Economic bubble to burst by year's end?

Hot money inflows from foreign investors have created bubbles in stock & bond markets. Bubble burst by end of the year a real risk, says Virabongsa Ramangkura.

A bubble about to burst as a needle is pushed into it.

Click button to listen to Bubbles from Capital Inflows download

ECONOMICS

BoT chairman raises alarm of property, capital bubble

19 Mar 2013
Thai News Agency & Bangkok Post

Virabongsa: Burst could come soon

Foreign capital inflows have put the economy at risk of financial and property sector bubbles which could burst by year's end, Virabongsa Ramangkura, chairman of the Bank of Thailand board, has warned.

Dr Virabongsa said capital inflows have forced the stock market index up from around 1,000 points in the middle of last year to nearly 1,600 at present, while the purchase of government bonds has also surged by more than 15%.

He said he doubted that the central bank's Monetary Policy Committee would lower interest rates to cool the influx of foreign capital

As a result, all parties concerned must find ways to prevent an economic bubble given Thailand's risk as a liberalised market, he said

His concern is in line with the Asian Development Bank (ADB), which is warning about the rising risk of asset price bubbles in emerging East Asia due to increased capital flows through bond markets.

The region is more resilient than it used to be, Thiam Hee Ng, senior economist at the ADB's Office of Regional Economic Integration said.

But governments still need to be careful that the surge in capital inflows does not fuel excessive asset price gains, and that they are prepared for a possible reversal in the flows when the US and European economies recover.

Emerging East Asia is defined as China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Vietnam and Thailand

Investors have been putting their money to work in emerging East Asia since the early 1990s, but the flows have picked up pace recently because of low interest rates and slow or negative economic growth in developed economies.

Emerging East Asia, meanwhile, has enjoyed high growth rates and appreciating currencies, Mr Thiam said.

Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said yesterday he did not see any signs of a domestic property bubble.

He accepted there had been massive capital inflows into Thailand, but said very little of this had entered the property sector.

Mr Kittiratt said most of the "hot money" from foreign investors was flowing into the capital and bond markets rather than real sectors like the property market.

"It was possible that investors who had made profits in Thailand might partially re-invest in local property, but this was still fairly rare and would not lead to any economic trouble, Mr Kittiratt said. "However, the government is taking proper precautions," he added.
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Dr Virabongsa also said Thailand's agricultural sector needs to make structural adjustments, and the government must refrain from subsidising agricultural produce.

(Source: Bangkok Post, ECONOMICS, BoT chairman raises alarm of property, capital bubble, 19 Mar 2013, Thai News Agency & Bangkok Post, link


Economic Bubble Vocabulary

economic bubble - when asset prices rise to levels far beyond their long-term true worth, the bubble eventually bursts, a lot of people lose money, and then asset prices return to their long-term trend value เศรษฐกิจฟองสบู่, เศรษฐกิจที่ขยายตัวเกินสมควร (See Wikipedia)
find ways to prevent an economic bubble

bubble -
Same as "economic bubble"
a bubble economy - Same as "economic bubble"

asset - something owned by a person, company etc., particularly money and property ทรัพย์สิน
asset price bubble - Same as "economic bubble"

stock market bubble - (See Wikipedia)
real estate bubble - (See Wikipedia)

stock market - the business of buying and selling shares in companies and the place where this happens ตลาดหุ้น
real estate - land and the buildings and homes built on the land บ้านและที่ดิน
buildings - ตึก, อาคาร, สิ่งก่อสร้าง
property - Same as "real estate", also called "real property" (because "property" can include the other things a person owns)

capital -
money invested in businesses
capital bubble
property bubble

emerge -
to appear or become known; to start to gain influence, power or wealth
emerging market economy - countries with quickly growing economies, with China and India being the largest ones (See Wikipedia)
emerging East Asia - the merging market economies of Asia, the quickly growing but not yet fully developed economies of Asia, Asian middle income economies or Newly Industrialized Country (NIC)
asset price bubbles in emerging East Asia

bonds - an agreement by a government or an organization to pay back the money an investor has lent plus a fixed amount of interest on a particular date; a document containing this agreement พันธบัตร, หุ้นกู้ (See Wikipedia)
bond markets

asset price bubbles due to increased capital flows through bond markets

burst - explode, break open ระเบิด, แตก, โพล่ง, ปะทุ
the bubble bursts
a bubble burst
Virabongsa: Burst could come soon

sector - a part of a country's economy or business activity ภาคเศรษฐกิจของประเทศ (See Wikipedia)
property sector - the real estate sector, the building and buying and selling of buildings and homes
financial sector -
the buying and selling of "financial assets" or "securities"such as stocks and bonds
agricultural sector

property sector bubble
financial sector bubble

put the economy at risk of financial and property sector bubbles
financial and property sector bubbles which could burst by year's end

capital - money invested in a business
foreign capital

inflow - the amount flowing into a place
foreign capital inflows

influx - Same as "inflow"
the influx of foreign capital

alarm - to cause worry or fear that something unpleasant or dangerous might happen or is happening ทำให้กลัว
raises alarm
BoT chairman raises alarm of property, capital bubble

risk - danger, how likely or possible it is for a bad event that causes harm and damage ความเสี่ยง
put at risk

board - board of directors, the group of people who make high level policy for an organization (the highest group of decisionmakers in an organization)
Bank of Thailand board

chairman - the head or leader of the board
chairman of the Bank of Thailand board

Foreign capital inflows have put the economy at risk of financial and property sector bubbles which could burst by year's end, Virabongsa Ramangkura, chairman of the Bank of Thailand board, has warned.

