Thai AirAsia shuts operations in August due to domestic flight ban
Thai AirAsia will temporarily cease all operations in August, due to zero revenue following the ban on domestic flights in the “dark red” provinces, in order to meet the conditions of social security assistance.
Employees were paid 50 per cent of their salary in July and the balance payment is postponed to September.
Thai AirAsia Co Ltd announced on Sunday that the company’s board had approved a temporary closure of operations at a meeting on July 29.
At the meeting, the management team explained to the employees that the company had always done its best to manage and seek funds to mitigate the impact. But, due to the third wave of the pandemic since April and the flight prohibition order in the “dark red” zones since July 21, the company has encountered a lack of cash flow and the situation was worse than expected. Therefore, it became necessary to announce short-term measures to postpone employees’ salaries for July-August.
In July, Thai AirAsia’s active employees were to be paid 50 per cent of their salary and another 50 per cent in September, while all managers and senior executives’ payments are postponed to September. In August, the company will be temporary closed for all operations in order to receive social security compensation. The situation is expected to ease in September which will allow the company to receive funds, be able to operate flights, and pay its staff full salary, the compantly said.
At the end of the meeting, Thai AirAsia executives thanked the employees for their understanding, sacrifice, and cooperation. The management team promised to continue to resolve the issues and apologised for any impact they might have caused by not handling the situation well enough.
Thai aviation industry sinking deeper as Covid shuts down travel and tourism: CAAT
Thailands aviation industry is still moving in a downward trajectory due to uncertainty over the Covid-19 outbreak among Thai and foreign tourists, the Civil Aviation Authority of Thailand (CAAT) said on Saturday.
It said the volume of passengers and flights in the second quarter of this year dropped by 35.5 per cent and 27.8 per cent year on year, respectively.
Meanwhile, the volume of air freight has slightly risen by 0.01 per cent compared to the same period last year, it added.
Citing the Bank of Thailand’s forecast, the CAAT said many negative sentiments pressured the aviation industry, such as the vaccination rate and sluggish recovery in the tourism sector’s recovery.
“If the government can procure and distribute 100 million doses of Covid-19 vaccines within this year, herd immunity is expected to be created within the first quarter of next year which is too late because the country’s tourism season will begin from October this year,” the CAAT explained.
The CAAT said the slowdown in the tourism sector’s recovery also affected the aviation industry because Thailand was unable to ease quarantine measures within the second quarter of this year, while the crisis is likely to prolong.
It added that the number of foreign tourists visiting Thailand this year is expected to drop to 700,000 people and 10 million people next year, compared to the previous forecast of 3 million people this year and 21.5 million people in 2022.
“The authority does not expect the aviation industry to recover significantly this year as the Covid-19 crisis is becoming more severe, while Thailand has imposed travel restrictions which directly affect the tourism sector,” the CAAT said.
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Meanwhile, Airports of Thailand president Nitinai Sirismatthakarn said that the six airports in July saw 10,000 travellers per day, down 80 per cent year on year.
The Stock Exchange of Thailand (SET) Index closed at 1,521.92 on Friday, down 15.86 points or 1.03 per cent. Transactions totalled THB87.72 billion with an index high of 1,539.03 and a low of 1,516.77.
In the morning session, Krungsri Securities predicted the index would fluctuate between 1,530 and 1,550 points after the US Federal Reserve kept its interest rate at 0.25 per cent and maintained quantitative easing, while the oil price rose.
It also said the index would be under pressure from rising domestic Covid-19 cases and volatility in foreign fund flows.
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The 10 stocks with the highest trade value today were DTAC, TOP, PTT, KBANK, SCC, 7UP, ADVANC, PTTEP, GPSC and SCGP.
Other Asian indices were on the slide:
Japan’s Nikkei Index closed at 27,283.59, down 498.83 points or 1.80 per cent.
China’s Shanghai SE Composite Index closed at 3,397.36, down 14.37 points or 0.42 per cent, while the Shenzhen SE Component Index closed at 14,473.21, down 42.11 points or 0.29 per cent.
Hong Kong’s Hang Seng Index closed at 25,961.03, down 354.29 points or 1.35 per cent.
