Though the third quarter started off pretty well, the period ended amidst a lot of volatility. A surprise ‘no taper’ announcement from the Fed and now the government shutdown have lately caused worries for investors worldwide.
The partial government shutdown has led to uncertainty not only for the U.S. economy but also has ripple effects in the global markets. The shockwaves traveled across emerging markets (EM) as well.
Some emerging market titans in the ETF world which were striving to recover ever since the FOMC meeting on September 18th has seen some brutal trading, though there has been a bit of a rebound in many names as well. (See: Time to Panic About Emerging Markets?).
While many emerging economies suffered badly, Thailand seems to have been one of the worst hit.
Is Thailand in a recession?
Thailand was in the spotlight for the first half this year. However, a series of downturns have led some observers to label the country to be in a “Technical Recession” now.
While Thailand’s economy grew by 2.8% in Q2 on a year-on-year basis (YoY), growth has fallen by 0.3% in the second quarter from the previous quarter. This followed a 1.7% quarter-on-quarter (QoQ) fall noted during January-March this year.
In fact, many businesses in the country are forced to cut their spending due to a slowdown in domestic consumption. Moreover, due to factors like rising costs and sluggish growth, the private sector has been badly affected. Due to a decline in profits, companies have curtailed spending on Research & Development (R&D).
Goldman Downgrades Thailand
Due to the country’s grim economic outlook and concerns over potentially high levels of non-performing loans, Goldman Sachs has downgraded Thailand’s rating to market-weight from overweight. (Read: Is the Thailand ETF in Trouble?).
Given this gloomy backdrop, the country’s main benchmark has seen pretty rough trading over the past few weeks. Furthermore, the nation’s currency, the baht, has also struggled, losing a bit in recent trading.