Thread: Thailand's Baht, Peso --- Decline

The perception about HBOS is that it's being pushed lower by speculation. The underwriters of the current stock issue at 275p look set to take a major hit. The bank is unlikely to be in trouble unless the underwriters default. That would never be allowed.

In hindsight merging a conservative bank with a cheesy building society doesn't look like it was such a good idea.

Originally Posted by Begbie

The perception about HBOS is that it's being pushed lower by speculation. The underwriters of the current stock issue at 275p look set to take a major hit. The bank is unlikely to be in trouble unless the underwriters default. That would never be allowed.

No the underwriters will be left with the shares. This is not good and will bring Rights Issues for UK banks to a screeching halt, when most expect another round of RI's before this is concluded. The underwriters will be forced sellers of the shares, which will drag the share price down further and could cause a run on the bank.

Originally Posted by Begbie

In hindsight merging a conservative bank with a cheesy building society doesn't look like it was such a good idea.

Add to this that the Halifax was britains biggest mortgage lender and has an all-or-nothing bet on the UK housing martket, which is currently in freefall...

Originally Posted by bkkandrew

No the underwriters will be left with the shares. This is not good and will bring Rights Issues for UK banks to a screeching halt, when most expect another round of RI's before this is concluded. The underwriters will be forced sellers of the shares, which will drag the share price down further and could cause a run on the bank.

A drop in share value causing a run on the bank ? Is there a linkage between the banks intrinsic value and the shares at the moment or is the drop in price just panic about the future of he housing market ?

If the shares fell but the bank was still sound, surely a good time to buy in ?

Mortgage lender HBOS mounted a strong rally on Thursday taking the rest of London’s banking sector and the benchmark FTSE 100 index with it.
The FTSE 100 climbed 35 points, or 0.6 per cent, to 5,759.9 by mid morning.

maybe all will not be doom and gloom

Until this aspect is dealt with who knows what is going to happen.

"Econbrowser
Analysis of current economic conditions and policy
« Making fuel out of air and sunshine | Main | Charles Engel on the oil bubble »

May 17, 2008
Oil bubble
How speculation may be contributing to the most recent moves in oil prices.

An important recent trend in management of pension and hedge funds is the increasing allocation of investment dollars to commodity speculation. There are lots of ways you can do this. Perhaps the simplest is to purchase, say, the July NYMEX oil futures contract. If you'd bought that contract Friday, it would enable you to take delivery of oil in Cushing, Oklahoma some time in July for $126/barrel. As a pension fund, you don't actually want to receive that oil, so in early June you'd plan on selling that contract to someone else and using the proceeds to buy the August contract. If oil prices go up and you can sell the contract for more than $126/barrel next month, you will have made a profit. By rolling over near-term futures contracts in this way, your "investment" will earn a return that follows the path of oil prices.

The Goldman Sachs Commodity Index is essentially a mechanical calculation of how much money you'd have each day if you followed a strategy like this for each of the major commodity contracts, with energy prices comprising about 70% of that index. There are a number of firms that offer products that could implement such strategies on your behalf, such that the dollar value of your investment will essentially follow the GSCI (or similar index) less trading costs and management fees.

In April Bloomberg reported:

Investments in commodity indexes rose $40 billion in the first three months of the year to $185 billion, a larger gain than the whole of 2007, Citigroup analysts Alan Heap and Alex Tonks said today in a note to clients....

After investments in indexes, commodity trading advisers account for the biggest portion of the total amount invested, the Citigroup analysts said. At the end of the first quarter, advisers accounted for $94 billion, 18 percent more than at the end of last year, the analysts said.

Hedge funds ranked third, with $75 billion in commodity holdings, an increase of 25 percent over the end of 2007, Heap and Tonks said. In all, they estimate $70 billion in additional investment funds flowed into commodities markets in the first quarter.

What would be the effect of a big increase in the volume of purchases of near-term futures contracts? If investors were all equally informed and risk neutral, an increased volume of purchases would have no effect on the price. In such a world, there would be an unlimited potential volume of investors out there willing to take the other side of any bets if the purchases were to result in a price that was anything other than the market fundamentals value. But with risk-averse investors or with differing information, the answer is a little different. For example, I might read your willingness to buy a large volume of these contracts as a possible signal that you know something I don't. For this reason, standard financial "market micro-structure" theory predicts that a large volume of purchases may well cause the price to increase, at least temporarily, until I have a chance to verify what the true fundamentals value would be.