South Korea’s KOSPI closed at 3,202.32, down 40.33 points or 1.24 per cent.
Taiwan’s TAIEX closed at 17,247.41, down 155.40 points or 0.89 per cent.
Streaming trend driving 6% rise in Thai entertainment-media revenue this year: PwC
Thai entertainment and media (E&M) revenues are forecast to climb above 500 billion baht this year, bouncing back from a drop of 6 per cent last year (484 billion baht) during the Covid-19 crisis. The forecast comes from PwC’s Global Entertainment & Media Outlook 2021-2025, which estimates E&M revenues will grow by 4.45 per cent to hit 601 billion baht in 2025.
Driving this year’s revenue rise is the resurgence of cinema, music, radio and podcasts and out-of-home advertising businesses, PwC said.
“While the Entertainment and Media outlook in Thailand will continue to be impacted by the pandemic this year, some E&M segments have benefited from a consumer shift toward digital platforms. This has helped offset the slower growth in other major segments that we saw a year earlier. We expect to see average growth over the next five years to be around 4 to 5 per cent per year,” said Tithinun Vankeo, assurance partner and entertainment & media leader for PwC Thailand.
PwC’s Outlook forecasts the top three fastest-growing segments this year will be cinema (growing at 47% from last year to 7.8 billion baht), followed by music, radio and podcasts (27% to 11.9 billion baht) and finally out-of-home advertising (24% to 5 billion baht).
In contrast, the traditional TV-and-home video segment and the books segment will be the most vulnerable, shrinking 3 per cent and 2 per cent respectively.
The spending rebound for Thai E&M is in line with global spending, which is expected to grow 7 per cent from last year to 68 trillion baht (US$2 trillion) with 4.61 per cent annual growth across the next five years. This growth is fuelled by strong demand for digital content and advertising.
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Streaming a game-changer for Thai E&M
Outlook shows that Covid-19 is driving shifts in the E&M industry as a whole. Cinema visits have dropped in favour of streaming platforms. And since they’re stuck inside, many younger consumers immerse themselves in their mobile devices, searching for content and playing games.
“As long as consumers spend more and more time on online platforms, over-the-top video and streaming video businesses will keep up their pace and continue to grow,” Tithinun said.
“We’re seeing the rising trend of competitiveness in OTT video and subscription video-on-demand business, both in terms of price and promotion. Video games and e-sports is another segment that has been growing continuously for many years, and according to the study, Thailand has the highest number of people who play video games in the world,” she said.
According to the Digital 2021: Thailand report by DataReportal, there were 48.59 million internet users in Thailand in January 2021. Internet penetration stood at 69.5 per cent and the country also had 90.66 million mobile connections in the same period. These statistics indicate an increasing demand for media and entertainment.
“The popularity of OTT and video streaming will create more opportunities, but also more challenges. Operators will see more and more competition and will have to formulate strategies to penetrate the growing market and generate sales.
“Choosing the right platforms and content customised for each target audience, together with understanding the external and internal context and market factors, will help operators to adapt and offer services or content at the expected speed. These will help create a competitive advantage as well,” Tithinun said.
SET remains under pressure from volatile funds flow, despite Fed continuing fiscal policies
The Stock Exchange of Thailand (SET) Index fell by 2.64 points, or 0.17 per cent, to 1,535.14 on Friday morning.
The SET Index closed at 1,537.78 on Thursday, up 0.15 points or 0.01 per cent. Transactions totalled THB79.54 billion with an index high of 1,545.08 and a low of 1,533.94.
Krungsri Securities predicted the index on Friday would fluctuate between 1,530 and 1,550 points despite the US Federal Reserve maintaining its interest rate at 0.25 per cent and continuing with its quantitative easing programme, plus the rising oil price.
It also predicted that the index would be under pressure due to rising domestic Covid-19 cases and volatility in foreign funds flow.
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It recommended that investors buy:
▪︎ HANA, KCE, TU, CPF, ASIAN and EPG, which would benefit from the weakening baht.
