Economics: Strong Thai Bond? or Weak Thai Bond?

Please tell me Korn, should I shop or should I save?
Please tell me Korn, should I shop or should I save?

http://www.bangkokpost.com/business :For the next massive Korn bond offering and how employees are facing salary cuts and no bonus.

http://www.matichon.co.th/: For Central Bank, Commerce Ministry, and The University of Thai Chamber of Commerse says consumers spending is crucial.

We would like to say thanks to Bangkok Post and Matichon

 

By Terry/Tavivoot

What about that Korn, borrowing from the public with a high interest rate of 3%-4%.  It is so popular, like Bangkok Post said that hundred of thousands of people were disappointed they could not get a hold of Korn’s offering.

And the latest news is that Korn plans to issue another 100,000 million baht in these great high interest rates bonds. And this one, will go to big investors who have lots of money. Really impressive and Thais are real happy about Korn now.

The votes must be flowing in big times now.

Seismic Reaction

Korn’s action sent a seismic level reaction throughout Thailand financial industry. Now banks and mutual, are trying to match Korn’s offering-by increasing the interest rates on their savings products offerings-and going to the market with massive sales and advertising campaign-that says “Save” all over the place.

Well Thais must say thanks to Korn for helping push up the savings rate in Thailand. Wow, and the next borrowing for big investors who have lots of money available-they must be thinking about saving now.

Save or Spend?

But then again, Thailand’s overall economic recovery-as many points out-depends a great deal on consumer’s spending. So how will this country wide drive for savings impact spending?

So as Bangkok Post reported, while Thai consumer confidence is the lowest in Asia but is ticking up bit by bit-now Korn has thrown a general trend of rising savings rate into the that situation.

Then the reality is, as this savings drive is driving saving rate up, bank’s spread of some 5%-6% will certainly come under pressure. While borrowing activity at banks is still weak and there is something of a credit contraction going on-and so one would think banks will not up their lending rates-because that might turn-off borrowers.

What will Banks Do?

But knowing banks-the bottom line is if, will rising savings rate and they increase the lending rates in responds-make them more profit?

Well the demand for loan is still weak, but then where will people borrow other than banks and really will borrowers be turn off from higher borrowing cost? So the key question for banks is “Would increasing lending rates, as savings rates goes up, turn off people from borrowing?”

So Korn, through his “Strong Thai Bond” is making bankers up their savings rate, and start to think about the lending rates-at a time when Thailand needs consumers spending and the lowest borrowing rates possible.

But Korn knows all of the above-but the bottom line to Korn is that money that the government is borrowing-and causing a sessmic reaction in the Thai financial industry-is going to government spending that will put life back into the economy.

Borrow to Put Life Back into the Economy

So all of the above in this article-both good and bad-is to put life back into the economy.

But then where is that borrowing going-like how much life will it inject into the economy? Well most of the spending will go to infrastructure and education. Infrastructure has a lot to do about foreign imports and it will create jobs related to those projects. Then education is also about improving long-term competitiveness of Thailand.

How much life will the government spending inject into the economy? Well who knows, but it doesn’t look like much.

What on Earth is Going On?

So basically, it is weaker consumers spending as a savings drive goes on, and at the same time, government spending might not put in all that much life into the economy.

But then the global economy may have hit the bottom already and is improving-and so looks like exports might come to the rescue and also foreign tourism. But then un-employment in most key Thai markets is running at 10% and their main assets like house have dropped in value. And foreign tourist? Well we have Abisit to thanks for improving Thailand’s image or is it the other way around.

Then we off course have to say thanks for doing a great job on the epidemic and only got Thailand to be the place with the highest death rate in Asia. Like really, isn’t consumers confidence, that is the lowest in Asia, low enough?

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