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Asia Crisis Haunts Thailand With Clash Over $35 Billion Debt

December 30, 2011, 12:15 AM EST By Daniel Ten Kate and Suttinee Yuvejwattana

(Updates baht in fifth paragraph.)

Dec. 30 (Bloomberg) -- Thailand’s government will today press the central bank chief to take on $35 billion of legacy debt from bank bailouts as Prime Minister Yingluck Shinawatra looks for fiscal scope to finance flood defenses.

Bank of Thailand Governor Prasarn Trairatvorakul meets with cabinet members in Bangkok over the proposal to shift the debt to the BOT’s balance sheet. Deputy Prime Minister Kittiratt Na- Ranong said yesterday the step would save the government as much as 65 billion baht ($2 billion) in annual interest costs that could be used to fund anti-flood measures.

The push risks deepening concern that Yingluck’s administration is infringing on the central bank’s independence, after Kittiratt in October said the BOT should lower interest rates to help businesses cope with the country’s worst flooding since 1942. The government itself lacks unanimity on the move, with Finance Minister Thirachai Phuvanatnaranubala warning it could hurt investor confidence and stoke inflation.

“The weakening of the baht in the last few days may come from this concern about inflation,” said Somprawin Manprasert, an economist at Tisco Securities in Bangkok. “It’s not a good thing to do at all and will hurt both fiscal and monetary discipline. People will start to think that if the government can do it one time, they can do it again when debts pile up.”

The baht yesterday fell the most in two months to 31.75 per dollar, the weakest level since Aug. 16, 2010, according to data compiled by Bloomberg. It was unchanged today as of 8:46 a.m. in Bangkok, set for its biggest annual loss since 2005. The benchmark SET Index has dropped 1.8 percent over the past six days, the worst performer in Asia after Vietnam in that time.

‘Quite Strange’

Thailand’s Cabinet resolved earlier this week to study moving 1.1 trillion baht in debt incurred bailing out financial institutions 14 years ago onto the central bank’s balance sheet. Prasarn said this week it was “quite strange” that the government didn’t discuss the debt transfer officially with the central bank before bringing the issue to the Cabinet.

“Our losses on the balance sheet will be higher and that may affect confidence,” Prasarn told reporters on Dec. 28.

The Financial Institutions Development Fund racked up a 1.4 trillion baht debt during the 1997 Asian financial crisis on loans aimed at rescuing struggling lenders. The government closed more than 60 non-bank financial companies and seized half of the nation’s 14 commercial banks that received help from the fund.

Under a repayment agreement in 2002, the finance ministry makes interest payments while the central bank pays down the principal whenever it earns a yearly profit. The Bank of Thailand has reported annual net income once since 2004 and last year reported a net loss of 117 billion baht, mostly due to losses on foreign exchange.

Proud to Repay

Since 1997, the principal on the debt has fallen by 300 billion baht, or about 21 billion baht per year. During that time the government has paid as much as 65 billion baht in interest annually, according to Kittiratt, who said yesterday the central bank would report a “record high profit” for 2011.

“The central bank should be proud that they can take care of part of the nation’s debts,” he told reporters in Bangkok yesterday. “If we transfer the debt to the Bank of Thailand, it will help reduce the government’s concerns.”

The move would reduce the public debt-to-gross domestic product ratio by 10 percentage points from 40 percent now, providing room for more government borrowing, Kittiratt said. Thailand’s Cabinet this week approved a proposal to borrow 350 billion baht to set up a fund for long-term water-management projects following the floods.

‘Amend the Bible’

The government’s move has more to do with sidestepping restrictions on budget deficits than its ability to borrow, said Sethaput Suthiwart-Narueput, managing partner of Advisor Co., a Bangkok-based corporate advisory, and former executive vice president of Siam Commercial Bank Pcl. Yingluck’s government could spend more by passing a stimulus bill as the previous administration did in 2009, he said.

Thailand’s Budget Procedures Act passed in 1959 prevents the government from borrowing more than 20 percent of approved annual budget expenditures plus 80 percent of expenses allocated to government debt payments.

The government is “trying to get more spending out without having to issue a new law,” he said. “They certainly don’t want to amend the budget law because to do that it would be seen as ‘Oh my God, they are undermining the fiscal discipline our forefathers put in place.’ It’s like trying to amend the Bible.”

Printing Money

Thirachai, the finance minister, suggested allowing the use of interest from the country’s $167 billion in foreign reserves, amounting to 25 billion baht this year, for debt payments. His predecessor under the previous government, Korn Chatikavanij, said such a move would “retain the prudency and accountability and transparency of the current structure.”

The debt “is a burden for sure, but what would be worse is trying to push it off the government balance sheet and pretend it doesn’t exist,” Korn said in a telephone interview. “It would also be detrimental to the central bank, which would have no way to repay the debt except printing fresh money.”

