Archive for October, 2009

Chart, exports : at last, a Green Shoot… – 8,5 % in september

At last ! A Green Shoot…


And, obviously -8,5 % in september (year on year) is better than the -25 % we had in july.

The Commerce Ministry has released the first data for exports in september : 14,99 billions USD.

Imports fell 17,9 % at 12,92 billions USD.

The Bank Of Thailand will publish the details on october 31.

A classic comment (from an economist in Singapore), in line with the doxa.

When base effects kick in in November, we will probably see stronger headline numbers. Exports will continue to get better. (Forbes)

Base effect… In november last year exports in value dropped like a stone. Therefore, the % of difference with november 2009 is likely to be less “uggly”.

To face debts, Thai Airways plans to raise… capital


Thai Airways International, Thailand’s largest airline, plans to issue shares next year to raise funds for repaying short-term debt, its newly appointed president said on Monday.

Piyasvasti Amranand did not say how much money the flag carrier will raise. But 29 billion baht ($869 million) of debt matures next year, he added.

Kosin Sripaiboon, a senior analyst with UOB Kay Hian Securities, said he expected Thai Airways to raise almost 20 billion baht ($600 million), or issue 800 million new shares, half of its current registered capital of 1.7 billion shares.

The carrier has a total debt of 160 billion baht [4,8 billions USD]

“We need to raise capital because we have a lot of short-term debt to be repaid,
” Piyasvasti said.

“We are also trying to convert our short-term debt to longer maturities. As the long-term debt has a maturity of six years, that doesn’t match our funding for plane procurements,” he told reporters on the first day of his top job. (Reuters)

Let me translate what the new president seems to have discovered on his first day on the job : Thai Airways is broke. Speak about a discovery !

Let’s review the titles of some of my articles about the national carrier.

Thai Airways : “The situation has deteriorated from bad to worse “...
Thai Airways : is there any captain on (the) board ?
If… if… if and if… Thai Airways will return to profits
No cash to pay new airplanes, airports closure, economic downturn… Thai Airways is crashing
Peter Principle : desperate Thai Airways relies on… government officials to fill its aircrafts and seeks 1 billion USD
Thai Airways : tales of the daily corruption

You have an image coming to your mind ? Yes, you’re right : a crashing airplane.

Sure… we could blame the high oil prices in 2008… the political crisis… the flu… then the recession… then the extraterrestrials, etc. This is exactly what the new president is doing.

Long gone are the days when Thai Airways was so terribly exotic… when tourism increased every year… when the reputation of the airline was a rising star…

Those externals factors had a cruel effect : they expose the company, naked, in front of the whole world. It’s impossible to lie anymore, to hide behind a reputation and a never ending tourism growth. The party is over. Now it’s time to pay, and the smart money is unlikely to answer the call.

Thai Airways is a public company (the thai government is the first shareholder), baddly managed, indebted, overstaffed, with an old fleet, acting like a reservoir of privileges for many lunatics in unform (the cousin, the maid, the mia noi of General X, colonel Y etc.), frozen in time, rapped and abused over and over by politicians, and unions too.

A perfect cas d’ecole. A negative show case.

So who is going to buy this generous offer ? Shares from Thai Airways ? To invest now in an airline, and in Thai Airways, would be just suicidal.

The thai government ? Broke too.

And what about dilution ?

But eventually, of course, someone will pay : the thai people.

Chart, gvt’s revenues : -8,8 % for fiscal year 2009

End of september, end of the fiscal year for the thai government. Data have been updated on the website of the Finance Ministry.

Result ?

Total revenues (gross) : 1 674 billions THB, -8,8 % compared to the previous fiscal year (october 2007 to september 2008)
Corporation taxes : -14,8 % (392 billions THB)
Personal income taxes : -3,5 % (197 billions THB)
VAT : -10,8 % (at 343 billions THB)

And we are talking in current THB… So factor in inflation plus the several “stimulus” packages… that’s weak.

