SGD weakened vs USD after the MAS comment to ease on the #coronavirus & now w/ South Korea, Thailand & the Australian AUD as the worst performing currency in Asia. Note that all these economies are linked to China via either trade, commodity price, or tourism (Thailand tops Asia) 
We get the Bank of Thailand decision at 3pm today & markets are totally mixed on this w/ consensus of a hold.
The question is whether the BOT would cut after the THB already lost -2.6% vs the USD on this virus (note that not too long ago we were obsessed w/ baht strength).
So
The question is whether the BOT would cut after the THB already lost -2.6% vs the USD on this virus (note that not too long ago we were obsessed w/ baht strength).
So
BOT rate is 1.25% (same as Bank of Korea) so not too much room to move if there's actually a recession. My guess is that it will hold on this meeting to save some space (same as RBA) given the lack of ammunition in case things are much worse later.
The weakness of THB is reason.
The weakness of THB is reason.
But I could be wrong. Tough one. The reason why the THB is now at the bottom w/ KRW & SGD is because Thailand exposure to China via tourism as a share of GDP is the HIGHEST IN ASIA (obvs Macau & Hong Kong higher).
And we know for sure that Chinese tourists are staying home so...
And we know for sure that Chinese tourists are staying home so...
This is not a rounding error for Thailand, and especially for the south of Thailand where it depends on tourism and agri much more. And agri doing badly this year due to the drought & now we got a Chinese tourist drought.
Not good news for the baht, which has weakened to help👇🏻.
Not good news for the baht, which has weakened to help👇🏻.
Meaning, impact on exports to China may be depending on supply linkages, type of products (discretionary v essentials) etc but we know w/ absolute certainty that Chinese tourists are staying home. That absolute certainty puts the baht at risk of roughly 70 to 75bps of GDP in Q120
I will be on CNBC tomorrow at 830am to speak about impact of the virus on Asia, BOT, BSP, RBI etc.
When China catches a massive flu, the rest of the region catches a cold but w/ varied degree & India and Indonesia most immune for its very sheltered economy (weakness & strength)
When China catches a massive flu, the rest of the region catches a cold but w/ varied degree & India and Indonesia most immune for its very sheltered economy (weakness & strength)
One thing we can be sure of is that if the BOT isn't cutting today, it'll cut. The question is timing & pausing to cut later as the baht is already weak or just front-loading the rate cut. Note that Thai firms don't have repayment issues. Their challenge is GROWTH & baht strength
BOT cut rates by 25bps to 1%; There you go, it follows the MAS dovish tone & that means it has only 100bps to go if things get worse!
The THB is now the WORST currency since 20 Jan 2020 due to its HIGHEST exposure to Chinese tourism as a share of GDP in Asia (2.7%) so the hit on GDP is not a rounding error.
That said, the BOT has very little ammo left for a bigger downturn but it does get a cheaper Baht!
That said, the BOT has very little ammo left for a bigger downturn but it does get a cheaper Baht!
