In general, the threatened tariffs and investment restrictions on China won’t likely cause deep pain to the Chinese economy, nor will they have a material impact on corporate borrowers in either country, it said in a press release on Monday.

S&P believes China’s response will be the key determinant on what happens next.

So far China’s response has been relatively measured, indicating potential tariffs on about $3 billion of US imports. But will China take additional retaliatory action?

“More aggressive moves could escalate into a full-blown trade war between the world’s two largest economies – with spill-over effects on global business confidence, investment, and growth,” said managing director Terry Chan.

“We asked our analysts to assume significant tariffs on specific Chinese import items to determine the impact associated with a potential downside scenario.”

Preliminary analysis shows that the overall impact on Chinese corporations and banks will be contained because the US represents only about 15 per cent of China’s exports, and China’s domestic activity now drives its economic growth rather than exports.

The $50 billion-$60 billion targeted by potential tariffs could affect up to 12 per cent of Chinese imports to the US. The trade dispute appears to be about technology and intellectual property, so products subject to the tariffs could include computers and cell phones.

However, it’s unclear whether the tariffs will focus on just one or two product categories or be more widespread.

“The near-term effects on corporate credit will likely be muted – barring an immediate escalation of retaliatory measures – but there will still be some impact for certain sectors, depending on their reliance on the Chinese market,” said managing director of corporate ratings David Tesher.

“However, our base case for limited ratings impact doesn’t factor in a Sino-US trade war. China has so far flagged that it may impose tariffs on 128 US product imports, including pork, recyclable aluminium, fruit and nuts, wine, and steel pipes.

“However, these products represent a relatively modest portion of trade from the US. If China’s response is more retaliatory, we would re-analyse the impact on industry sectors in both countries.”

The report, “Global perspectives for private companies: Plans, priorities, and expectations”, said two-thirds of private company executives across the globe believe their revenues will rise in the year ahead.

Surveying almost 1,900 executives in 30 countries, the majority of respondents expect revenue, profits, productivity and capital investments to increase in the coming year.

Additionally, 45 per cent expect to hire more full-time employees.

Despite these expectations, 53 per cent of respondents perceive a greater level of uncertainty around their future business prospects.

“The optimism of private companies worldwide reflects an economic alignment taking hold for the first time in years,” said Mark Whitmore of Deloitte Canada.

“In the face of increased uncertainty, private companies seem to be leveraging their inherent agility to gain a competitive edge.”

While private companies are similarly optimistic across the globe, reflecting current levels of global interconnectivity, the survey revealed some differences in top risks to growth across different regions.

For instance, respondents in the Americas expressed concern about the uncertain economic outlook in their home countries, while respondents in Europe, the Middle East and Africa point to hiring as a top challenge, and Asia-Pacific respondents identified raw material costs as a barrier to growth.

Trade wars to fuel pressure on Thai bourse

Therdsak Thaveeteeratham

Executive vice president – research

Asia Plus Securities

After its all-time high of 1,843 points on January 25 this year, the SET Index has turned due to lack of support. Fundamentally, there are no negative factors, but concerns remain the same regarding the Eastern Economic Corridor, public investment and changes in commodity prices. Foreign investors have continued their net sales and focused more on short-term trading. As a result, the SET Index has moved in a narrow range. Late last week’s issue on US trade protection will likely presฌsure the SET Index to drop from the normal range of 1,800 +/10 points but with limitฌed downside as foreign holdings of Thai shares are now very low. The resistance line of 1,780 points is strong.

The Fed’s view for this year’s three rate hikes reflects the upward trend of interest rates, while in Thailand the BOT is expectฌed to continue its monetary easing and leave the policy rate unchanged at 1.5 per cent for the whole 1H18 due to low inflation. The Thai policy is predicted to rise by 25 basis points in 2H18.

Amidst global trade protection and Thai fiscal stimulus, Thai GDP growth is estimated at 4.2 per cent this year. We prefer domestic plays for its fewer impacts from international trade and gains from domestic economic recovery. We pick BCH (fair value@Bt19.30) and BPP (FV@Bt33.20). Dividend plays are also attractive, while interest rates remain low and previously, their prices fell to low level in opposite with outstanding performance. We prefer QH (FV@Bt4.30).