What about september alone ?

The VAT is at -10 % compared to september 2008. That’s better than august (-16 %). Corporation taxes take a hit at -82 % (128 billions THB).



Corporation taxes should remain under pressure.


King’s health : “lung infection… and heart conditions… but no worries”… and new antibiotics

First official reaction from the royal family.

Majesty the King’s health condition is no longer worrying, said his daughter HRH Princess Chulabhorn Walailak

“Now there is nothing to worry about his heart conditions and lung infections,” she told officials at Thai embassy in Germany during her visit there. (Nation)

It’s like an impressionist painting… Little by little, we get more details.

And It’s really surprising that no one seems to notice… the “heart conditions” !

It’s astonishing. 27 official statements were issued since the hospitalization… and they never talked about “heart conditions“.

The King is hospitalized since september 19. One month already.

However, there is a new detail with the 27th statement…

The Committee of Royal Physicians reported that His Majesty the King had a little fever from time to time. (PRD)


28th statement… and the fear is back.

His Majesty the King’s doctors administered a new dosage of antibiotics after his lungs were found still to be inflamed, the Royal Household Bureau said in a statement released last night.

His Majesty’s fever, however, had lessened and he could sleep well and had regained his appetite, the bureau said in its 28th statement since the King was admitted to Siriraj Hospital with a high fever and inflamed lungs on September 19. (Nation)

That’s -at least- the second time that the fever is coming back and therefore the antiobiotics (after being stopped, apparently).

King’s health : shift in official communication

Though His Majesty’s lung infection is clearing up, complete recovery will still take a while, the 25th Royal Household Bureau statement said yesterday.

The statement explained that older people usually take longer to recover, adding that royal physicians have asked His Majesty to remain at Siriraj Hospital so the continued medication and rehabilitation can ensure recuperation. (Nation)

After toying with the nerves -and basic common sense- of the whole thai population for almost A MONTH (the King was hospitalized on september 19)… after using ridiculous “permutations” to write the official statements (using the words “food”, “sleep”, “better”, “x-ray”, “intravenous fluids” and then just changing the order of those words within the statements)… after playing seek and hide with basic medecine concepts… after playing with words (infection becomes “inflamation” etc)… the people in charge of the PR, eventually, understood that something was seriously wrong and that the frontier between “controled communication” and outrage was  thin.

So the 25th statement represents a shift.

-It’s the first time the statement speaks about the future : “complete recovery will take time”. It’s obvious but it’s good to write it.

-it’s the first time the statement speaks about the King as an “old man”. I mean : a man.

Sounds like small details. But it’s important.

Last but not least, after saying that antiobiotics were stopped… the statement talks about “continued medication”… Which kind ?

Exchange rate Drama : more non sense coming from so called “exporters”

The Exchange Rate Drama is unfolding. And some lala businessmen are crying like babies.

Thailand’s exports are unlikely to achieve 10% growth next year if the government leaves the baht’s appreciation unchecked, exporters warn.

“Ongoing baht strength will harm Thai shipments and weaken our competitiveness,” said Pornsil Patchrintanakul, deputy secretary-general of the Board of Trade.

Mr Pornsil was one of a group of leading executives from more than 50 trade associations who on Monday met with Veerasak Jinarat, the vice-minister for Commerce.

The baht, quoted Monday at 33.35 to the US dollar, is currently trading at a 14-month high and is up 4.4% since January.

Exporters said the baht has appreciated significantly faster against the dollar than competing currencies such as the Chinese yuan or the Vietnamese dong, hurting Thailand’s trade competitiveness. (Bangkok Post)

Who is Mister Pornsil ? A guy who has a very simple view of business : rewards and no risks.

His only ability to sell something outside Thailand is to rely -not on merit, talent, intelligence, better products, courage and why not luck-… but on cheap currency.

