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Thai shippers cut 2020 export outlook to 10% fall from 8% drop


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Thai shippers cut 2020 export outlook to 10% fall from 8% drop

 

2020-07-07T054204Z_1_LYNXMPEG6609K_RTROPTP_4_THAILAND-ECONOMY-TRADE.JPG

FILE PHOTO: A view of the Port of Bangkok, Thailand, March 25, 2016. Picture taken March 25, 2016. REUTERS/Athit Perawongmetha

 

BANGKOK (Reuters) - Thailand's exports are expected to shrink 10% this year, deeper than the previous forecast of an 8% drop, due to the coronavious pandemic and the strength of the baht currency, a Thai shipping association said on Tuesday.

 

Global demand has yet to recover and there is a risk of a second wave of the pandemic, which could lead to lockdowns in trading partners, Ghanyapad Tantipipatpong, chairwoman of the Thai National Shippers' Council, told reporters.

 

"The strengthening baht is also making Thai products less competitive," she said, adding the group would send a letter to the prime minister in a bid to help keep the currency at 34 baht per U.S. dollar.

 

The baht traded at 31.2 per dollar at 0833 GMT. It hit 30.79 on June 24, the strongest since late January.

 

The central bank recently said the baht's strength could affect an economic recovery and it would consider more steps as necessary to curb it.

 

Visit Limluecha, president of the Thai Food Processors' Association, said a ban by some British retailers on Thai coconut products over the use of monkey labour had yet to impact trade much, but it would if other countries followed suit.

 

Thailand needs to urgently address the issue, he said, adding the country had exported coconut milk worth $411 million last year, mainly to the United States, Australia and Britain.

 

The commerce minister said monkey labour for commercial products was almost non-existent and he would discuss the issue with coconut producers on Wednesday.

 

In the January-May period, the value of annual exports, a key driver of Thai growth, fell 3.71% in dollar terms and declined 5.18% in baht terms.

 

In 2019, Southeast Asia's second-largest economy saw a 2.65% drop in exports amid global trade tensions and a strong baht.

 

(Reporting by Kitiphong Thaichareon and Orathai Sriring; Editing by Ed Davies)

 

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-- © Copyright Reuters 2020-07-08
 
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There's something Pavlovian about Reuters and Bloomberg economics reporters, when they have to write something about the Thai economy they must mention how strong the Baht is and how it's hurting the Thai economy, I think one of them may even be a TVF poster! 

 

I wonder how many of those people or even how many TVF posters have actually looked at the exchange rate history to understand past value and trends, my guess is not very many, apart from those who are now getting squeezed by the current rate. The fact is that 31 is actually a fair value rate, so for exporters to cry that they want 34 is nonsense, it's plain greed and cannot be justified other than on a temporary recovery basis perhaps.

 

From 2007 until today the average rate was 31.xx, a two year period beginning in 2015 saw it fall to 36 as the military government came to power but after two years it returned to the long term trend of 31. Twice in the past seven years exporters have seen 29.xx and exports didn't suffer as a result, in 2013 and 2019 the country kept up its export levels.

 

https://tradingeconomics.com/thailand/currency

 

https://tradingeconomics.com/thailand/exports

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1 hour ago, Trillian said:

There's something Pavlovian about Reuters and Bloomberg economics reporters, when they have to write something about the Thai economy they must mention how strong the Baht is and how it's hurting the Thai economy, I think one of them may even be a TVF poster! 

 

I wonder how many of those people or even how many TVF posters have actually looked at the exchange rate history to understand past value and trends, my guess is not very many, apart from those who are now getting squeezed by the current rate. The fact is that 31 is actually a fair value rate, so for exporters to cry that they want 34 is nonsense, it's plain greed and cannot be justified other than on a temporary recovery basis perhaps.

 

From 2007 until today the average rate was 31.xx, a two year period beginning in 2015 saw it fall to 36 as the military government came to power but after two years it returned to the long term trend of 31. Twice in the past seven years exporters have seen 29.xx and exports didn't suffer as a result, in 2013 and 2019 the country kept up its export levels.

 

https://tradingeconomics.com/thailand/currency

 

https://tradingeconomics.com/thailand/exports

I stand firmly with the exporters, who must compete on the global marketplace with an overpriced Baht.  I understand your supply side arguments that you and the BoT espouse.  And I believe most everyone on TV would strongly prefer a lower Baht.

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5 hours ago, smedly said:

coconuts 

 

hundreds of monkeys seen queuing at local job markets, they are demanding equal rights and working conditions and have formed a union - we will no longer work for peanuts 

Peanuts has just told them that is all the wages they will get ,so go and work for another employer if they dont like it.

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2 minutes ago, Trillian said:

I'd prefer 100 baht per Pound, doesn't mean that's realistic, probable, possible and or right in economics terms so it's a thought I usually keep to myself.

It’s OK, we understand.  Carry on...

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3 hours ago, Trillian said:

There's something Pavlovian about Reuters and Bloomberg economics reporters, when they have to write something about the Thai economy they must mention how strong the Baht is and how it's hurting the Thai economy, I think one of them may even be a TVF poster! 