▪︎ BCH, CHG, BDMS, GLOBAL, DOHOME, BEM, CKP, CBG, OSP, ICHI, GPSC, BEC, GUNKUL, JWD, WICE, SONIC and NER, whose second-quarter business turnover is expected to improve.
Baht expected to weaken but unlikely to dip below 33 to US dollar
The baht opened at 32.87 to the US dollar on Friday, unchanged from Thursday’s closing rate.
The Thai currency is likely to move between 32.80 and 32.95 during the day, Krungthai Bank market strategist Poon Panichpibool said.
Poon said the US dollar was weakening but the Thai currency was unlikely to strengthen soon due to the worsening Covid-19 situation in Thailand.
Foreign investors were still offloading their assets, such as stocks in Thailand, which would lead to a weakening of the baht, he predicted.
But Poon believed the Thai currency would not weaken below 33 per US dollar if investors felt “safe” from the worldwide Covid-19 situation and hence did not need to hold onto safe-haven assets.
Gold gets a boost as dollar weakens after Fed keeps status quo
The price of gold in Thailand rose by THB100 per baht weight on Friday morning.
The Gold Traders Association report at 9.26am showed the buying price of a gold bar at THB28,300 per baht weight and selling price THB28,400, while gold ornaments were priced at THB27,788.28 and THB28,900, respectively.
At close on Thursday, the buying price of a gold bar was THB28,200 per baht weight and selling price THB28,300, while gold ornaments were priced at THB27,697.32 and THB28,800, respectively.
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Spot gold on Friday was US$1,828 (THB60,155) per ounce after Comex gold on Thursday rose by $31.2 to $1,835.8 per ounce on the weakening dollar after the US Federal Reserve maintained its interest rate at 0.25 per cent and continued with its quantitative easing programme.
US GDP growth missing forecasts in the second quarter also boosted mass buy-ups of the precious metal.
Hong Kong gold price, meanwhile, rose by HK$70 to $16,940 (THB71,720) per tael, the Chinese Gold and Silver Exchange Society reported.
The world needs coffee but dont look to Vietnam for help
Global coffee consumers seeking more supplies to fill the void left by the devastating frost in Brazil wont get much relief from Vietnam.
Shipments from the country, the biggest robusta coffee grower, are declining because of depleted farmer inventories, a worsening Covid-19 outbreak and a severe container shortage. Exports are likely to continue dropping through September, according to top shippers Intimex Group and Simexco Daklak.
“Farmers say they have run out of beans and so can’t benefit from this surge in prices,” said Do Ha Nam, chairman of No. 1 shipper Intimex Group. “We have bought no beans and sold no beans for more than a month.”
Prices of the milder tasting arabica variety traded in New York rocketed to the highest since 2014 this week after frigid weather destroyed trees in Brazil. That helped lift London prices of the more bitter robusta to the strongest since 2017. Arabica is set to increase 25% this month and robusta to rise about 13%.
“The price rally has not benefited exporters much,” said Phan Hung Anh, chief executive of Quang Minh Coffee Trading in the southern province of Binh Duong. “Surging shipping costs have discouraged importers from purchasing beans in Vietnam. We have no new contracts to buy beans from farmers.”
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Sending a container from Vietnam to Europe costs as much as $10,000, six to seven times more than a year ago, according to Anh, who sees his company’s overseas shipments this year shrinking at least 20% from 50,000 tons in 2020.
The country’s exporters haven’t been able to gain much from the jump in the market because stockpiles in their Ho Chi Minh City-area warehouses have been priced already, according to a survey of traders. “We have sufficient beans to fulfill our commitments through the end of the season,” said Le Tien Hung, chairman of the second-biggest shipper Simexco Daklak.
Shippers are worried that the logistics pain may persist through the end of this year when the new harvest rolls in and exports normally rise. An explosive new surge in coronavirus cases is another concern.
The tally in five provinces of the Central Highlands, a key coffee-growing region, jumped to almost 300 as of Wednesday morning from only a few before last week, according to the health ministry. The capital city of Buon Ma Thuot and a district have been under a stay-home order since Saturday.