But verifying that true fundamentals value in the case of current oil markets is not an easy thing to do. If you believe, as I do, that the Hotelling principle has now become a factor contributing to oil prices, the market fundamentals value depends on how much oil the world is going to be able to produce over the next half century and what alternatives we're going to develop. If you have a different answer to that than I do, it's a very difficult task for me to figure out which one of us is right.

Let us for the moment accept the possibility that a sufficiently large volume of speculative commodity investment could succeed in driving the price of those futures contracts above what they would have been in the absence of these purchases, at least for a while if the volume of such purchases continues to increase. That still leaves a key question: If speculation is driving the futures price up, what force is bringing the spot price up with it? Wouldn't the large volume of speculators selling the July contract next month drive the July price down at that time, so they make a loss, not a gain?

The enterprise at the end of the chain in July, the ultimate final buyer of the July contract, is someone who actually wants to take physical delivery of oil in Cushing, Oklahoma some time in July. That would be a refiner who wants to turn it into gasoline. The demand for oil from a refiner in Cushing is responsive to the spot price through two mechanisms. The first is the demand elasticity that's ultimately inherited from the motorists who use the gasoline. If consumers face a higher price for gasoline, they will reduce their purchases, by which mechanism ultimately the refiner would want to buy less crude when the spot price goes up. But, particularly in recent years, that consumer demand response is very small.

A much more important way in which the spot price of crude would affect the refiner's demand for the product is through an intertemporal calculation. Given my customers' demand, I'm going to need to buy the product sooner or later. If you charge me a lower price today than you're going to charge me next month, I'd choose to buy more today to put it into inventory. If you charge me a higher price today, I'd rather run down my inventory and buy the oil next month, and of course the futures market allows me an opportunity to lock in a price for doing just that. Thus by far the most important factor in refiner's demand for July oil will be the August futures price. If my production plans left me willing to buy July oil for $124.25/barrel when August oil was selling for $124/barrel, I'll probably want to buy July oil for $126.25/barrel now that I'm forced to pay $126/barrel for August oil. Thus to a first approximation, the spot price would move by exactly the same amount as the near-term futures price. A $1 increase in the August futures price would shift the demand curve for July spot oil up by $1. In this fashion, an ever-increasing volume of speculative purchases of the near-term futures contracts would drive the spot price up with them.

Now, the above argument abstracted from the effects of the price on final gasoline demand, and we know that the demand elasticity for the final product is not literally zero. Thus the bubble described here could not literally be self-fulfilling. Something else has to give-- this is the point emphasized by Paul Krugman. If it all transpired just as I said, with international producers all adjusting their price to move in step with the West Texas Intermediate delivered in Cushing, they would ultimately find they're selling less than they otherwise would have. And so you might expect to see stories like this one from Bloomberg:

Iran, OPEC's second-largest oil producer, more than doubled the amount stored in tankers idling in the Persian Gulf, sending ship prices higher as demand for some of its crude fell, people familiar with the situation said. The 10 tankers hold at least 20 million barrels of oil....

Iran has a glut of its sulfur-rich crude as refineries that can process the fuel shut down for maintenance. The discount on Iranian Heavy crude compared with Oman and Dubai petroleum has more than doubled since the start of the year, according to data compiled by Bloomberg.

"There's not much demand for heavier crudes such as those from Iran," said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo.

And eventually the bubble could only be ratified if we saw decreased production from oil producers, or at least stagnating production in the face of growing demand. But of course it is a fact that global production has failed to increase the last two years.



World Production of Crude Oil, NGPL, and Other Liquids, and Refinery Processing Gain, in million barrels per day, from EIA.



The biggest single factor in the stagnating global production is the fact that Saudi Arabia in January and February produced 350,000 b/d less than its average level in 2005. The increase in production to 9,450,000 b/d announced yesterday in conjunction with President Bush's visit to the Kingdom would still leave Saudi production 100,000 b/d below the 2005 levels.

