Bank chairman sounds the alarm. Panic-mongering?
Panic-mongering or a serious warning? Virabongsa Ramangkura, chairman of the board of the Bank of Thailand, warns of a financial and real estate bubble as a result of the foreign capital flowing into Thailand. That bubble could burst by the end of the year, he thinks.
But Minister Kittiratt Na-Ranong (Finance) does not believe it. Most of the 'hot money' from foreign investors flows into the capital and equity markets, not the real estate market. Investors may have reinvested their profits in real estate, he says, but this is still the exception and does not lead to economic problems. "Nevertheless, the government is taking the necessary precautions," Kittiratt said.
Virabongsa, who previously argued in vain for a reduction in the policy rate to curb the inflow of foreign capital [said by some to be responsible for the baht/dollar exchange rate appreciation] points out that the stock market index has risen from 1000 points in the middle of last year to 1600 points now and government bond purchases have increased more than 15 percent. He doubts whether the central bank's Monetary Policy Committee is willing to lower interest rates to curb the inflow of foreign capital.
Virabongsa's concerns are in line with those of the Asian Development Bank (ADB). The ADB warns of the increasing risk of bubbles in the real estate markets of emerging East Asia due to capital inflows into the equity markets. The region is more resilient than ever, says Thiam Hee Ng of the ADB. But governments must be careful that the increase in capital inflows does not lead to excessive property gains. They must prepare for the flow of capital to change direction as the economies of the US and Europe recover.
'Emerging East Asia' refers to China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Vietnam and Thailand. Investors have been pouring their money there since the early XNUMXs, but recently that inflow has increased sharply due to low interest rates and slow or negative economic growth in developed countries. Emerging East Asia, on the other hand, has high growth rates and exchange rates are rising.
(Source: Bangkok Post, March 19, 2013)
In the 90s we called these countries Asian Tigers. Any country in the world would be happy with capital inflows related to real estate and the stock market. I don't understand this fearful attitude. Thailand needs money and investment from abroad in order to grow. The houses and apartments are mainly sold to Thai speculators and farang. If that farang were to disappear, those Thai speculators would not invest any money either, because they see a possible increase in value in real estate.
Thailand open up that market and let foreigners invest, so there will be more employment and the country can join countries such as Hong Kong and Singapore.
If you want to grow in this world, don't just focus on rice.
Capital will only leave if wrong policies are pursued such as over-borrowing and thereby jeopardizing the strength of the Baht.
In short, keep the money coming
Borrowing too much by the Thai…..
Wasn't that what caused the previous crisis?
Can't imagine anyone wanting to do that again.