Economics: SMEs & SET are “Humty Dumpty Sits on a Wall”

By Pooky, Thai Intel’s economics journalist

Humty Dumpty is a very cute Egg.

On The macro-level, Thai inflation is heading up and interest rates are expected to head up to cool-off the Thai economy-and thus bringing the inflation down. That higher Thai interest rates, would also, in theory, harden the Thai Baht currency. Off course, exporters and tour operators-are not all that happy about a hardening Thai currency-as it makes them less competitive in this globalized world.

But this is amazing Thailand-and reason and logic have mostly gave way to blind devotion to “Rubbing of Tree Barks for Lotto Numbers” or just look at the extent of the royalism hype in Thailand.

Thus you got the Commerce Minister-saying more goods would enter the price control scheme, and as Thai some newspapers are reporting this morning-hundreds upon hundreds of ware-houses-are not registered with the authorities-and massive stocking up of consumers goods is going on.

So since this is Thailand-the government is going to try to crack-down on the evil operators who stock up goods leaving little for consumers-and do a price control thing-as a way to keep inflation under control-and help stop the Thai interest rate from having to move up.

Then off course, the Thai government, seeing that inflation is heading up and goods price are heading up-that is for sure bad in an election year. So the government is like doing price support for oil and gas-and is handing out money to the small guys. That off course, means lots of borrowing and spending-that hurts investments.

So the government is like-all out for promoting Thai investments. That is again, because the government lacks money to invest-as it is borrowing and borrowing for “Freebies” to win an election.

Off course, the above, is having an impact on the poor consumers and operators-on many level.

But since this is the Thailand of the royalist, elite and military-what do one expect-except that in the end-the ultra rich-as always-gets richer. A popular place for the rich to get rich is the Stock Exchange of Thailand (SET).

So it is “Humty Dumpty Sits on the Wall.” Humpty Dumpty, is a famous Western Cartoon Character-that is an Egg, but he goes and sits on a great big wall-then he falls off the wall and breaks.

Lets look at Eggs, SMEs and the SET.

On Eggs: The Thai government is now going to change the way eggs are sold in Thailand-from counting the number to weighting them-and then slap a price control on eggs. Initial reaction from the small eggs farm operators, as reported in Post Today, is that the move will kill off SMEs Thai eggs operators and leaving the business to large farms, like the CP Conglomerate with ultra-strong ties to the government-with its modern operation in total control of the industry. “Once they have totally controlled the market, with their connection to the government-they then clean-up. Initial reaction from consumers, as indicated by many newspapers, is that “Good Grief” this is Thailand, and the “Weight Machine” in most markets, are “Set to Cheat Buyers” a little here and there. Then buying in weight, is going to see more sellers just throwing the eggs into a bag, instead of in the set-numbers-eggs container. One newspaper quoted a Thai consumer as saying, “Very Precious eggs better not break on the way home from the market.”

On SMEs: That drive to promote investments in Thailand-as the government lacks funds to invest, again because it borrows and borrows and give out freebies and freebies-thus more and more money is going to finance the borrowing-the Thai government just got the Chinese to invest in a Mega-Trade-Center in Thailand. The latest is that the Thai Federation of Industry, is against the investment-as the unit says it will flood Thailand with cheap Chinese goods-wiping out massive numbers of  Thai SMEs operators. “The government should set up a Trade Center for Thai SMEs,” said the unit. But off course, the Chinese center is an investment in the US$ billions and the Thai government is like getting close to being broke.

On SET: Well, foreign investors have been selling the Thai stock market-about US$300 million net sell in the past few weeks. That is because, foreign stock research house, have said that Thai GDP growth is going to slow this year, as inflation and interest rates heads up. “The Thai stock market was up 40% last year, and it looks like the room to move up is limited and the risk increasing,” is the summary of most reports tracked by Thai Intel. But buying into the Thai market currently, as foreigners sell, is the Thai Ministry of Finance controlled Mutual Funds. This is mainly the MFC and civil servants retirement funds. In fact, the government mutual fund controlled industry said last year, before the political crisis, that they would “Buy Heavily” into the Thai stock market, “If the stock market dropped as a result of political instability.” In economic terms-that is nothing but a stock market support fund. Yesterday, as the Thai Stock Market rose about 10 points, the institutional investors was a massive “Net Buy. That heavy buying comes on top of a SET teetering on a major sell-off.

One economic research house, put the house’s analysis as follows:

“In predicting what economic policy Thailand will follow, investors must understand the Thai political picture. The government is trying to win votes with the poor and keep its elite supporters satisfied. The middle-class are getting squeezed-and that will hurt the medium to long-term prospect of Thailand, as the middle-class is Thailand’s main productive agent.”

In fact, statistics show, as the income gap between the rich and poor in Thailand is like one of the worse globally-being hit the hardest is the middle class.

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