Arab News quoted Saudi Oil Minister Ali Al-Naimi as declaring on Thursday:

Financial markets have a logic and mechanism of their own. Such markets are influenced by ever-changing factors and parameters that transcend markets and boundaries and are often unregulated. Therefore, the short-term oil prices are more closely tied to the internal logic of the financial markets than to underlying supply and demand fundamentals.

Reuters reported this from a follow-up news conference the next day:

Saudi Oil Minister Ali al-Naimi said on Friday that the world's top oil exporter would meet any demand from its customers for oil. "Any demand for extra production capacity from consumers will be immediately met," Naimi told a news conference.

If we take these statements at face value, they seem to be declaring that Saudi policy is to allow their prices to follow the futures markets. If you offer to sell all that anybody wants to buy at that price, you'll discover that demand for your product has gradually slipped as a result. But of course, saying this is all caused by the futures speculation is quite inaccurate. If this is what has been going on, declining Saudi production played an absolutely critical role in the price bubble.

Let me repeat here that I do not believe that speculation is the reason oil went from $60 to $120 a barrel. The biggest part of that longer term trend is due to fundamentals, not speculation. Notwithstanding, it does appear that speculation has gotten ahead of those fundamentals in the most recent developments.

For the bubble to continue, we would need to see ever-increasing volumes of investment money pouring into the futures markets, and continuing stagnation in global production to ratify them. Even if the former occurs, my best guess is that the latter will not."

Originally Posted by bkkandrew

Heres another one, DJ Financials Index. Circled area is where so called "market experts" advised investors that "the worse is over and the end is in sight" for problems in the US financial sector.

Originally Posted by Begbie

Originally Posted by bkkandrew

No the underwriters will be left with the shares. This is not good and will bring Rights Issues for UK banks to a screeching halt, when most expect another round of RI's before this is concluded. The underwriters will be forced sellers of the shares, which will drag the share price down further and could cause a run on the bank.

A drop in share value causing a run on the bank ? Is there a linkage between the banks intrinsic value and the shares at the moment or is the drop in price just panic about the future of he housing market ?

If the shares fell but the bank was still sound, surely a good time to buy in ?

HBOS' capital base is shot to peices. Unless the property market suddenly upturns in the UK (unlikely, to say the least) it is practically insolvent. So, no, the bank is not 'sound'. This is demonstrated it is worth just 25% of what it was 1 year ago. Forced sale of underwritten shares will dramatically worsen this and encourage depositors to protect their savings accordingly.

Graph for demonstration:

Price for HBOS:IX

B & B's naughty secrets start to come out mainstream:

http://www.ft.com/cms/s/0/9e06ad36-38ba-11dd-8aed-0000779fd2ac,dwp_uuid=4da69efc-1b8f-11dd-9e58-0000779fd2ac.html?nclick_check=1

Bradford & Bingley boosts securitisation

By Jane Croft, Retail Banking Correspondent
Published: June 12 2008 23:08 | Last updated: June 12 2008 23:08


Bradford & Bingley, which shocked the market with a profit warning last week, is set to inject more cash into its main mortgage securitisation vehicle to avoid breaching its obligations.

The bank was forced to pull its original rights issue and bring in TPG, a US private equity group, as a 23 per cent investor after reporting rising mortgage arrears.

This week, B&B’s new anti-dilution rights – allowing TPG to “participate in any offer, allotment or grant of rights” by the bank in the next 12 months – caused controversy because existing shareholders will not have the same rights.




The bank has £11.1bn of mortgages in its Aire Valley master trust securitisation programme, which is triple A-rated. However, action taken by the three main rating agencies to downgrade B&B’s own credit rating after its profit warning means the bank does not meet the sufficiently high rating required under the interest rate swap that it provides to the Aire Valley trust.

B&B has to take action within the next 30 days and has three options. Besides injecting additional cash, it could replace itself as a counterparty with an intermediary, or bring in a guarantor, with an appropriate rating.

B&B stressed it had not currently breached any obligations.

B&B said in last week’s profit warning that arrears had risen sharply, particularly in the loan books it acquired from GMAC, the former financing arm of General Motors.

