Several Thai economic indexes have now past their levels of the pre 1997 crisis, and the Thai Baht is also at record high level compared to the dollar. Does this mean that we are heading toward another busting bubble cycle ?

Thai equities are a juggernaut. The MSCI Thai Index has been on an inexorable multi-year rise. Four of the top five performing equities funds sold in Hong Kong are invested in Thai stocks, according to the information company Lipper.

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There is a sense of déjà vu about the strong capital inflows, rising financial leverage, and red-hot property markets that Thailand is witnessing.

The strong rally in Thai equity markets over the past year has left many battle-scarred investment veterans scratching their heads.

 

In 1997, it was precisely these trends that precipitated the massive devaluation of the baht, which then triggered the Asian financial crisis and left Thailand virtually bankrupt. So the question investors might ask is, is Thailand’s rally sustainable, or it is just undergoing another bubble that will eventually burst?

I would argue the former. To get to that view, you need to appreciate the strength of investment trends under way in Thailand, and the powerfully positive effect of the recent stabilisation of the country’s political situation. Thailand is at the start of a new investment cycle that is expected to last at least until 2020.

The most important driver is a government infrastructure spending programme to the tune of 1.9 trillion baht HK$498 billion, with the peak of the spending outlays occurring in 2016-17.

via Thailand’s boom is sustainable, unlike the one in 1997 | South China Morning Post.

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