Thailand, along with several other Asian nations, have enacted a capital inflow withholding tax of 15% on Foreigners investing in Thailand. This is in response to a massive influx of capital from Western economies in the past few months. As a result of the capital inflows, Thai Thailand Stock Exchange is pushing 1,000 points. The Baht is also appreciating against the dollar dramatically.
From an investment perspective the bull run on the Thailand Stock Market cannot last because it is based on foreign money from short term institutional traders. Once global conditions change, the short term traders will find new opportunities and the Thai Stock Exchange will return to its normal levels.
On the other hand, Thailand’s strong currency is yet another factor hampering the Thailand tourism recovery. Although the red shirt protests and crackdowns are probably beginning to fade from people’s memories, economic factors and safety concerns are still pre-eminent in people’s minds. Thailand looks expensive to travelers because of the rise of the baht. The world as a whole is also more reluctant to spend on discretionary items and expensive traveling because of economic fears. A vacation close to home seems more prudent in the current climate.
The G-20 has recently held a conference wherein world leaders attempted consensus on avoiding a currency war. Nevertheless, the mere fact that a conference was called to discuss avoiding devaluation of currencies goes a long way to making the argument that the threat is real and imminent.
In the face of currency devaluation, and the prospect of massive inflation where do you put your money? The gold bugs are no longer the fringe people stocking up on emergency rations and ammo for their underground bunkers. They are the people right next door.
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