--Editors: Tony Jordan, Chris Anstey

To contact the reporters on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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2012 May Bring a Bear Market for Metals

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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HSBC’s Sale of Thai Unit Shows Priority Is Scale, Not Geography

December 29, 2011, 11:39 PM EST By Stephanie Tong and Joyce Koh

Dec. 30 (Bloomberg) -- HSBC Holdings Plc’s effort to sell its retail bank in Thailand, a market it entered more than a century ago, marks a shift toward larger-scale operations as the bank sells assets to bolster its capital base.

Bank of Ayudhya Pcl, the Thai lender partly owned by General Electric Co., is expected to complete an acquisition of HSBC’s credit card and personal loans valued at 30 billion baht ($945 million) to 40 billion baht early next year, the Bangkok Post reported on Dec. 27, citing a person in the banking industry it didn’t name.

HSBC, which was trying to buy a bank in Thailand as recently as 2010, would loosen ties to the country just as new rules next year let foreign-owned banks open as many as 20 branches. Stuart Gulliver, chief executive officer of the London-based bank, is reversing two decades of expansion, selling assets and cutting jobs as Europe’s debt crisis saps profit and regulators boost capital requirements.

“HSBC used to look at their business portfolio geographically, but they now look at it by size,” Masahiko Ejiri, a Tokyo-based fund manager at Mizuho Asset Management Co., which oversees about $41 billion, said by phone yesterday. “HSBC’s disposal of assets in Asia may make it less attractive to investors.”

The bank in December announced the sale of its Japanese private banking business, with assets under management of $2.7 billion as of Oct. 31. HSBC, with total assets of $2.7 trillion, will be more disciplined about where it deploys capital, focusing investment on faster growing markets, as it faces “regulatory and inflationary headwinds,” Gulliver said in May.

’Disciplined Management’

HSBC failed in its 2010 bid to buy Siam City Bank Pcl, the country’s seventh-biggest lender by assets at the time, which was eventually sold for about $2.14 billion. The bank aims to cut as much as $3.5 billion of expenses by 2013 to tackle wage inflation in faster-growing economies and prepare for new capital rules, it said in May.

The lender announced 14 transactions from January through Nov. 9, including the sale of a U.S. credit card business valued around $32.7 billion, a Chilean retail bank and a Hungarian consumer-finance portfolio, the lender said. It’s also selling operations in Georgia, Iraq and Poland.

“There has been a disciplined management at HSBC that is going ahead without hesitation to trim businesses they don’t wish to commit more capital in,” Chong Yoon-Chou, Singapore- based investment director at Aberdeen Asset Management Asia Ltd., whose holdings include HSBC shares. “For a lot of investors, this could be a symbolic action to continue to restructure its businesses.”

First Banknotes

HSBC issued the first banknotes in Thailand, in 1889, and made the first foreign loan to the Thai government, for a railroad project, according to its website. In addition to the retail operation it is reported to be selling, the lender offers corporate and investment banking services in the country.

Ayudhya said in June it was in acquisition talks with consumer finance companies, after buying General Electric’s GE Money unit in Thailand in 2009. GE owns 33 percent of Bank of Ayudhya, the biggest stake and more than twice the second- largest holding, data compiled by Bloomberg show.

Ayudhya “welcomes opportunities to grow its business,” Philip Tan, head of the bank’s consumer-finance group, said by phone on Dec. 27, declining to comment on the Bangkok Post report. Varanandha Sutthapreeda, vice president of communications at HSBC in Thailand, also declined to comment. Penny Shone, a Singapore-based spokeswoman for GE, cited a policy of not commenting on “market speculation” in an e-mail today.

Bank of Ayudhya’s shares have fallen 14 percent this year, compared with a 0.9 percent decline in the benchmark SET Index. Bangkok Bank, Thailand’s biggest by assets, gained 4.1 percent in the period.

Bank of Ayudhya had $29.3 billion of assets as of the end of September, making it the nation’s fifth-biggest lender according to data compiled by Bloomberg. Bangkok Bank has $64.7 billion and Krung Thai has $61.6 billion, according to Bloomberg data.

--With assistance from Suttinee Yuvejwattana and Supunnabul Suwannakij in Bangkok and Nathaniel Espino in Hong Kong. Editors: Nathaniel Espino, Mohammed Hadi

To contact the reporters on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net; Joyce Koh in Singapore at jkoh38@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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Young Investors Simple Stock Investment Strategy

Homebuilders Gain on Pending Sales Data

Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)

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U.S. Population Saves By Moving Inland

December 28, 2011, 11:30 AM EST By Brian Chappatta

(For more stories on the census, TOP CENS .)

Dec. 20 (Bloomberg) -- New York, California and other high- cost U.S. states may lose residents as the economy recovers, continuing a trend during the past decade of Americans searching for more affordable regions to settle.