In the ideal and lala world of Pornsil, international trade would be someting like that :

-Hello mister foreign buyer. I sell to you 1 kilo of rice, 1 t-shirt and 1 air conditioner… let’s see total cost 200 USD… Special price for you. I will get 252453456533 millions THB thanks to the exchange rate. It’s magic. Yeah that will do. I could buy 17333 condos for my daughter, my nephew, my maid and mia noi. And maybe 6536 BMW cars. Pink color. Okay khrap ?

When the USD – which is the only currency that matters as far as exports are concerned (read my article here)- when the USD is falling… then small fry people like Pornsil start to freak out.

Not even 1 minute, Pornsil is able to think that a lower USD will lower the huge oil bill Thailand has to pay every month, and the bills for many other raw materials and parts imported. And therefore, will lower the costs of many businesses… Hence, the costs of exporters !

I mean it’s Economy 101. Minus 101 should I say. First grade school level. But obviously, it’s too complicated for Pornsil’s 2 neurons brain.

Furthermore, Pornsil is unable to understand that if his pathetic export company is selling less It’s not because another country can give a better price thanks to a better exchange rate… But instead, because DEMAND (solvent demand) HAS BEEN REDUCED… The crisis, hello ? The recession ? Oh my god… I forgot that Abhisit told us that the economic crisis was over. My mistake. One point for Pornsil. 😉

Again, it’s way too complicated for all those clowns.

Last but no least, I would like to refresh your memory, with a (now) famous statement from Tarisa, our dear BOT governor. January 2009. Like an eternity away.

“Comparing the baht against the dollar does not represent the whole picture.”

Cheers Tarisa. You’re a winner. 😉

Dance of the suckers : thai Central bank “intervenes” to curb THB gains

We had an interesting string of events this week :
-dollar was hammered
-gold shot up

… and

Asian central banks said to be intervening in currency markets overnight by buying dollars included South Korea, Hong Kong, Taiwan, Thailand, the Philippines and possibly, Indonesia, according to analysts. (Reuters)

A pathetic fart. And the perfect Dance of The Suckers.

And indeed the Bank Of Thailand does confirm :

The Thai baht, Asia’s fourth best-performing currency this year, is rising too fast this month and the Bank of Thailand is taking action to slow its rise, an assistant central bank governor said on Thursday.

‘Somedays its strength is beyond economic fundamentals,’ Suchada Kirakul told reporters. ‘The baht is strong and we are still taking care of it.’

‘Our economic factors are not as good as others’, so we (our currency) does not need to rise as fast as theirs’,’ she said. […]

The BOT has been in the market frequently in recent weeks to curb baht gains, but the currency has climbed fast after breaking 33.50 — a level which the market suspected would trigger intervention. (Forbes)

First, you’ll notice : they spend a huge amount of energy to convince us that the Recovery (hats off) is there, but… meanwhile they tell us that the thai economy is not as good as others… And therefore, cry baby, the local currency should not increase versus USD.

Let’s make it clear : the THB is not “strong”. What is happening is that the USD is falling. Period. And a lot of smart money is going into asian and emerging countries. It’s mechanical : offer and demand… People want to invest in Asia (and to fly away from USD), so they have to buy local currencies, and so they are selling US. Therefore the exchange rates of those local currencies are going up.

But it’s too complicated for the Suckers. It’s politically incorrect. Because the Recovery is nothing but a fiction, they all want to boost their exports… at the expenses of others.

It’s the famous Beggar thy neighbour policy, through competitive devaluation (or at least competitive-not-valuation).

The famous blogger Mike Shedlock summarizes it perfectly :

Every country wants to grow by ramping up exports in a world of decreasing consumer demand. To achieve that end, every country wants its currency to be weaker against every other currency. Of course that is logically impossible.

Logically impossible indeed. But again, it’s too complicated for the Suckers to understand this.

The BOT is buying USD through forward positions.


(Source BOT)

From a low point of 3,68 billions USD end of february… the total forward positions increased to 15,63 billions last week.

It means we can’t even see the “‘interventions” of this week in the current chart (we will have to wait 7 days more).