 

https://tradingeconomics.com/thailand/currency

 

https://tradingeconomics.com/thailand/exports

Collectively, we’ll take that as a compliment.  Thanks!

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2 hours ago, Walker88 said:

Quite obviously you have knowledge of finance and markets. Therefore, you know that current prices already account for all that is known, as well as current psychology. Once the view of tomorrow begins to change, so does market psychology.

 

Markets that have been relatively stable for long periods build up a kind of complacency, which is reflected by market players gravitating to one side. When their world is disrupted and positions begin to move against them, panic often ensues.

 

FX markets tend toward long term trends, and trends tend to change when markets become boring, which is to say they reach a point of low movement and low volatility.

 

The conditions for baht stability may well be changing right now. Govt finances are going to be hurt both by the need for aid to ailing companies and unemployed workers, as well as reduced tax remittances. The current account balance will change because of the fall in exports, as well as tens of millions of inbound tourists NOT exchanging their FX for baht.

 

Exports are going to be hurt not only because worldwide growth is tumbling, and thus worldwide appetite for what Thailand exports, but also because many countries have realized that something like a pandemic can greatly disrupt supply chains. Over the next few years expect an increasing tendency for production to move ‘back home’ in whatever country 'home' is. The secondary advantage of such a move toward domestic production of all inputs is to maximize domestic employment, something else nations have suddenly realized, with this pandemic, is important.

 

The baht may well hold steady based on yesterday’s factors, but the world looks to be changing in ways deleterious to the strength of the baht. Because the market is concentrated to one side currently---long baht---the move could be sudden and dramatic.

Yours is one of the more considered and interesting pieces I've read here for a while, thanks for taking the time to post it.

 

I can't disagree with much of what you wrote but I wonder how applicable it is to a currency such as THB that is not freely convertible and cannot be exported in quantity. After all, dealers can take positions against the Baht but not for delivery so the effect of any change in strategy is unlikely to be effective unless BOT agrees and actively seeks to lower the value of their currency. I'm not convinced BOT wants that and why should they. Exporters have lived with 29.xx previously plus a stronger Baht means lower energy, transportation and fuel costs, what's not to like.

 

Plus BOT follows a managed floating peg to USD, it's one thing for BOT to try and use tools to effectively devalue the Baht against an already weak USD but it's nigh on impossible to use tools to make it stronger again, once USD recovers. And using those tools risks Thailand being labelled a currency manipulator, a label they certainly must avoid.

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1 hour ago, Trillian said:

Exporters have lived with 29.xx previously plus a stronger Baht means lower energy, transportation and fuel costs, what's not to like.

Tell that to the exporters and manufacturers.  I doubt you could sell that conjecture to them.  Sure, one can belt-tighten at 29.xx, but not for long.  Look at the big picture, and you’ll realize they must compete on the world marketplace.

Perhaps the government plan is to simply sell raw materials to larger industrial states, and receive millions of tourists in return.  I hope i’m wrong on this.

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1 hour ago, Isaan sailor said:

Tell that to the exporters and manufacturers.  I doubt you could sell that conjecture to them.  Sure, one can belt-tighten at 29.xx, but not for long.  Look at the big picture, and you’ll realize they must compete on the world marketplace.

Perhaps the government plan is to simply sell raw materials to larger industrial states, and receive millions of tourists in return.  I hope i’m wrong on this.

There were similar discussions years ago when the Baht was at 65, 60 then 55 to the Pound, it's too strong "they" wailed, they're killing tourism they cried, it'll soon be back to 70 "they" said. One or two said, this is the future, get used to it, there's much worse to come, it'll reach 42, +/- 5% within five years. Ha they "said", you're mad, the country will go broke first, it'll never happen, exports will collapse, tourist locations will become deserts. Fast forward and "they" have returned home, out of necessity, some belt tighteners linger.

 

Within five/seven years, USD/THB at 27 will be the norm., that's only 10% stronger than what we've already experienced, it was at 25 for years, remember!

 

Do I like it, not one bit but why deceive yourself.

 

That's the big picture.

 

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3 hours ago, Trillian said:

There were similar discussions years ago when the Baht was at 65, 60 then 55 to the Pound, it's too strong "they" wailed, they're killing tourism they cried, it'll soon be back to 70 "they" said. One or two said, this is the future, get used to it, there's much worse to come, it'll reach 42, +/- 5% within five years. Ha they "said", you're mad, the country will go broke first, it'll never happen, exports will collapse, tourist locations will become deserts. Fast forward and "they" have returned home, out of necessity, some belt tighteners linger.

 

Within five/seven years, USD/THB at 27 will be the norm., that's only 10% stronger than what we've already experienced, it was at 25 for years, remember!

 

Do I like it, not one bit but why deceive yourself.

 

That's the big picture.

 

Perhaps you’re right—the Baht will rise another 10%.  Yes, I know it was pegged to USD at 25 for years.

But since that time, the Thai economy has flourished with huge international investments in industry and infrastructure to match—all since the Baht fell in 1997.  Look at all the resorts built and high rise construction built since them,  Given the tremendous growth here, would they (BOT) really throw it all away, with an ever rising Baht?