The bank is committed to purchasing a minimum of £350m of loans from GMAC each quarter – although this is subject to satisfactory due diligence.

Analysts at Moody’s said none of the GMAC-originated mortgages were included in B&B’s covered bond programme or its Aire Valley Master Trust programme. This means the GMAC-originated mortgages have to remain on B&B’s balance sheet and any losses would be borne by the bank.

B&B’s shares closed up 6½p at 72½p – above the 55p rights issue price.

Thai Stocks Are Best Pick Amid Volatility, Morgan Stanley Says By Chen Shiyin

June 13 (Bloomberg) -- Thailand's stocks, the cheapest in Asia, are the most attractive at a time of market volatility as earnings growth accelerates in the country, Morgan Stanley said.

Thailand overtook Malaysia as the region's best bet, analysts Corey Ng, Antony Conte and Toby Walker said in a report today. Shares with the highest dividend yields and the lowest ratios of prices to forecast earnings growth will perform best, the analysts said. Australia, India and Hong Kong are the least attractive, they said.

``Value remains solid through the volatility,'' the report said. Assuming an imminent second round of declines in stocks this year, ``the pan-Asia Pacific factors that work the best during a second leg down will continue to be value factors,'' or price to earnings and dividend yield, the analysts said.

Companies on Thailand's SET Index are valued at about 11 times estimated earnings, the lowest in Asia, according to Bloomberg data. They offer a dividend yield of about 4 percent, compared with 2.44 percent for the 991 companies on the MSCI Asia Pacific Index.

The SET Index slipped 0.1 percent as of 10:05 a.m. in Bangkok. It has lost 7.9 percent this year, the third-best performing benchmark in Asia after Taiwan and Pakistan.

To contact the reporter on this story: Chen Shiyin in Singapore at schen37[at]bloomberg.net

Last Updated: June 13, 2008 00:13 EDT

Originally Posted by thehighlander959

Sounds like the UK Pound could be in a bit of trouble. Good information last week Andrew just need to wait for the drop in value now. Am I glad I am paid in Euros not that Euros are bullet proof in the current climate. Willhave top wait and see!!

Not quite bullet proof. I mentioned on another thread the possibility, albeit low, of a split from the Euro, notably by Spain. Now the Telegraph is not known for its love of the Euro, but this was an interesting read:

Support for euro in doubt as Germans reject Latin bloc notes


By Ambrose Evans-Pritchard

Last Updated: 1:26am BST 13/06/2008





Notes printed in Berlin have more currency for bank customers who fear a 'value crisis'

Ordinary Germans have begun to reject euro bank notes with serial numbers from Italy, Spain, Greece and Portugal, raising concerns that public support for monetary union may be waning in the eurozone's anchor country.

X-factor: German bank customers are favouring notes that start with the distinctive ‘X’ serial numbers, which show they have come from Berlin


Germany's Handelsblatt newspaper says bankers have detected a curious pattern where customers are withdrawing cash directly from branches, screening the notes to determine the origin of issue. They ask for paper from the southern states to be exchanged for German notes.

Each country prints its own notes according to its economic weight, under strict guidelines from the European Central Bank in Frankfurt. The German notes have an "X"' at the start of the serial numbers, showing that they come from the Bundesdruckerei in Berlin.

Italian notes have an "S" from the Instituto Poligrafico in Rome, and Spanish notes have a "V" from the Fabrica Nacional de Moneda in Madrid. The notes are entirely interchangeable and circulate freely through the eurozone and, indeed, beyond.

People clearly suspect that southern notes may lose value in a crisis, or if the eurozone breaks apart. This is what happened in the US in the Jackson era of the 1840s when dollar notes from different regions traded at different values.

"The scurrilous idea behind this is that if the eurozone should succumb to growing divergences, then it is best to cling to most stable countries," said the Handelsblatt.

"There are no grounds for panic. The Italian state is not Bear Stearns," it said.Germans appear to be responding to a mix of concerns. Many own property in Spain or Portugal and have become aware of the Iberian housing slump.

A spate of news articles in the German press has begun to highlight the economic rift between the North and South of eurozone.

