Thai Crises

The Thai crisis is very serious issue and it would take at least two years to tide over it. The economy was rated among the fastest growing in the world, maintaining an impressive over eight per cent growth of the GDP for a decade.

But this year, Thailand would have to rest content with a four to five per cent growth. Though the IMF-Japan-led meeting in Tokyo came up with a pledge for $ 16 billions to bail out the Thai economy, the details are still being worked out and the coalition regime in Bangkok could have a tough time selling a severe austerity package for two years and pruning the fat in the machinery. It would be a testing time for the Prime Minister heading a seven-party coalition and getting ready to face another no confidence motion.

As a result of all this and the depreciation of all South East Asian currencies, India could also feel the pinch - it is already feeling it as an RBI Deputy Governor recently put it. The Indian rupee remained steady, hovering around Rs. 36 to a dollar. This could make the exports less competitive in the regional and global markets and is already being considered unrealistic and overvalued. A spokesman for a regional investment fund in Singapore struck a warning note.

Quite bulks of the resources of the regional funds have now been parked in India. But this is potentially explosive, because once things improve here and investors find more attractive markets than India, they will evaporate quickly and cause a slump in Mumbai, for instance. The reports of a $ 30-billion reserve built up by India should cause a lot of concern.

At the end of the tunnel, the industrialized countries are waiting with a package to prise open the financial services of all the developed and developing economies through global negotiations under the World Trade Organization. With a December 15 deadline to clinch the financial services pact, members of the G-7 and the OECD are busy trying to extract as many concessions as possible.

Japan has offered to play the role of a regional leader to hammer out a consensus in Asia and also floated the idea of a regional fund to dip into in times of crisis like the turbulence in the currency charting. But analysts in South East Asia are left wondering if there is going to be light at the end of the tunnel. These seem reasonable adjectives to describe the present state of some of the leading currencies. But where does that leave investors? First, let's provide a checklist of some sensible moves to consider.

Sterling holdings: the pound's weakness against all the major currencies has been such that it now purchases depressingly little of them. Stick with the pounds you've got unless you are convinced sterling will yet fall markedly further; in which case switching to the Japanese yen or Swiss franc looks favorite. Dollar holdings recently in much the same boat as sterling, but the consensus view now strongly favor a dollar revival. Keep current holdings. Deutschmark holdings recent strength gives it a lot of purchasing power of pounds and dollars. Switch into one of those, probably dollars.