Back to future: SE Asian stock collapse?<\/p>\n
By Joshua Kurlantzick<\/p>\n
BANGKOK (AFP): Thailand's stock exchange is rapidly falling
\nthrough the floor, triggering fears in Southeast Asia that the
\nregion is heading towards another economic crisis, analysts said
\nMonday.<\/p>\n
"Foreign investors are deciding to completely abandon
\nThailand's market .... in the next six months, we'll see a major
\ncooling off in all Southeast Asian regional markets," an analyst
\nwith a prominent foreign brokerage in Bangkok told AFP.<\/p>\n
"Already, people can't be bothered with the Thai market, and
\nthe other regional markets are likely to suffer greatly as well."<\/p>\n
"Even major, positive economic news (in Southeast Asia) just
\ntriggers one-day recoveries, and then nothing more. It's an ever-
\ndecreasing, very dangerous circle... except in Singapore, which
\nis stronger."<\/p>\n
Thailand's stock exchange has lost nearly 25 of its value
\nsince Jan. 1, while the Indonesian bourse has lost approximately
\ntwenty percent and the Philippine market has lost 27 percent over
\nthat time.<\/p>\n
Foreign investors have already sold seven times more Thai
\nstocks in 2000 than they did in all of 1999.<\/p>\n
The Bank of Thailand has hired external consultants to study
\nstimulating the Bangkok bourse, and the Thai cabinet held an
\n"emergency meeting" on May 11 to examine whether the stock drop
\nwill cause an economic collapse.<\/p>\n
It is unclear whether the cabinet or the consultants will have
\nany effect.<\/p>\n
Despite high praise from the IMF, which on May 9 lauded
\nThailand's "impressive" economic recovery, many foreign and local
\nretail investors believe Southeast Asia's alleged economic and
\npolitical reform is just a smokescreen.<\/p>\n
Many investors are concerned that Thai and Indonesian banks
\nunderreport their non-performing loans, that Thailand faces
\nmounting public debt and that Southeast Asian states have failed
\nto establish a government-backed institution to manage insolvent
\ncompanies' assets, one analyst said.<\/p>\n
In addition, few Southeast Asian states have the kind of sexy
\nInternet companies that still attract investors despite recent
\nlosses on the Nasdaq index, he said.<\/p>\n
And political uncertainty throughout the region also is
\ndeterring foreigners.<\/p>\n
Indonesia remains plagued by violence in Aceh, the Maluku
\nislands and even the main island of Java. The southern
\nPhilippines has witnessed several recent hostage crises, and
\nThailand is due for a general election before the fall.<\/p>\n
Because of this political uncertainty, as well as many
\ncitizens' belief that Asia's economic recovery is still fragile,
\nconsumer spending in Southeast Asia remains much lower than in
\npre-crisis years.<\/p>\n
Because of its huge public debt, the government has been
\nunable to adequately stimulate Thais to open their wallets, said
\nMerrill Lynch Phatra Securities' Theerapong Vachirapong.<\/p>\n
The government "has basically failed to encourage more
\nconsumer spending," he said.<\/p>\n
Financial doomsday could loom just over the horizon.<\/p>\n
Tuesday's meeting of the U.S. Federal Reserve, at which the
\nFed is expected to raise U.S. interest rates by at least fifty
\npoints, may be the catalyst that converts Southeast Asia's market
\nslide into a wholesale economic collapse.<\/p>\n
Thai commerce secretary Supachai Panitchpakdi has admitted
\nthat even more foreign investors may pull out of Thailand after a
\nU.S. rate hike, since foreigners would seek more secure places to
\nput their money.<\/p>\n
And any major slowdown in U.S. growth could wreck Southeast
\nAsian manufacturing and agrobusiness.<\/p>\n
Approximately 25 percent of Thai exports go to the United
\nStates, and several Southeast Asian states have made export-led
\ngrowth a key to their economic recovery.<\/p>\n
But Arporn Chewakrengkrai, economic advisor to the prime
\nminister, told reporters that a rate hike would not have a
\nserious effect on Thailand, as the country enjoys a current
\naccount surplus and can weather a major capital outflow.<\/p>\n
"The impact would not be as severe as expected, thanks to the
\nsurplus in the country's current accounts," he said.<\/p>\n
And though exports to the United States are important to
\nThailand's economy, Thai manufacturers have been diversifying
\ntheir client base and exporting to more states, he said.<\/p>",
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