Would reducing themselves to a raw material/agricultural provider to industrial powerhouses really seem preferable to them to what they have now?

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7 hours ago, Isaan sailor said:

Perhaps you’re right—the Baht will rise another 10%.  Yes, I know it was pegged to USD at 25 for years.

But since that time, the Thai economy has flourished with huge international investments in industry and infrastructure to match—all since the Baht fell in 1997.  Look at all the resorts built and high rise construction built since them,  Given the tremendous growth here, would they (BOT) really throw it all away, with an ever rising Baht?

Would reducing themselves to a raw material/agricultural provider to industrial powerhouses really seem preferable to them to what they have now?

"Given the tremendous growth here, would they (BOT) really throw it all away, with an ever rising Baht?

Would reducing themselves to a raw material/agricultural provider to industrial powerhouses really seem preferable to them to what they have now?"

 

I didn't get this part, what makes you think it would all be thrown away!

 

You seem to think exports would simply stop being exported as soon as the Baht hits below 30, the evidence is that nothing changes on that front, even at 29. We don't know what happens at 28 but it's possible not much happens at that level either.

 

And tourists simply don't care if the Baht is 31 or 29, tourists don't say let's holiday in Thailand, oh wait, the Baht is 29 so we won't go! If tourists want to take a vacation in a particular location, 31 vs 29 will not be a limiting factor, which is why tourist numbers have increased here every year......queue those posters who all have friends who say they're not coming back because Thailand is too expensive, yawn!

 

The real problem in these discussions is that expats are being squeezed by the exchange rates, especially the ones on fixed income. They, you, are projecting that across the entire economy so you keep coming up with the wrong answers on the economy as a whole, it's a proxy argument where you think everyone else is getting squeezed also and not everyone is. There are plenty of independent travellers who think Thailand offers good or fair value and they have money to spend, the exchange rate is not an issue for them and the country has said they will target them further. It's not the same inexpensive destination it was ten fifteen or twenty years ago but things have moved on since then, at least the economy has...queue more posters who think the tourist numbers are fudged, yawn!

 

 

 

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Back to the Baht, Reuters this morning reports that:

 

"A decline in the dollar earlier this week set off a technical formation known as a “Death Cross,” which occurs when the 50-day moving average crosses below the 200-day moving average, according to analysts at BofA Global Research. Past occurrences of the Death Cross have been followed by a period of dollar weakness eight out of nine times since 1980 when the 200-day moving average has been declining, as it is now, analysts at the bank said".

https://www.reuters.com/article/us-health-coronavirus-dollar-analysis/death-cross-strikes-u-s-dollar-as-covid-19-cases-grow-idUSKBN2492PI

 

The US Dollar Index is down 6% on the year.

 

 

 

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1 hour ago, Trillian said:

Back to the Baht, Reuters this morning reports that:

 

"A decline in the dollar earlier this week set off a technical formation known as a “Death Cross,” which occurs when the 50-day moving average crosses below the 200-day moving average, according to analysts at BofA Global Research. Past occurrences of the Death Cross have been followed by a period of dollar weakness eight out of nine times since 1980 when the 200-day moving average has been declining, as it is now, analysts at the bank said".

https://www.reuters.com/article/us-health-coronavirus-dollar-analysis/death-cross-strikes-u-s-dollar-as-covid-19-cases-grow-idUSKBN2492PI

 

The US Dollar Index is down 6% on the year.

 

 

 

The USD is on investor’s sh_t list—I get that death cross stuff...

But change is a constant. At some point, the conditions will reverse—and gold, the Euro, and the Yen will ease.  

To me, the glass is half full...and we may well discuss in the near future why the USD has risen so abruptly...

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28 minutes ago, Isaan sailor said:

The USD is on investor’s sh_t list—I get that death cross stuff...

But change is a constant. At some point, the conditions will reverse—and gold, the Euro, and the Yen will ease.  

To me, the glass is half full...and we may well discuss in the near future why the USD has risen so abruptly...

Yes indeed, finally a point we can agree on. :))

 

Not wishing to spoil the mood or appear pessimistic but, the following is an interesting read on USD strength. 

 

https://www.bloomberg.com/opinion/articles/2020-06-14/dollar-crash-how-will-it-unfold

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“There's something Pavlovian about Reuters and Bloomberg economics reporters, when they have to write something about the Thai economy they must mention how strong the Baht is and how it's hurting the Thai economy, I think one of them may even be a TVF poster! “
 

-Trillian, yesterday.
 


 

“Not wishing to spoil the mood or appear pessimistic but, the following is an interesting read on USD strength. 

 

https://www.bloomberg.com/opinion/articles/2020-06-14/dollar-crash-how-will-it-unfold

 

 

-Trillian, today


 

 


“The lady doth protest too much, methinks.”

 

-Queen Gertrude (Hamlet)

 

Edited by Airalee
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The central bank recently said the baht's strength could affect an economic recovery and it would consider more steps as necessary to curb it.

 

How many times per year can a central bank recycle a line ????

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