Prakit Siriwattanaket

Vice president

Kasikorn Securities

The trade dispute between the US and China for infringement of intellectual property, and China’s retaliation, has raised concerns for stocks markets in the region. We believe this dispute will not develop to a trade war. The Thai bourse should not see panic sales. Historically, US stock market fluctuations affected the SET Index only after the Thai exchange opened. There were always rebounds on closing.

The US-China trade dispute is expected to affect Thailand’s midstream products, particularly electronics items exported to China, given these are a part of Chinese products’ supply chains. HANA could affect the situation largely as 33 per cent of its income is from exports of electronics components to mobile phone makers in China. KCE and Delta could see limited impact, given its focus on Europe. Besides, industrial estates will likely suffer impacts if the situation is developed to affect global trade and investors postpone their investment. Domestic players such as retailers, hospitals, power plants and communications firms will see limited impacts. When their prices drop following negative market sentiment, this is an opportunity to accumulate them. This week, the SET Index still sees its expectations on window dressing. In the past five years, the SET Index had an 80 per cent probability to provide an averฌage return of 1.9 per cent in the last five days of the first quarter. Rises in the SET Index have always been in line with purฌchases of local institutional investors late in a quarter. We believe that some of their purchase will be directed to big caps in the SET50 Index, which could prompt popular stocks and large funds to hold to create some window dressing.

Within four months after the signing, 100 trucks each side would be allowed to cross the border back and forth in both directions between Myanmar’s Mawlamyine and Thailand’s Mukdahan along the east-west corridor, according to Aung Khin Myint, chairman of Myanmar International Freight Forwarders’ Association.

The MoU is a part of the Crossborder Transport Agreement ratified by six countries in the GMS – Cambodia, China, Laos, Myanmar, Thailand and Vietnam.

Myanmar has not yet fully ratified annexes and protocols of the pact, making necessary the bilateral MoU with Thailand to facilitate the high demand for cross-border movements, Aung Khin Myint said.

Myanmar is now improving its transportation facilities including roads and vehicles as well as human resources to support logistic sector in the country and in the region, said Sann Myint Au, Myanmar’s managing director of Road Transport Department.

The country recently launched a national logistics masterplan with 167 projects to develop road netฌworks and other facilities to bring Myanmar’s logistics system up to international standard and build strong connections to countries in the Mekong region, he said. “To link with the Asian Highway and GMS economic corridors, the surface condition and alignment of many roads in Myanmar needed an upgrade,” he said.

While the main routes connecting to the Asian Highway meet international standards, many roads in rural areas and provinces needed to be improved to meet the Asean standards of 10 tonnes per axle for a road network carrying heavy loads.

“In term of logistics, we still urgentฌly need truck terminals and high density international standard warehouses, as well as information for backloading empty trucks. If we can provide those services, costs would be reduced,” Sann Myint Au said.

It is also important to improve the skills of truck drivers, said Sann Myint Au, who presided over the launching of “Training for Companies on Eco and Defensive Driving” programme in Nay Pyi Taw on March 1316.

A trainer at Nay Pyi Taw driving school shows his trainees how to check vehicle readiness

Sponsored by the European Union, the programme aims to increase sustainable freight transฌport and logistics in the country with participation of 150 small and medium companies.

U Kyin Thein, vice chairman of Myanmar Highway Freight Transportation Service Association sent two drivers from his Htun Padetha Logistic company’s Yangon and Mandalay branches to join the programme.

While the programme aims to train the trainees to drive safely and save energy, Kyin Thein said his company has applied for the licence for international transport and would later train drivers to a higher skill level and to follow laws and regulations of other countries.

According to a report by the Bank of Thailand, as of September 30, 2017 Thai investors showed outstanding direct investment worth US$32.88 billion (about Bt1.05 trillion) in Asean countries – up 18.95 per cent from the same period last year. Up to 34 per cent of the total, or $11.19 billion, was invested in Singapore, followed by Vietnam, Myanmar, and Indonesia.

