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US Dollars, GB Pound, or Euros, Sir?

Jun 10, 2016 | Emerging Trends

If offered the choice of which currency in world which to hold your wealth, I presume that most of you would opt for one of the first three. In my opinion it’s natural for us westerners to feel that investments in our homeland countries offer much more safety and security than in emerging continents, especially Asia.

The world is changing, and changing at a rapid pace. When we were young the west was so much far forward compared to the East, and perhaps that mind-set is engraved in our thinking – but is that really the case today?

Many western businesses have expanded or totally immigrated into East Asia and in the last 10–15 years a lot of money has also followed. In fact this year alone foreign investors have demonstrated a definite confidence in the Thai stock market, introducing 81.6 billion baht ($2.35 billion) and $1.7 billion of which has come since May 2016. This is significant news when you consider all the somewhat negative news pushed out in the media about the military government and effects on the economy.

Over the last ten-years Thailand has demonstrated stable growth and the GDP has increased 78%. It has a diversified economy, centred on IT, manufacturing, farming, and the automotive sector plus it is less dependent on natural resource exports than its neighbours or other emerging countries. A good example of this is the Middle East and Russia which predominantly rely on the oil industry to fuel their fire (no pun intended).

So in looking specifically at Thailand I have taken some time to do some comparisons with the THB against the above leading western currencies, and what I found could well come as a surprise.

Recent to the time of writing the Thai Baht reached 34.76 against the US Dollar, representing a 3.6% increase this year. Substantial foreign investment during June came as investors returned to buy Thai securities following the Brexit vote and the US Central Bank (Federal Reserve) being expected to delay its interest rate normalisation until year-end or early next year. These two reasons show us that the once thought of ‘stable currencies’ are really not as stable as we might think.

The Thai Central Bank are predicting further growth from an economy that so many were insisting would decline during a transitional period of political uncertainty (Since the 2014 military coup) The forecast now is of 3.1% growth this year, up from 2.8% in 2015. There has been a long history of military coup’s and political unrest, but such is the strength of the Thai economy that these rarely actually affect the value of the Baht.

Set these figures alongside the US growth rate for 2015 of 2.3% and news just in that the UK has just halved their interest rate from 0.5% to a historical low 0.25%, and dropped the growth target for 2017 from 2.5% to a shocking 0.8%. Even the most cynical of observers would have to accept that the Thai economy is in good shape as usual.

Thailand has just voted in a new constitution, and although it cannot please everybody, it is at least a further step forward in bringing in more order to the country. Looking back across the globe, Britain is entering a two-year period of political uncertainty which will affect European markets in a way we can only guess at for now. Terrorism is rapidly increasing in Europe, and in the US there is a growing unrest between the police and the African American people, oh and last but not least – you have a choice of Hillary Clinton or Donald Trump taking over the reins of the biggest western powerhouse!

The smart money is sniffing around for new places to park – emerging markets, strong domestic economies, reliable currencies and decisive political leadership.

The Thai Baht is performing well during the global political turmoil.

The Bank of Thailand (the BOT) is not expected to resist the baht’s increase in value against the world’s dominating currencies, despite some short-term effect on exports. The Thai central bank is considered to have performed well amid the prevailing currency war as reflected by the baht’s stable value.

Direct Performance to Other Currencies:

GBP/THB trend (Graph shown)

graph-one

Over the last decade the Thai Baht has risen from 72 THB/GBP to 45-46 THB/GBP, representing a 35% growth in value against the pound sterling. Given the general economic environment expected in Europe as it re-orders its political model, many forecasters believe this trend is likely to continue.

EUR/THB trend (Graph shown)

graph-2

During the same ten-year period the Thai Baht has risen in value against the Euro from 48 THB/EUR to 39 THB/EUR. This represents a 19% increase against a currency many predicted would be one of the world’s strongest and safest performers by now.

With the UK exit of the European Union, Europe is heading into a period of the unknown and unpredictable. Terrorism, economic migrants, the rise of the Right Wing political parties and a shifting social order are all likely to mean the THB/EUR positive trend will continue.

RUB/THB trend

The same ten-years has seen a dramatic 271% increase in the value of the Thai Baht against the Russian Rouble. Sure, most of that can be accounted for by the collapse of the Russian currency at the close of 2014 but, given the world price of gas and oil, coupled with the biting economic sanctions Russia is experiencing; there is no sign of that recovering any time soon.

USA – As for America, well with either Donald or Hillary to look forward to by the end of this year, don’t be surprised if more of the smart money heads towards what are now becoming regarded as the more reliable currencies, from some of the emerging economies over the next five to ten years.

US Dollars, GB Pound, or Euros Sir? I think I will take Thai Baht – Thank You!

In my profession as a property investment advisor here in Thailand, numerous times I have been given answers by clients that they definitely want to invest but they want to wait for the currency to improve a bit first. Every time I reply that it’s best to move your money now and get it working for you, rarely do you save money by waiting. Some people learn from this experience but sadly others end up pricing themselves out of the market by waiting – only to see good deals dry up and their spending power decrease further!

My advice to anybody now with money in their pocket that is not working and simply getting devalued is to get it into a safe and secure asset (I prefer property) and an asset that is performing for you (I prefer fixed and regular income).

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