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Published on September 7, 2007

The US subprimemortgage fallout may not have a direct impact on Thailand, but the shock waves will have a sizeable effect, says Narai Property deputy managing director Jainchai Limvattanakul.

He said that while Thai banks were probably not too exposed to subprime debt, the fallout from an expected slowdown or recession in the US would impact the local economy.

"The global market today is much more intertwined than ever before," he said. Any domino effect would be much stronger than during the 1997 crisis.

"The psychological impact has already affected the economy," said Jainchai, a former investment banker who joined Narai Property three years ago.

It is inevitable that the subprime meltdown, which has caused the collapse of several hedge funds and banks, will spark a more cautionary stance among Thai investors, which is altogether not a bad thing, he said.

And of all the Asian countries, few are as prepared as Thailand for global financial crashes, as the Kingdom triggered the Asian financial crisis only a decade ago.

Jainchai himself survived the tough years following the crisis. He understands the current cycle well.

"This is not an event one can afford to underestimate."

Jainchai was employed by Finance One when the crash wiped out it and 55 other financial institutions and banks. The experience taught him to approach business more carefully than before.

"The current situation needs monitoring. That our central bank is pumping liquidity into the system is a sign that the situation is serious."

The good news, however, is the fears are making sure housing developers, bankers and buyers follow more responsible and prudent practices.

"For homebuyers, affordability is now a major issue," he noted. "The subprime fallout is forcing players to take preventive measures and avoid making a disastrous deal by buying expensive real estate they cannot afford."

"During an up cycle, you can sell anything, but in a down cycle, only solid products find buyers," he said.

"Narai Property is a conservative company. Global events like the subprime crisis are making us even more conservative. So far, that has paid off. Our condominiums are priced reasonably, usually much lower, but provide more amenities than do our rivals. We are confident about riding out a downturn."

Itthi C Tan

The Nation