Twenty Years On
Two months from now will mark the 20th Anniversary of the start of the Asian Crisis. The depegging of the Thai baht on 2 July 1997 was the earthquake which set off multiple aftershocks throughout the region, not least in Indonesia, Korea and Malaysia. It induced a six-year long recession in Hong Kong. In April we made a country visit to Thailand to check on what was happening today and also revisit those heady mid-1990s days. What we found was an economy that had entered - at least in the minds of our contacts - middle age. Most people now consider Thailand's future to be one of around 3% growth, solid external fundamentals and more boring (a good thing) politics.We found ourselves, in stark contrast to the mid-1990s, to be much more upbeat about Thailand's prospects than the consensus. The country sits at the heart of the Greater Mekong Subregion (GMS). It has the potential to become that region's hub: in logistics, financial services and transport terms. Already Thai companies (Thailand has a net direct investment outflow these days) are investing heavily in Cambodia, Laos and Myanmar. The Asian Development Bank has committed tens of billions of dollars to infrastructure investment in the GMS over the next decade. Thailand itself now seems to be cranking up the approvals for its Eastern Economic Corridor project - a transport, industrial and tourist hub that will serve the whole region.
And we are not at all down on the baht. In contrast to 1997, the only prospect for the currency is a steady appreciation. That is what comes of having an 11%+ current account surplus. Could it hit Bt25/US$1, the level that was defended so damagingly twenty years ago? Certainly not in the next few months. But could the Thai baht breach the Bt30/US$1 mark? That is not at all out of the question although the Bank of Thailand is likely to do battle in the opposite direction this time.
As we show in the attached Asianomics Group Strategy Report, Twenty Years On, we are much more relaxed about Asia's prospects with respect to external debt and external balances than was warranted a generation ago.
Asianomics, founded by Dr Jim Walker in 2007 and based in Hong Kong, specialises in economic analysis research, cross-referencing their work with credit cycles, profit cycles and cash flows. Asianomics focus is on developments in the Asia-Pacific region, and they also cover developed markets like the US and Europe.
The Austrian Economics model provides a framework for the economic research. The basis of the School of Austrian Economics is that economies work more efficiently and effectively when companies and individuals are free from excessive interference by government and special interest groups. The Asianomics economic research team includes Deputy Chief Economist Sharmila Whelan who is recognised for non-consensus thinking and her depth and quality of primary research, and Chief Economist Dr. Jim Walker.
Asianomics’ subscribers have access to regular economic commentary, stand-alone Country Reports, Special Reports and Investment Strategy Reports. Dr. Jim Walker also provides weekly webcasts.
Dr. Jim Walker is regarded as one of Asia’s leading economists. Prior to setting up Asianomics, he was the Chief Economist at CLSA Asia-Pacific Markets, where he worked for more than 16 years. He has achieved numerous ‘Best Economist’ rankings in the Asiamoney, Institutional Investor and Greenwich surveys of fund managers.
Previous successful calls include:
- In 1995 Dr. Jim Walker wrote about the prospect of Asia being forced off its de facto dollar peg “within the next two-three years”. The Asian Crisis, precipitated by the Thai baht devaluation, began in July 1997.
- Forecasted the US 2007 downturn and financial sector meltdown in series of ‘Apocalypse’ reports.
- Called early the upswing in the Indian stock market in the final quarter of 2013.
Recent Recommendations:
- Overweight China - We are overweight Chinese equities with momentum improvement in the economy.
- Short Sterling, Long Renminbi - China’s currency offers good upside with a positive carry.
- Short European Financials, Long Indian Financials - This is the simplest pair trade to play superior demographics and growth in Asia relative to the region with the biggest problems.
- Long EM Asia, Short Developed countries - South and SE Asia, and direct investors from North Asia, are ‘buy and hold’ investment bets.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.