Asian Countries Attempting to Win in Turbulent World Markets

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) August 17, 2011 -- Yingluck Shinawatra has become Thailand’s first female prime minister and has immediately attracted attention with her promises to increase incomes for the country’s agrarian farming population. She plans to do so by increasing prices on rice, the production of which is a significant portion of the Thai economy. However, other Asian countries may end up having to pay for Shinawatra’s campaign promises.

Shinawatra has already announced that the Thai government will buy unprocessed grain from farmers for 15,000 baht ($502) per ton during the November harvesting period, which is higher than the current market price of 9900 baht per ton. With Thailand being the world’s biggest exporter of rice, this may cause an increase in the purchase price of rice in the region as a whole, which has 87% of the world’s supply of the grain. The newly elected Thai leader presented her new economic policy to the Cabinet and is planning to announce the details publicly on August 24. It’s difficult to say whether we should look for some sort of legal conformity in these events but it is generally thought that the new premier will have to sell the country’s entire harvest for export in order to close the 38 million Euro gap in Thailand’s already thin budget. “High rice prices will inevitably lead to increased inflationary pressure on Asia at a time when most inflation indicators have already been playing in the region of the central banks’ highest allowable level or they will overcome the upper limits of the range,” says Chua Hak Bin, a Singapore economist with the Bank of America Merrill Lynch. “As soon as the global situation stabilizes, inflation may return to target levels.”

DT Trading analysts are also following other important political news concerning Asia, as US Vice-President Joseph Biden set out on a visit to China yesterday in order to use his eloquent manner to establish a dialogue with the US’s Chinese partners on the issue of the country’s enormous debt. Immediately after S&P downgraded the US’s credit rating on August 5, China made sharp comments about Washington’s political tactics threatening America with default. The vice-president is traveling to Beijing to smooth things over with the United States’ main creditor. The downgrade put US stock indices on a roller coaster for a week and caused a surge in sales on the markets which destroyed about $7 trillion in equity. Yields on 10-year US bonds dropped to record low rates last week since investors literally snapped up treasuries due to signs of slowing economic growth and the spread of the debt crisis in Europe. The American and Chinese economies, Number 1 and Number 2 in the world, are becoming even more intertwined. China is holding $1.17 trillion of US debt as of June and entirely depends on exports to the US to boost its economic growth. The trade gap between the US and China increased to $26.7 billion in June, the highest deficit since September of last year, and up from $25 billion in May. Imports from China have grown to their highest level since November 2010.

Today, DT Trading analysts await publication of data on the Eurozone’s Consumer Price Index and the first part of a report on US inflation. This main index is expected to grow 2.5% for the year in 19 Eurozone countries – as much as was predicted in the previous assessment. The growth of the benchmark indicator, not including prices on fuel or foodstuffs, should be 1.8% in annual terms, versus the 1.6% predicted in the June assessment.

DT Trading Limited Analytical Department

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