While Singapore led the countries attracting Thai investors last year, CLMV countries are expected to be the top five for Thai investors from this year until 2022. This follows the Thai government’s policy to encourage local investors to expand their investment in CLMV. Meanwhile, CLMV governments are also promoting their countries to foreign investors by offering additional incentives (see graphic).

Cambodia’s Commerce Minister Sorasak Pan said in a recent interview with The Nationthat his country expects the value of Thai direct investments to double by 2020, driven by an expansion in services, agricultural processing, small and medium-sized enterprises and restaurants.

“We are now open for foreign investors to hold a 100-per cent stake in businesses in Cambodia and we also offer a tax holiday of up to nine years for foreign investors who apply to the Council for the Development of Cambodia [CDC] for benefits offered as incentives,” he said.

Similarly, Laos’ Finance Minister Somdee Duangdee has pointed to his government’s effort to encourage foreign investors to do more business in Laos by revising its investment promotion incentive law, providing a one-stop service to interested investors and offering tax privileges for up to 15 years depending on the industry.

“Laos has promoted investment in agriculture, processing of agriculturall products, electronics, electronic parts, energy, tourism and SMEs,” he said.

Myanmar is in the process of modifying the century-old Myanmar Companies Act, Aung Naing Oo, director-general of the Directorate of Investment and Company Administration (DICA) and secretary of Myanmar Investment Commission (MIC) said recently.

As part of the MIC’s efforts to facilitate foreign direct investment, both local and foreign companies have been allowed to appoint expatriates to the management level and as technical staff including accountants. For its bit, DICA is facilitating stay permits and visa extensions for foreign investors, technicians, and their family members.

Vietnam has also revised two acts governing investments and enterprises since 2015, opening up the opportunity for foreign investors to expand their investment in the country. This has boosted Vietnam’s economic growth beyond five per cent a year.

Cambodia, Laos, and Myanmar have also benefited from the most favourable regime designation availฌable under the EU’s Generalised Scheme of Preferences, namely listing in the “Everything But Arms” (EBA) scheme. The EBA gives the 47 “least developed countries” duty-free access to the EU for export of all products except arms and ammunition.

Siam Cement Group (SCG), a Thail conglomerate in construction, raw materials, petrochemical, and paper industries, can expand its investment by Bt188 billion from this year till the year 2022 by starting with only Bt20 billion this year.

PTT Exploration and Production Plc is considering expanding its energy investments in Myanmar and Vietnam, according to CEO Somporn Vongvuthipornchai.

CP Group also has expanded its agriculture and food processing business in Cambodia, Laos and Vietnam.

TCC Group, headed by beverage tycoon Charoen Sirivadhanabhakdi, has expanded investments in Laos, Myanmar and Vietnam.

Central Group expanded its retail business by taking over Big C in Vietnam and is planning to invest in Laos and Myanmar.

Energy firm CK Power Plc also expanded its investment in hydroelectric power projects in Laos, and its parent company Ch Karnchang Plc has expressed interest in expanding investments in Myanmar, said Ch Karnchang Plc’s CEO Supamas Trivisvavet recently.

Meanwhile, the Thai government has taken the lead on a master plan for trade and investment collaboration with the CLMV subregion in an effort to ensure all five countries continue to prosper, Deputy Prime Minister Somkid Jatusripitak said recently. “We started to write a master plan to develop trade and investment with Laos after visiting Laos in last year,” said Somkid. “This is a pilot project to negotiate with Myanmar, Cambodia and Vietnam this year.”

In his latest jolt to the prevailing global order, Trump on Thursday authorised tariffs on as much as $60 billion of Chinese imports, targeting sectors in which Washington says China has stolen American technology.

Liu He, the Chinese vice premier in charge of the economy, told US Treasury Secretary Steven Mnuchin Saturday that Beijing was “ready to defend its national interests” but hoped that “both sides will remain rational and work together,” according to China’s official Xinhua news agency.

He also accused a US probe into Chinese intellectual property practices of violating international trade rules.

China had warned the United States on Friday that it was “not afraid of a trade war” as it threatened tariffs on $3 billion worth of US goods in retaliation. And French President Emmanuel Macron said Europe would respond “without weakness” to Washington’s threats of tariffs on steel and aluminium.

