, his view is that he better get out while the “greedy Ukraine” bids are there because the new junta government set rules on a day to day basis and he cannot afford to have that risk in his portfolio.
Lets take a look at Thailand’s major investors in this old (2013) HSBC chart.
Dear me, the lion share belongs to Japan, not that it is a big sum to the Japanese (they are buying up America and the rest now).
Honda came out to announce a 40% production cut in their Thai plants one day after the coup, citing that it was not the coup that was behind their decision.
Singapore is a major beneficiary as a safe haven for Thais as evidenced in the FNN buy out and the 20% Breadtalk investment.
Money is flowing out, faster than it is going in.
Yellow line – inflow as % of GDP
White line – outflow as % of GDP
I believe we are too complacent about USDTHB which really has room to challenge this year’s high of 33.15 and we are bouncing off a double bottom considering their twin deficits. https://tradehaven.net/market/fx/the-twin-deficits-way-of-life-gbp/
SGDTHB should be spiking further from here even though we are at highs not seen since 1998 at 26.11. I see potential for a break towards 28.00.
The contagion effect on the region should be muted given that the new government will do their best to avoid international sanctions and pick a new interim leader soon.
Coups are usually unhealthy business even if this one is being hailed as good thing by global investors. And if I had to pick a major currency as a hedge, I would pick the USDJPY.
The USDJPY longs are patiently awaiting a break up out of the dead zone, as the range we are in now is called. There is a good chance of a break lower under 101.
EM Asean euphoric sentiments are fading to a slight risk off despite the signs of fund inflows into the EM bond basket. Even darling Indonesia is getting a little stale. Only Malaysia remains untainted and a good buy according to certain investor polls.
I tend to agree.
Lets play guess the country game.
Which one is JB and which one is Singapore ?
The conundrum : that if the traffic originates from one source and the source is empty, why should the destination be jammed ?
Have a good day.
Indeed, the military may be planning on staying longer than some assume. Assumptions can be dangerous. Assuming coup 2014 to be just like coup 2006 could be especially dangerous. So far the army has not announced any timetable for return to free elections, unlike 2006. Instead, the army seem to be attending to long term infrastructure projects and of course, reform. The time scale of infrastructure is years. The time scale of political reform is years. So the army might be around for years.
The other hinge is the monarchy.
Bcos people now a days do not solve the issues at hand, they divert it else where, hence the source looks empty but nothing has change in fact
http://www.nytimes.com/2014/05/30/opinion/thailands-army-tears-up-the-script.html?_r=1
As the general just said, yesterday evening or this morning, “the country comes first, democracy second” and that democratic elections would be expected in about 15 months or so. My guess is longer, but the time scale is still years whether you take the general’s 15 months as the minimum or a make realistic several years, in my view. Underlying all of this, of course is the monarchy, but that’s really best not discussed. In fact, the UK’s Daily Mail found that one out, having been permanently blocked after publishing derogatory photographs of members of the Royal family. One wonders of course how the Daily Mail could possibly have come to be in possession of those photographs, and who at such a sensitive time decided to send them. Yes, under the surface there is more to all this. But for now, all I think is there are better risks out there than a complacency based buy the SET because Teflon Thailand gets away with anything….ever owned a Teflon coated frying pan….it wears down in the end.
New rules daily is no fun. Extra red tape to cross.
Biggest loser – biggest investor.
But I like the new world rules – good short term investment as long as you don’t live there.