The U.S. population climbed 9.7 percent from 2000 to 2010, according to Census Bureau data. Five states -- Nevada, Arizona, Texas, Utah and Idaho -- grew at more than twice the national pace, as California, the most-populous, had its smallest increase ever, the data show.

The Northeast states of New York, New Jersey, Rhode Island and Massachusetts are among those that had population increases of less than half the average. Though migration has slowed, the effects of the economic downturn may rekindle movements away from high-priced areas, said Joel Kotkin, author of “The Next Hundred Million: America in 2050,” a book about demographics.

“If you move from New York to Houston, you just gave yourself a gigantic raise,” Kotkin said in a telephone interview. “As the country has become more stressed, people have to move to those places where they can achieve a middle- class lifestyle at a lower cost.”

Living With Parents

The average sale price of a single-family home in the area including New York City was $464,900 at the end of September, compared with $159,500 in the Houston region, according to National Association of Realtors data.

New York state has the fifth-highest income-tax rate in the U.S., while Texas is one of seven with no personal income tax. California is third-most, at 6.7 percent, trailing only Hawaii and Oregon.

About 1 in 9 people, or 11.6 percent, changed locations between 2010 and 2011, the lowest total since the government began tracking the figure in 1948, census data show. Men 25 to 34 years old, who are usually among the most frequent migrants, have increasingly opted to live with their parents during the past five years, according to government figures.

“A lot of people who would have been out-migrants have not yet left home,” said William Frey, a senior fellow at the Brookings Institution in Washington who has studied census data for more than three decades. “There is this pent-up demand for migration, and it could be that once things pick up, there will be an exodus again from these places.”

Californian Culture

Rich Karlgaard, publisher of Forbes Magazine, wrote in his 2004 book, “Life 2.0,” that Americans would leave cities such as New York, Boston, San Francisco and Los Angeles for smaller towns in Oregon, Missouri and North Dakota.

The population in Los Angeles, the second-largest U.S. city, grew 2.6 percent between 2000 and 2010, the census data show. The population in Santa Barbara, about 90 miles northwest of Los Angeles along the Pacific coast, fell 4.2 percent, while inland cities including Fresno and Sacramento experienced growth of 16 percent and 15 percent, respectively.

Overall, California’s population climbed 10 percent. The Census Bureau on Dec. 21 plans to release July 1, 2011, state population estimates.

Californians have made Oregon a top moving destination, behind Nevada, Arizona and Texas, according to Internal Revenue Service data compiled by Aaron Renn, who examines migration trends for his website Urbanophile.com. His data uses the number of exemptions claimed on tax returns for filers moving between states as a proxy for people.

Similar Culture

Moves deep into the interior U.S. from the coasts have been less frequent, according to the IRS data. California natives prefer destinations such as Phoenix, Salt Lake City and Seattle over areas in the Midwest because of similarities with the climate and demographics, Kotkin said.

“It’s not just going to where prices are the lowest,” he said. “It’s about the places that are the nicest, that are relatively cheaper, and that have similar culture.”

Wall Street may cut an additional 10,000 jobs by the end of 2012, New York Comptroller Thomas DiNapoli said in October. New York City weathered the recession that started in December 2007 better than other major cities because of its large banking industry, which was cushioned by the Troubled Asset Relief Program, Kotkin said.

New Yorkers affected by reductions in financial services may move to “safety valves” like eastern Pennsylvania or upstate New York, the Brookings Institution’s Frey said. Still, recent college graduates may opt to “ride things out” in the city to position themselves for an economic recovery, he said.

Cost of Living

Karlgaard’s book examined the difference between working where you live and living where you work. He argued in 2004 that because of real estate prices, traffic and higher costs of living, “a growing number of Americans are seeking a larger life in smaller places.”

For Wall Street traders and analysts, software developers and biochemists, location choices are much broader than “a guy with a B.A.,” Kotkin said. The unemployment rate in New York in October was 7.9 percent, compared with the national mark of 9 percent, according to the Bureau of Labor Statistics.

Nevada has the highest unemployment rate at 13.4 percent. Average home prices in the Las Vegas area plummeted to $138,000 in 2010 from $220,500 in 2008, the second-biggest decline behind Fort Meyers, Florida, according to NAR data.

“A lot of the jobs in Nevada, Arizona, and Florida were related to the growth itself -- construction and retail,” Frey said. “Once the economy stopped, the growth stopped.”

As housing prices continue to slide, future construction stagnates and unemployment remains elevated, would-be migrants may stay put against their will, Frey said. This will give places like New York and Los Angeles another chance to appeal to residents “stuck” with unsellable homes.

“When migration picks up, to what degree will there still be this gulf between where the middle class can afford to live and where they can’t?” Frey said. “Coastal California will likely still be out of a lot of middle-class homeowners’ reach, as will living in the more expensive parts of the Northeast.”

--Editors: Stacie Servetah, Flynn McRoberts

To contact the reporter on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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