“Nothing should be addressed when it is with a gun to your head,” he said at the end of an EU summit in Brussels.

Global stocks have plummeted as fears rise that the confrontation could provoke a damaging trade war. Meanwhile, World Trade Organization Director-General Roberto Azevedo called for cooler heads to prevail, saying in a statement that new trade barriers would “jeopardise the global economy”.

But speaking to reporters on Friday as he signed new budget legislation, Trump said his efforts were beginning to bear fruit.

Washington this week said it would temporarily exempt Europe as well as countries including Brazil, Argentina, South Korea and Australia from the steep new steel and aluminium tariffs that Trump unveiled this month and which took effect Friday.

‘Fair trade deals’

European and US trade officials said this week they were beginning talks to reach a compromise.

“Many other countries are now negotiating fair trade deals with us,” Trump said Friday.

“Part of the reason, frankly, that we’re able to do that is the fact that we have the tariffs on steel and the tariffs on aluminium.”

Meanwhile, US Commerce Secretary Wilbur Ross said Friday that US and South Korean officials were “relatively close” to reaching a deal on the steel and aluminium tariffs, with an announcement possible as early as next week.

But Beijing on Friday also unveiled a hit list of products that could face duties of up to 25 percent, from fresh fruit to pork and wine, though it stopped short of pulling the trigger as it indicated its readiness to negotiate an agreement.

China’s commerce ministry warned that a 15 percent tariff on 120 goods worth almost $1 billion — including fresh fruit, nuts and wine — would be imposed if the US fails to reach a “trade compensation agreement” within an unspecified time frame.

In a second step, a 25 percent tariff would be imposed on eight goods totalling nearly $2 billion, including pork and aluminium scrap, after “further evaluating the impact of the US measures on China,” the statement said.

“China does not want to fight a trade war, but it is absolutely not afraid of a trade war,” the commerce ministry said.

The list noticeably does not include soybeans, a key US export from Trump-voting states that Chinese state-run newspaper the Global Times had suggested should be targeted by Beijing.

Betty Wang, an economist at ANZ bank, said China’s reaction was “relatively mild.”

“From China’s perspective, it absolutely does not want to see a trade war. Coming back to the negotiation table is a relatively good result,” Wang said.

The United States had a record $375.2 billion goods trade deficit with China last year.

Change China’s behaviour

Senior White House economic advisor Everett Eissenstat said Thursday the new US import duties would target sectors where “China has sought to acquire an advantage through the unfair acquisition or forced technology transfer from US companies.”

US Trade Representative Robert Lighthizer indicated the industries could include aerospace, maritime and rail transport equipment, and new energy vehicles.

Trump’s order also directs the US Treasury to develop new proposals to increase safeguards against Chinese investments in the US that could compromise national security.

In addition, the United States launched a challenge at the World Trade Organization on Friday, saying in a statement that China appears to be breaking WTO rules by denying foreign patent holders rights “to stop a Chinese entity from using the technology after a licensing contract ends.”

White House officials said the actions came after years of efforts failed to convince China to change its behaviour.

American industry, agriculture in particular, as well as members of the president’s own Republican party have voiced strident opposition to his recent trade moves — but the latest actions against China did receive some support on Capitol Hill.

Opec-led production controls are quite the norm now, ever since a key group of producers including Opec and others put in place the supply cut agreement in December 2016. This year so far has been a validation of their efforts, with the two international benchmarks: front-month ICE Brent futures and NYMEX light sweet crude oil averaging $67 a barrel and $62.68 a barrel, respectively, since the start of the year.

“Everybody benefited,” Opec Secretary-General Mohammed Barkindo said at a recent industry conference, adding that the agreement put the industry back on a “path of sustainable growth.”

The impact can be seen across oil price forecasts generated by industry experts. Where record crude oil inventories just a year ago made the likelihood of $60 a barrel -$70 a barrel a pipedream, analysts this year are far more bullish.

Goldman Sachs analysts in their Commodities Research report said: “Combined with our expectation for strong oil demand growth and high Opec compliance, we reiterate our constructive forecast on oil prices with global inventories set to fall further below their 5-year average levels through Q3 2018.”

