Friday, August 29, 2008

Rage in the streets start derailing Asia

Commentary by Bloomberg's William Pesek

Asia has indeed decoupled - not from the US economy, but from political reality.

Thailand is Exhibit A. Three years ago, it was the post- Asian-crisis role model. Living standards were rising, investors were funneling in and Asian peers were envious of ''Thaksinomics.''

The reference here is to the dual-track plan to boost domestic demand and export growth championed by Thaksin Shinawatra. The former Thai prime minister was removed in a September 2006 coup amid corruption allegations. Thaksin fled to the UK and bought soccer team Manchester City.

Yet the military leaders who replaced him were painfully inept. That paved the way for the People Power Party to be elected in December 2007. Its pro-Thaksin leader, former television chef Samak Sundaravej, is facing massive protests and calls for his resignation.

And just like that, one of Southeast Asia's shining examples of stability, prosperity and democracy is descending into farce. The joke among investors is which English Premier League team will Samak buy if he flees Thailand?

It's less of a joking matter that strategists like Dwyfor Evans of State Street Global Markets in Hong Kong say Thailand's baht may slide more than 3% by year-end, leading global funds to pull money from the country.

Malaysia's Woes

Events in Malaysia also are troubling. Again, this is an economy than won kudos following the Asian crisis a decade ago. Malaysia's headline-grabbing backlash against the International Monetary Fund moved to the background as growth returned, stocks rose and commodity prices soared.

Now, headlines are filled with ''sodomy'' and ''opposition official arrested'' and ''leadership crisis.'' The personality in question is Anwar Ibrahim, who's been accused of having illegal sex with a man. This week, Anwar won back a seat in parliament, increasing his chances of ousting Prime Minister Abdullah Ahmad Badawi. Malaysia's government is adrift when its economy can least afford it.

''At a time when Asia is under pressure from external forces, strong and stable leadership is crucial,'' says Simon Grose-Hodge, a strategist at LGT Group in Singapore. ''Malaysia and Thailand seem unable to deliver that.''

Biggest Surprises

Politics often offer the biggest surprises in Asian markets. In recent years, investors have found themselves less shocked by reports on gross domestic product, inflation or stock movements than coup attempts, scandals or disagreements between neighboring governments.

source: Rage in the streets start derailing Asia
Sydney Morning Herald, Australia