Bangkok Hipster Stock Tips May Signal Market Correction

Joe Kennedy famously claimed that he knew it was time to dump shares when he got a stock tip from a shoeshine boy inNew York.

Alarmed by the market froth, Kennedy began shorting shares and emerged an even richer man after the 1929 crash. This cautionary story has become part of Wall Street lore. It popped into my head last week in Bangkok when a young Thai musician told me that many of his hipster friends were obsessing over stock prices and swapping tips. Thai stocks have been on a roll this year, along with the Thai currency which hit a five-year high on the day that I met the musician at a dinner party. “Is it going to continue to go up?” he asked me. The short answer was no: Thailand‘s equity index suffered a 3.3% correction on Mar 22, partly on Cyprus-related jitters. The resolution of the Cypriot storm-in-a-teacup helped the Thai market’s recovery on Monday, with a 2% jump, outpacing other Asian indices. Game on.

Yet Thailand still looks frothy compared to other Asian emerging markets that haven’t seen such dramatic gains. Stocks are up 47% since the start of 2012. There is a growth story, of course, and capital market activity that supports more currency inflows. Fitch recently upgraded Thailand’s foreign-currency debt, citing its resilience to shocks. Note, however, that last year’s 6.4% GDP growth was flattered by the catastrophic impact of flooding in the final quarter of 2011. Matching that pace of growth will be tougher this year, though external demand for Thai manufactured and farm goods should remain strong. Tourism is also booming, with forecasts for a remarkable 24.5 million visitors in 2013. That’s double the level in 2005 and a vital multiplier for local employment in Bangkok and coastal resorts. Tourism also bolsters the property market, as more Southeast Asians and expatriates opt for second homes in Thailand. One key factor is Thailand’s relative political stability since 2011, when voters tossed out a weak coalition government cobbled together by military and judicial fiat. Prime Minister Yingluck Shinawatra, the younger sister of exiled billionaireThaksin Shinawatra, isn’t the most dynamic of leaders, but her government has performed sufficiently well to reassure investors of continuity (and the parliamentary opposition is feeble). In Bangkok’s wealthier neighbourhoods, signs of luxurious consumption and expansion are everywhere, and bars are teeming with young revellers. That some are checking their smartphones for stock updates should be food for thought, if you follow Kennedy’s dictum.

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