Similarly, analysts from Societe Generale in a report forecast front-month ICE Brent prices to be $67 a barrel in Q2 2018 and $68 a barrel in Q3 2018. While this carefully monitored effort to curb global oil production and exports has received credence from initially skeptical industry analysts, the spotlight now shifts to US energy policy.

In the context of worldwide producer cuts giving a leg up to oil prices, US producers have come back from the brink of a challenging financial phase for the drilling industry, with the country’s production crossing the 10 million barrels/day mark in a record-setting November last year, up from 8.77 million barrels/day in November 2016.

Output has stabilised a bit since then. According to Baker Hughes, the US rig count — an early indicator of future crude oil production – fell 4 to 796 in the week to last Friday, the first such fall in seven weeks. Meanwhile, analysts expect US crude inventories to see a build of 2.5 million barrels for the week ended March 9, and preliminary data from the American Petroleum Institute shows a possible build of 1.2 million barrels for the same.

But domestic oil production is not the only way the US may impact global oil winds this year. The fresh dismissal of US Secretary of State Rex Tillerson by President Donald Trump puts the industry into a new flux, reviving the question of whether the US will reimpose sanctions on Iran.

Trump named CIA Director Mike Pompeo, a former Republican congressman from Kansas and a harsh critic of the Iran deal, as Tillerson’s replacement, which industry watchers say makes sanctions a high possibility.

“I think we can now safely say that the end is near for the Iran deal,” Joe McMonigle, an analyst with Hedgeye Capital.

“Should sanctions be re-introduced against Iran, versus the previous lifting of the said sanctions, as long as Tehran limited its nuclear energy program, it could raise the geopolitical risk premium in oil markets,” OCBC analyst Barnabas Gan said after the news.

May 12 is the next deadline for the US to waive oil-related sanctions on Tehran as part of the Joint Comprehensive Plan of Action.

Iran, meanwhile, is not wasting any time. It has been vocal about pushing its production past current Opec limitations based on the suppressed output it had to endure during the previous phase of sanctions.

Iranian oil minister Bijan Zanganeh argues higher prices are reviving US shale at Opec’s expense. In a recent interview with The Wall Street Journal, he said the 14-member group may agree at its next meeting June 22 on a strategy for ending its cuts starting in 2019. Zanganeh insists Saudi is on board with the idea, but his message contradicts recent signals of longer term cooperation between Opec and producers outside the group led by Russia.

The next opportunity for Opec and its partners in the production cut agreement to discuss policy comes next week when a six-country technical committee overseeing the deal meets to discuss market conditions. Iran isn’t part of the committee.

Opec as a whole is 340,000 barrels/day below its notional ceiling of about 32.73 million barrels/day, when every country’s quota under its production cut agreement is added up, says the latest Platts Opec survey.

Contributed by MRIGANKA JAIPURIYAR, Associate Editorial Director, Asia & Middle East Energy News & Analysis, S&P Global Platts

Anan Wongbenjarat, director-general of the Tourism Department, which is part of the Tourism and Sports Ministry, said the three agencies were teaming up to strengthen tourism small and medium-sized enterprises under the government’s “Pracha Rath” policy.

Presiding at the MoU signing ceremony were Deputy Industry Minister Somchai Harnhirun, Industry Ministry permanent secretary Pasu Loharjun, and Tourism and Sports Ministry permanent secretary Pongpanu Svetarundra.

The MoU was signed by Anan on behalf of the Tourism Department; Pornthep Karnsub, Industry Ministry inspector and representative from the Pracha Rath SMEs Fund; and Mongkol Leelatham, president of SME Development Bank.

Under the agreement, the three agencies will launch joint activities to strengthen tourism SMEs and related businesses, so that they can access the Pracha Rath SMEs Fund and other services from SME Development Bank.

Anan said his department would assist the SMEs by giving them support on tourism information and public relations, and by providing links for tourists to gain access to community-based tourist attractions and the Creative Industry Village, which are supported by the Industry Ministry and SME Development Bank.

In addition, the Tourism Department will support tourism SMEs, as clients of SME Development Bank, and the target groups of the Industry Ministry with activities, speakers and experts in various fields, in order to help them develop community-based tourism and improve services to meet the Thailand Tourism Standard, he explained.