To know more about forward positions, you should read my article of last december : The case of the forward positions : the coal mine canary.

Forward positions = Bank of Thailand’s forward obligations to buy (long) or sell (short) foreign currency against Thai Baht.

For that matter, they are like a “peek” at how the reserves will behave in the future.

By the way, I was perfectly right. I wrote that eventually the BOT would follow the asian bias, to save thai exports.

And I spoke about the “joker” too.

And this is the true frightening part… USA are doing exactly the same (but for different reasons, not exports). The USD is condemned to loose value. It’s inescapable (zero interest rates, massive printing of money, mountains of debts, etc.)

So you start to understand the problem : we have a freaking race toward zero, a race toward the bottom. What could happen if all the countries in the world see their currencies going down ? At the same time ? It’s insane.

Yes… this is exactly what is happening now… and this is why gold is going up ! Paper money is toilet paper.

Anyway. Back to the BOT and asian central banks.

Interventions do not work. They can’t control the forex market. Because it’s just too huge. Japan was a famous “currency manipulator”… At least on intends side… But it didn’t work. So of course, if we speak about scale, the BOT’s small farts will change nothing.

Only one thing could work… They did it not so long time ago… You don’t remember ? 😉

Capital controls !

Yes ladies and gentlemen… In december 2006, three months after the Coup… And the situation was exactly the same : the THB was shooting up against the USD. At that time already, the obsession was to save exports sector.

One last word : when we speak about “saving thai exports”… it’s not really a matter of competition. I think it’s even simpler than that. It’s a matter of liquidities. For the whole economy.

Thai companies convert in THB (most of) the USD they earn outside Thailand (this exchange was even compulsory before... the BOT changed the regulations in 2008 , read here).

It’s very simple to understand :

-1-with an USD-THB exchange rate of 40, when you export 1000 USD of goods, you receive 40 000 THB. You feel rich. You can use this money to invest, to buy stupid and overvalued condo in Bangkok… The builders will earn money… Workers have work… The economy is running. People are happy. So politicians are happy too, and they can steal more money.

-2-with an USD-THB exchange rate of 33, when you export 1000 USD of goods, you receive 33 000 THB. You feel much poorer. You won’t buy a third condo for your children. Or to rent to stupid foreigners who won’t come to Bangkok anymore. Builders will earn less money. Unemployment rises. The economy is choking. People are not happy… And politicians are scared… And they can’t buy another Mercedes Benz with the money they can’t steal (and that’s really inhumane 😉 ).

Liquidities = lubricant = fuel = gasoline onto the fire.

The thai economy (along many other asian countries) is not really healthy (at this stage). A large chunck of the “growth” we have had in the recent years… was a mirage. Fueled by cheap currencies. Remove the lifeline of a strong USD… what do we have left ?

Abhisit’s smile ? 😉

Not quite enough to save us…

PS : I advise you to read the latest piece of Eric Janszen, about inflation on the long run… What he calls inflation via currency depreciation : the stealth currency devaluation. It’s radiant.

You’d think the deflationists would wonder how oil prices are above $70 in 2009 when demand is lower and inventories higher than in 2001 when the economy was nominally 15% smaller and oil prices averaged $22 after a very brief recession. […]

The U.S. monetary system is not on a gold standard in 2009 as it was in 1933. Instead the U.S. and the rest of the world monetary regime employ a de-facto global oil standard.

To prevent a liquidity trap via currency depreciation, instead of depreciating against gold the U.S. government depreciates the dollar against oil.

On one hand, we have Mike Shedlock, the Great Deflationist. And the other hand, what Mish calls the inflationistas. This debate deflation versus inflation is raging. Personally I’ve picked up my side : both. 😉

Mish is right : we are in deflation (assets prices / debts deflation). But Janszen is right too : on the long run, the bias toward a slow debasement of the value of money is just too appealing for the politicians (nothing new, the roman emperors did the same).

Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.