There is criticism of comments from Italian, Spanish, and French politicians that threaten the independence of the ECB, viewed as sacrosanct in Germany.

But the key concern appears to be price stability. Germany's wholesale inflation rate reached 8.1pc in May, the highest level in 26 years.

The cost of bread, milk and other staples has rocketed, adding to the sense that prices are spiralling out of control. Ordinary people are blaming the new currency - the "Teuro" - a pun on expensive - for their travails in the supermarket, even though the recent spike in farm goods and energy prices has nothing to do with monetary union.

Inflation touches a very sensitive nerve in Germany. Holger Schmeiding, from Bank of America, said the country had suffered two traumatic sets of inflation in living memory, first in Weimar in 1923 and then in 1948.

"People suffered a 90pc haircut on financial assets in the currency reform of 1948. The inflationary effects of two world wars were catastrophic," he said.

A group of leading German professors warned at the outset of EMU that the euro would tend to be weaker than old Deutsche Mark, and that it would fuel inflation over time. German citizens were never given a vote on the abolition of the D-Mark, which had become a symbol of Germany's rebirth after the war.

Many have kept a stash of D-Marks hidden in mattresses to this day. A recent IPOS poll showed that 59pc of Germany now had serious doubts about the euro.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/13/cneuro113.xml

Originally Posted by bkkandrew

HBOS' capital base is shot to peices. Unless the property market suddenly upturns in the UK (unlikely, to say the least) it is practically insolvent. So, no, the bank is not 'sound'. This is demonstrated it is worth just 25% of what it was 1 year ago. Forced sale of underwritten shares will dramatically worsen this and encourage depositors to protect their savings accordingly.

Graph for demonstration:

Price for HBOS:IX

HBOS is trading at 318p

^^HBOS jumping and sinking by double digit %ages on a daily basis is a sure sign of trouble indeed...

Friday June 13, 05:45 PM

FSA fillip for HBOS

The move by the City's watchdog to clamp down on short selling in the shares of companies undertaking rights issues offers some comfort to HBOS shareholders who are participating in the bank's £4bn capital raising.

HBOS shares rose 14 per cent on Friday to 322p after the Financial Services Authority said it would introduce a disclosure regime to monitor short-selling positions in companies undertaking rights issues.

And the recovery in the share price has prompted some brokers to encourage HBOS shareholders to take up their rights. "Obviously, it's conditional on the share price remaining above the rights issue, but HBOS isn't going to disappear," said Gavin Oldham, chief executive of The Share Centre, a retail broker.

Allegations of market abuse by short sellers were made after a dramatic fall in HBOS shares earlier this week, when they fell well below the 275p at which the bank's rights issue is priced. Short selling is a strategy where options on shares are sold in the hope that the price will move lower, so the physical shares can then be bought more cheaply than the price at which the original sale was agreed. Short sellers have been targeting HBOS because of its exposure to housing, and in the hope that it will be forced to reprice its rights issue.

In a week's time, the FSA will introduce provisions in its Code of Market Conduct, which would require the disclosure of "significant" short positions in the shares of companies carrying out rights issues. It classed 0.25 per cent of the issued shares as being a significant short position.

FSA fillip for HBOS

I have a 2 bedroom apartment in battersea London, any sugestions, hold or sell?

HBOS pressed over property sector loans

By Terry Murden
MORE pressure will be piled on banking giant HBOS this week to reveal the extent of its exposure to loans in the beleaguered housebuilding sector.

The Edinburgh bank is expected to provide a generally upbeat assessment of trading, but investors have grown concerned about investments in the troubled property markets.

The company poured billions into supporting a number of deals, including a stake in Miller Group and other investments in Crest Nicholson and the retirement homes firm McCarthy & Stone.

It is understood to have lent £40bn to construction and property companies.

It is also Britain's biggest mortgage lender and will have taken a hit from the softening of the home loans sector, with the likelihood that arrears will have risen.

HBOS will issue the prospectus for its £4bn rights issue this week, ahead of an extraordinary meeting on June 26.

Last week the bank's shares tumbled below the rights issue price of 275p, but regained ground on Friday after the Financial Services Authority announced new moves to curb the activities of short-sellers.