Beijing unveiled a hit list of products that could face duties of up to 25 percent, from fresh fruit to pork and wine, though it stopped short of pulling the trigger as it indicated its readiness to negotiate an agreement.

The latest trade action sent stocks diving as fears rise that the US, which accuses China of mass theft of intellectual property and other unfair practises, could provoke a damaging trade war.

The Dow Jones Industrial Average plunged more than 700 points, while Tokyo closed 4.5 percent lower and Hong Kong and Shanghai were both down more than three percent.

“China does not want to fight a trade war, but it is absolutely not afraid of a trade war,” the commerce ministry said.

Hours earlier, Trump signed an order that also could result in restrictions on Chinese investment in the US, saying it would be the “first of many” trade actions.

“We have a tremendous intellectual property theft situation going on,” Trump said as he signed the new trade order, which could include duties as high as 25 percent.

The action did not immediately impose any new tariffs, but within two weeks US Trade Representative Robert Lighthizer is due to publish a list of the products that could be hit with tariffs, which will be followed by a period of public comment.

As Trump has marched towards a confrontation, Beijing has repeatedly warned that trade wars benefit no one and that it would not stand by as Washington imposed new punitive measures.

US Commerce Secretary Wilbur Ross on Thursday suggested the new measures on intellectual property were in fact a way of bringing Beijing to the table, telling CNBC they were “the prelude to a set of negotiations.”

China’s commerce ministry warned that a 15 percent tariff on 120 goods worth almost $1 billion — including fresh fruit, nuts and wine — would be imposed if the US fails to reach a “trade compensation agreement” within an unspecified timeframe.

In a second step, a 25 percent tariff would be imposed on eight goods totalling nearly $2 billion, including pork and aluminium scrap, after “further evaluating the impact of the US measures on China,” the statement said.

The measures were specifically in response to US steel and aluminium tariffs, which were due to take effect Friday.

The list noticeably does not include soybeans, which Chinese state-run newspaper the Global Times had suggested should be targeted by Beijing.

That would be a major blow to US farmers, as a third of their soybean exports go to China in a business worth $14 billion last year.

The political stakes are high: Trump defeated Hillary Clinton in the 10 top soybean-producing states in the 2016 election.

Betty Wang, an economist at ANZ bank, said China’s reaction is “relatively mild” as it tends to seek solutions through negotiations.

“From China’s perspective, it absolutely does not want to see a trade war. Coming back to the negotiation table is a relatively good result,” Wang said.

– Years of ‘failed’ dialogue –

US Vice President Mike Pence hailed the new measures, saying they made it clear “the era of economic surrender is over”.

Senior White House economic advisor Everett Eissenstat said the new import duties would target industrial sectors where “China has sought to acquire an advantage through the unfair acquisition or forced technology transfer from US companies.”

The order also directs the US Treasury to develop new proposals to increase safeguards on Chinese investments in the US that could compromise national security.

In addition, the US trade representative will go after China in the World Trade Organization — a body Trump and his officials have criticised as ineffective — charging Beijing with preventing US companies from freely licensing their own technology in China.

White House officials said the actions came after years of efforts failed to convince China to change its behaviour.

While Trump hit out at China, he authorised the suspension of steel and aluminium tariffs on key trade partners — including the European Union and six other countries — until May 1.

– Pain for US consumers? –

The United States had a record $337.2 billion trade deficit with China last year.

American industry, and US agriculture in particular, as well as members of the president’s own Republican party have voiced strident opposition to Trump’s recent trade moves.

The US Chamber of Commerce in Shanghai said American companies face market access barriers in China but it said both sides should avoid a trade war.

“We welcome the US government’s determination to address China’s unfair trade practices but call on the Administration not to impose tariffs as its principal response,” the chamber said in a statement.

But White House trade adviser Peter Navarro told reporters that China benefitted far more from trade with the US, meaning retaliation could be difficult for Beijing, and that lawmakers would broadly support the measures.

Influential Republican Senator Lindsey Graham said he was “very pleased” with the moves, but other Republicans called on Trump to be judicious in designing the tariffs, warning of consequences for American consumers.