Thailand
No, the secular rise in geopolitical risk has not peaked. EU-China trade ties underscore the multipolar context, but this multipolarity is unbalanced, as the US has not reached a new equilibrium with its rivals. While the second quarter is murky, investors should stay defensive this year on the whole.
Great Power Rivalry is taking another leg up as Russia and China further align their geopolitical interests. Investors should stay long USD-CNY, favor defensives over cyclicals, and markets like North America and DM Europe that have less exposure to geopolitical risk.
Thai stocks and currency will weaken over the short term. And yet EM equity portfolios should overweight Thailand as tourism revivals will rejuvenate this economy.
Executive Summary Thai stocks’ recent outperformance had more to do with investors forsaking Chinese and Russian markets to rotate elsewhere, rather than Thailand’s bullish outlook. Thai domestic demand is still shaky as households are struggling with meagre income growth amid high…
We are booking profits on our short Baht/ long U.S. dollar trade instituted on March 25, 2021. The position has generated a 1.6% profit, including carry. We recommended to short the baht against the US dollar a year ago due to a shortfall in Thai tourism revenues. The baht was also too expensive…
The Baht Has More Downside…
Highlights The baht will depreciate further, given the state of the economy and external accounts. Domestic demand was already relapsing, even before the latest surge in COVID-19 cases. Now, the recovery will be delayed more. The authorities have little to offer by way of fiscal or monetary…
Highlights Years of capital outflows have turned Thailand a net creditor to the world – a rarity among developing nations. The Thai currency is too strong given the state of the economy. The baht is slated to depreciate this year; investors will do well to short it. Equity portfolios should…
Highlights A Biden victory with a Republican Senate (28% odds) poses the greatest risk to the global reflation trade. The US is the most susceptible to social unrest of all the developed markets. Europe is stable relative to the US, but political risks are rising as new lockdowns go into…
Please note that yesterday we published a Special Report titled Global Supply Chain: Moving Away From China? Please click on it to access it. Highlights Thailand has entered a phase of precarious, turbulent and potentially lasting political turmoil. Thailand’s governance system has largely…