They have been blamed for contributing to the fall in share prices at a number of firms requiring equity capital. From Friday they will be required to meet new rules on disclosure.

http://scotlandonsunday.scotsman.com/business/HBOS-pressed-over-property-sector.4186687.jp

McCarthy & Stone in crisis talks over £800m debt
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Retirement homes builder calls in Rothschild to help restructure its borrowing as fall in house prices stops pensioners selling up
By Mark Leftly

Sunday, 15 June 2008


Howard Phillips, the chief executive of McCarthy & Stone, has called in bankers NM Rothschild to restructure its £800m debt as the credit crisis wreaks havoc in the housebuilding sector.


Mr Phillips has hired Rothschild because of worries over its debt repayments. The board and representatives of leading shareholders, including embattled bank HBOS and Scottish philanthropist Sir Tom Hunter, held an emergency meeting with Rothschild on Wednesday to discuss how to avoid breaching debt covenants.

McCarthy, a retirement homes business, was taken private in a £1.2bn deal in 2006 but has since been plagued by difficulties. Many of its main customers, the newly retired, have been unable to sell their homes to move into a McCarthy property. It confirmed last month that it would cut 110 jobs from its 1,000-strong workforce.

However, the shareholders believe that its fortunes will improve once the property market recovers. McCarthy is the dominant player in the retirement housing sector, so its fundamental business plan is thought to be sound.

Rothschild is looking at ways in which McCarthy can restructure its debt, including delaying its key repayment dates, which run from 2012 to 2014. "All options are open to debate. McCarthy & Stone has had to look at the capital structure in light of market problems," said a source close to the company.

HBOS, which owns 20 per cent of the group, is heavily exposed to housebuilders through its stakes in companies including Miller and Crest Nicholson. The latter was bought in a joint venture with West Coast Capital, the investment group run by Sir Tom.

A source suggested that several of these businesses are in the process of restructuring their debt. Shares in HBOS, which is to issue a trading update later this week, have fallen below their discounted £4bn rights issue offer price.

A source close to McCarthy added that shareholders would ultimately "make a lot of money" out of their investments.

Barratt, whose shares fell by nearly 40 per cent last week, is also thought to be close to breaching its banking covenants. It too is in negotiations with its bankers about restructuring.

Although Barratt's chief executive, Mark Clare, said the company would meet its profit targets this year, the shocking fall in its share price means that it could face a debt-for-equity swap. Barratt has now fallen out of the FTSE 100 and could soon drop out of the FTSE 250.

Barratt borrowed heavily to buy rival Wilson Bowden last year, and former management is known to believe that this has led to the company's slide.

HBOS is thought to have been attacked by so-called "short-sellers", who look to force down share prices to make money. The Financial Services Authority is investigating the matter.

http://www.independent.co.uk/news/business/news/mccarthy--stone-in-crisis-talks-over-163800m-debt-847302.html

Thai Central Bank May Raise Rates to Quell Inflation (Update1)


By Rattaphol Onsanit

June 16 (Bloomberg) -- Thailand's central bank may adjust monetary policy to quell the fastest inflation in a decade without endangering economic growth in the Southeast Asian nation, Governor Tarisa Watanagase said.

``We are in a position to use monetary policy in a way that won't cause serious disruption to the economy,'' Tarisa told a press conference in Bangkok today.

``We are seeking to strike a balance'' between growth and stability. She didn't say whether the central bank would raise interest rates.

Asian governments need to consider raising interest rates to cool inflation, the Asian Development Bank said yesterday. The Group of Eight nations on June 14 called on emerging markets to stop subsidizing oil and food prices amid concern such support was propelling demand and prices higher.

``Tarisa is saying rates will gradually rise and the question is by how much,'' said Frederic Neumann, an economist at HSBC Holdings Plc's Global Markets unit in Hong Kong, who predicts the policy rate will increase by a quarter percentage point at the next meeting, scheduled for July 16.

Bank of Thailand policy makers said at their last meeting, on May 21, they are ready to ``adjust'' monetary policy should inflation accelerate. The one-day bond repurchase rate has been held at 3.25 percent since August.