index -
index number ดรรชนี, ดัชนี, ตัวเลขอัตราส่วนซึ่งอาจเปลี่ยนแปลงได้ในระยะเวลาหนึ่ง
stock market index

force up

force stock market index up
capital inflows have forced the stock market index up

purchase - buy  
surged - increased quickly เพิ่มขึ้นอย่างรวดเร็ว More details from DPA the German news agency: The
the purchase of government bonds has also surged

Dr Virabongsa said capital inflows have forced the stock market index up from around 1,000 points in the middle of last year to nearly 1,600 at present, while the purchase of government bonds has also surged by more than 15%.

interest rate - the cost of borrowing money, usually expressed as a percentage of the amount borrowed อัตราดอกเบี้ย

cool
- make less, reduce and speed at which something is happening 
influx - the amount of something coming into a place
cool the influx
cool the influx of foreign capital

lower interest rates to cool the influx of foreign capital

doubt - not believe completely, 100%; question whether something is true or not
He said he doubted that the central bank's Monetary Policy Committee would lower interest rates to cool the influx of foreign capital

parties - people or companies entering into a business arrangement or deal
concern - to be about เกี่ยวกับ
all parties concerned - everyone who is involved in some situation

liberalised - to make the rules for an industry less strict, so it is easier to do business and for new companies to enter the industry
a liberalised market - a market without a lot of restrictions, regulations and rules

Thailand's risk for economic bubbles as a liberalised market
As a result, all parties concerned must find ways to prevent an economic bubble given Thailand's risk as a liberalised market, he said

concern - a worry ความกังวล
in line with - follows, agrees with
his concern is in line with the Asian Development Bank (ADB)

His concern is in line with the Asian Development Bank (ADB), which is warning about the rising risk of asset price bubbles in emerging East Asia due to increased capital flows through bond markets.

resilient - recovers easily from problems or failure, able to succeed after failure, able to get strong after being weak, able to get back after you fall down ความสามารถในการฟื้นคืนสู่ปกติ คืนสู่สภาพเดิม
The region is more resilient than it used to be ...

excessive - too much; much greater than is usual; too much of something มากเกินปริมาณที่พอดี
excessive asset price gains

fuel - to make something increase or become worse ทำใ้ห้รุนแรงขึ้น
fuel excessive asset price gains

surge - a sudden increase in something การเพิ่มขึ้นอย่างรวดเร็ว
surge in capital inflows fueling excessive asset price gains

need to be careful that the surge in capital inflows does not fuel excessive asset price gains

reversal in the flows -
when what is flowing in, turns around, and flows out
a possible reversal in the flows

recover - when the situation improves, gets better; become healthy and fit again การฟื้นไข้
prepared for a possible reversal in the flows when the US and European economies recover.

But governments still need to be careful that the surge in capital inflows does not fuel excessive asset price gains, and that they are prepared for a possible reversal in the flows when the US and European economies recover.

pace - the speed at which something happens ท่างทำนอง ย่างก้าว จังหวะ ที่สิ่งต่างๆ ดำเนินไป
pick up pace - go quicker
flows have picked up pace recently

negative - less than zero (-1 is "negative one", for example)  
slow or negative economic growth in developed economies

Investors have been putting their money to work in emerging East Asia since the early 1990s, but the flows have picked up pace recently because of low interest rates and slow or negative economic growth in developed economies.

enjoyed - experienced
enjoyed high growth rates
appreciating currencies -
when currencies increase in value compared to other 
Emerging East Asia, meanwhile, has enjoyed high growth rates and appreciating currencies, Mr Thiam said

domestic - within the country ภายในประเทศ
domestic property bubble
he did not see any signs of a domestic property bubble

massive - very large in size, amount or numberใหญ่โต มหาศาล
massive capital inflows
massive capital inflows into Thailand
He accepted there had been massive capital inflows into Thailand, but said very little of this had entered the property sector

hot money - money moved quickly between countries to profit from changes in interest rates or in the value of currencies
hot money from foreign investors
most of the "hot money" from foreign investors was flowing into the capital and bond markets rather than real sectors like the property market

local - in this country (Thailand)
local property - property (land and buildings) in Thailand

partially - partly; not completely
re - do again
re-invest - invest again (for the 2nd, 3rd, 4th time, etc)
partially re-invest in local property
investors who had made profits in Thailand might partially re-invest in local property

rare - uncommon, unusual ซึ่งหายาก not happening very often ที่หาได้ยาก
fairly rare - rare but not very rare
this was still fairly rare

precautions - actions taken to prevent something bad from happening การป้องกันไว้ก่อน
proper precautions - the right precautions; do the right things to prevent something from happening
take proper precautions

It was possible that investors who had made profits in Thailand might partially re-invest in local property, but this was still fairly rare and would not lead to any economic trouble, Mr Kittiratt said. "However, the government is taking proper precautions," he added

structural - connected with the way in which the economy is organized or "structured" (examples: structural defects, structural changes in the industry, structural reform of the economy)
structural adjustments - changes to the way the economy is organized and works (example, farmers sell their rice to mills gain rather than only to the government)

agricultural produce - the agricultural goods that farmers "produce" such as vegetables and fruit

subsidise -
when the government pays part of the cost of something
subsidising agricultural produce

refrain - to stop yourself from doing something ระงับ เลิก
refrain
from subsidising agricultural produce

Thailand's agricultural sector needs to make structural adjustments, and the government must refrain from subsidising agricultural produce

About the author

columnist
Writer: Jon Fernquest
Position: Online Writer