[Economics] How about VND ?

[Minh <minh@cheerful.com>]

Hi,
I believe there's quite a bit of economists here in vnsa.
How about VND/USA rate in 1 month ? Does "domino theory" work in
economics ?
Cheers, 
Minh. (just a cheerful and ignorant guy :) )

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1. Thailand braces for possible inflation spiral
(http://www.asiatimes.com/97/07/08/08079707.html)
2. Myanmar currency plummets                    
(http://www.asiatimes.com/97/07/08/08079701.html)
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 Myanmar currency plummets
 Stephen Brookes, Yangon, 8th July 1997

 A sudden and precipitous decline in the value of the Myanmar kyat from
185 to 
 the United States dollar to 215 last week has analysts in Yangon
concerned that 
 further currency turmoil may be ahead.
 "It could be quite serious," said one Yangon-based economist. "The
government 
 only has enough foreign reserves to cover about 50 percent of its
domestic 
 obligations, and hard currency  earnings are going to be low for the
foreseeable 
 future. The government will have to buy dollars with   kyats to  meet
its obligations, 
 so it will have to keep on printing more and more kyats as the price
goes   up.  
 This could fuel domestic inflation."
 The kyat has seen several sudden depreciations over the past 18 months.
Trading at 
 about 120 to the US dollar in late 1995, it suddenly dropped to about
145 to the US
 dollar in May 1996, then dropped again to about 165 to the US dollar in
July 1996, 
 with another downward lurch earlier this year.
 "There's a pattern tied to export earnings," said one Yangon-based
analyst. "Between 
 December and March, the government gets hard currency from timber and
rice exports. 
 But then the money runs out, and the kyat rate goes down, and only
stabilizes when 
 earnings from beans and pulses start again in May and June. And when
those earnings 
 stop, you have a crisis again in July. That's what we're seeing now.
But we may be 
 heading into a much more serious crunch."
 The kyat is officially valued at a rate of approximately six to the US
dollar, but 
 is traded on the gray market at market rates. Myanmar citizens are not
allowed to 
 hold foreign currency, but the government issues Foreign Exchange
Certificates (FEC), 
 whose value is pegged to the dollar, and which are legal tender in
Myanmar.
 Myanmar's low level of foreign reserves is likely to put further
pressure on the kyat, 
 and some analysts predict that the currency will decline to about 230
to the US dollar 
 before stabilizing again in about four months. That value will also be
affected by the 
 domestic inflation rate, which is estimated to be running at about 20
percent annually.

---------------------------------------------------
 Thailand braces for possible inflation spiral
 Satya Sivaraman, 8th July 1997

 When the Bank of Thailand announced its surprise decision to float the
baht last Wednesday, it
 marked a defeat not just for the Thai central bank's decade-long policy
of keeping the currency
 stable but also for its fight against inflation.

 While prices of a wide range of goods have already jumped by between 15
and 20 percent, in line
 with the baht's fall in value against the United States dollar, Thai
businessmen and economists are
 warning that the overall average inflation for the rest of 1997 is
expected to be 10 percent or more.

 In late 1994, when the Bank of Thailand (BOT) raised interest rates and
announced wide-ranging
 measures to curb consumer spending - over protests from the automobile
and property sectors - the
 rationale behind the move was supposed to be keeping down inflation.

 But ironically, the tight credit policy hit sales in the property
sector hard, leading to defaults on loans
 taken from finance companies and banks by real estate companies and
ultimately to repeated
 attacks on the baht, which prompted the BOT's latest move on the
currency front.

 While the Thai government has claimed it will take various measures to
keep prices down, the
 devaluation has already resulted in an increase in the price of certain
goods - and not just those with
 high import content.

 At Bangkok's Pantip Plaza, a shopping center specializing in computers
and computer products, for
 example, retailers after a day of uncertainty increased prices by
between 20 to 30 percent.

 Among essential commodities, the price of packaged milk has gone up by
10 percent, while that of
 bottled drinking water has gone up by as much as 25 percent.

 The Thai Commerce Ministry has warned retailers not to increase prices
for at least the first few
 months after the flotation of the baht, but in the absence of proper
monitoring bodies, analysts
 doubted the threat would have any impact.

 "As prices increase because of the weakened baht, wages will be forced
upward, putting additional
 pressure on prices," said Olarn Chaiprawat, president of Siam
Commercial Bank and one of the
 candidates considered as a replacement for Thai finance minister Amnuay
Viravan when he resigned
 last month.

 Olarn, who is also the chairman of the influential Thai Bankers
Association, told a recent seminar in
 Bangkok that he expected "the baht to settle at 27.5 to the US dollar
over the next six months,
 equivalent to an overall depreciation of 10 percent and causing annual
inflation to rise to more than
 10 percent". The BOT's revised estimate for inflation during 1997 was a
mere six percent.

 Thailand's inflation record, barring the oil shock periods, has been
quite good - averaging only four
 percent per annum between 1982 and 1994. But in 1995 and 1996,
inflation moved up above five
 percent - a development blamed on higher food costs due to floods in
both years.

 Apart from the BOT's tight monetary policy, until recently one of the
reasons for low inflation was a
 moderate rate in the rise of labor costs. According to a BOT report on
inflation last year, the
 minimum wage in nominal terms rose by only seven percent a year between
1985 and 1995, leading
 to a substantial gain in price competitiveness on the part of the
manufacturing sector.

 The report also pointed out that Thailand's inflation performance ranks
third-best among the seven
 ASEAN countries, after Singapore and Malaysia. The worst performers
have been the Philippines
 and Indonesia, where average inflation from 1972 to 1995 was 13.6
percent and 12.5 percent
 respectively.

 Depending on which way the baht goes in the next few months, inflation
in Thailand could well be
 set to shoot up higher. While the authorities have held back a decision
on raising fuel prices - waiting
 for the baht to stabilize first - even the marginal increase of half a
baht per liter being considered
 could have a cascading effect on the prices of various commodities and
services.

 The higher value of the dollar is also expected to increase the cost of
imported raw materials, which
 make up a large proportion of many goods manufactured for Thai domestic
consumption, as well as
 for exports.

 In the Thai electronics and integrated circuits industries, for
example, which were among Thailand's
 largest exports last year, imported contents make up nearly 90 percent
of the products.

 "The de facto devaluation of the baht will not help Thai exporters if
all other costs go up, and the net
 result could be a further spiralling down of the baht due to the
worsening macroeconomic situation,"
 said an analyst with a Bangkok-based stock brokerage.

 According to a report issued by Jardine Fleming's research division,
the earnings forecasts of 20
 non-financial listed companies indicate a combined loss of 31 billion
baht (US$1.1 billion) this year
 following the devaluation of the baht, as against an earlier estimate
of profits of 35 billion baht.

 The combined capitalization of these 20 companies accounts for 58
percent of all Stock Exchange
 of Thailand non-financial companies and 39 percent of the total market
capitalization.