`Bite the Bullet'

``They should go ahead and bite the bullet and tighten rates like we've seen from other central banks in recent weeks,'' said David Cohen, an economist at Action Economics in Singapore.

India, Indonesia, the Philippines and Vietnam this month raised interest rates to tackle inflation. Malaysia may follow suit after the government raised petrol prices to stem crippling subsidy costs.

Thailand's five-month old government has capped cooking gas prices and bus fares and delayed retail fuel price increases to rein in the highest inflation rate in almost a decade. Consumer prices gained 7.6 percent in May.

``Inflation may reach two digits,'' Tarisa said today. ``But for the full year, that's unlikely.''

Consumer prices may rise by as much as 5 percent this year, the central bank said on April 22. The inflation rate was 2.3 percent last year. Core inflation, excluding food and fuel, will range from 1.5 percent to 2.5 percent in 2008. The central bank uses the measure to help set monetary policy.

`Raise the Rate'

``We expect them to increase the policy rate at the next two meetings because the inflation figure in May was very high and we think the figure will accelerate,'' said Nuchjarin Panarode, an economist at Capital Nomura Securities in Bangkok. ``The interest rate compared with inflation is quite low.''

Thailand's Finance Minister Surapong Suebwonglee said June 2 that the government would use fiscal policies and ``other measures'' to boost incomes and economic growth to counter inflation. Surapong aims to expand the $206 billion economy by 6 percent every quarter this year, matching the pace of the first three months.

``The central bank will use monetary policy to make sure that there won't be negative outcomes from the fiscal policy,'' Tarisa said today. ``So far, our fiscal and monetary policies have complemented each other.''

Escalating prices will curb demand and damp company earnings and economic growth in Thailand, Malaysia, Indonesia and the Philippines, Goldman, Sachs & Co. predicted on June 2, when it advised investors to reduce holdings of shares in the markets. Thailand's SET Index of stocks sank 10 percent in the three weeks to June 13.

`Not the Time'

``It is not the time to use monetary policy or hike rates to curb inflation as it will curb growth,'' said Usara Wilaipich, an economist at Standard Chartered Bank in Bangkok. ``Using fiscal policy is quite appropriate for this environment, where cost push inflation is dampening consumers' real income.''

Finance ministers from the G-8 nations singled out spiraling food and fuel prices as their chief concern in warning ``headwinds'' dog the global economy. Inflation is accelerating after the price of oil reached an unprecedented $139.12 a barrel on June 6 and food costs from rice to soybeans set records this year.

Asia has ``got to worry about inflation, it is the number one concern now for Asia,'' Rajat M. Nag, managing director- general of the Asian Development Bank, said yesterday.

To contact the reporter on this story: Rattaphol Onsanit in Bangkok at ronsanit[at]bloomberg.net;

^ increased interest rates usually means a strengthening of the currencies exchange rates.

Originally Posted by gjbkk

Surapong aims to expand the $206 billion economy by 6 percent every quarter this year, matching the pace of the first three months.

........

Thailand's SET Index of stocks sank 10 percent in the three weeks to June 13.

Looks like the second quarter is going well for Surapong.

Originally Posted by Panda

^ increased interest rates usually means a strengthening of the currencies exchange rates.

Unless the rate is less than the inflation rate (which it is in Thailand) leading to a real interest rate that is negative...

I haven,t noticed much difference in the baht to euro exchange rate over the last few days. I am beginning to think that the euro isn,t the be all and end all. Everyone is saying that there will be no recession, again oil jumped to over $140 a barrel today.
I am not so sure how long the market economies can can sustain this especially over an extended period of time.

^ Oil fell back rapidly to 133.50 though.

Originally Posted by bkkandrew

^No, a rather large problem in the banking sector. Full details in a week or so...

Originally Posted by bkkandrew

2. Then we have HBOS. HBOS are facing the failure of their crucial cash call - the 275p rights offer. The share price is well below the 'discounted' rights price and the fate of one of the World's largest banks lies in the balance. Collapse (possible) or bailout (more likely) would depress Sterling significantly.

I posted about HBOS months ago. An inlaw had seen an internal email about the sub prime crisis and the write downs that were due.


HBOS are offering a 10% savings account just now.