Stay-home orders may be extended to other coffee areas in Dak Lak, which grows about a third of the country’s coffee, said Trinh Duc Minh, chairman of Buon Ma Thuot Coffee Association. Minh is worried infections may increase as thousands of workers from southern Vietnam, the virus epicenter, flock home to the Central Highlands to shelter from the delta variant.
Harvesting may slow if the virus stays around until the harvest peaks in November, said Simexco’s Hung, who sees a smaller crop because of lower rainfall and a lack of investment. While most traders said it’s too early for a prediction, five of the 11 surveyed expect a good crop, with two seeing a rise of 6-10% from the previous year’s 1.7 million tons. Exports through July this year are running 9% below a year earlier, according to the statistics office.
Published : July 30, 2021
By : Syndication Washington Post, Bloomberg · Mai Ngoc Chau
U.S. GDP trails forecast even as consumer spending surges
U.S. growth missed forecasts in the second quarter as the effects of supply-chain constraints reverberated through the economy and took the shine off one of the biggest gains in consumer spending in decades.
Gross domestic product expanded at a 6.5% annualized rate following a revised 6.3% pace in the first quarter, the Commerce Department’s preliminary estimate showed Thursday.
The report underscores the robust bounce back in household demand as well as the challenges companies are facing keeping pace with that demand. Firms’ inability to keep merchandise stocked and bottlenecks in production have capped the speed at which the U.S. pandemic recovery can grow.
“The downside surprise in the GDP numbers is mostly in the inventory component,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note. “We are not disappointed by the headline GDP growth miss.”
The median forecast in a Bloomberg survey of economists called for an 8.4% increase in GDP. Shepherdson said he expects a big rebound in inventories and is penciling in third-quarter growth of 8% or more.
The S&P 500 climbed after the report, the yield on the 10-year Treasury note rose and the dollar weakened on expectations that the figures will encourage the Federal Reserve to maintain its support for the economy.
Personal consumption exceeded forecasts as Americans had both the wherewithal and the opportunity to ramp up spending on services such as dining out. Vaccinations, government aid and a broader reopening of the economy helped drive an annualized 11.8% gain, the second-largest advance since 1952.
At the same time, inventories took a 1.1 percentage points bite out of second-quarter GDP, while residential investment reduced growth by about 0.5 percentage point.
“The second-quarter GDP report is stronger than it looks, with measures excluding trade and inventory drag far outpacing the 6.5% headline gain,” Bloomberg economists Andrew Husby, Eliza Winger and Niraj Shahwrote in a note. “More ambitious marks like pre-pandemic trend, or closing the gap to some estimates of potential, is in reach within a few quarters.”
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The report showed the U.S. economy has recouped its pandemic losses. The inflation-adjusted value of domestically produced goods and services climbed to an annualized $19.36 trillion, eclipsing its pre-pandemic peak.
Looking ahead, economic growth will be challenged by waning federal support, a rapidly spreading variant of Covid-19, and lingering supply and labor constraints. The report showed the saving rate dropped to 10.9% in the second quarter from 20.8%, indicating Americans are spending cash built up during the pandemic.
Businesses have struggled to keep pace with the outpouring of pent-up demand, pushing prices skyward and eroding recent wage gains. The personal consumption expenditures price index excluding food and energy costs, followed closely by Fed officials, climbed an annualized 6.1% in the second quarter, the biggest gain since 1983.
Unlike output, the jobs market is far from reaching its pre-pandemic strength. The Fed held interest rates near zero this week and maintained its pace of asset purchases.
“We’re not there. And we see ourselves as having some ground to cover to get there,” Fed Chair Jerome Powell said at a press conference Wednesday.
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Supply shortages and logistics challenges are proving to be a lingering headwinds for companies including Apple Inc., Fastenal Co. and Whirlpool Corp., according to recent earnings calls.
Supply is well short of demand, allowing us to keep pricing strong, said Ford Motor Co. Chief Executive Officer James Farley on the company’s earnings call Wednesday. “Given the strength of our product lineup and the demand we see, we expect to have a relatively strong pricing power for the new foreseeable future.”
For the Biden administration, the supply-chain bottlenecks weighing on the figure may support calls for broader infrastructure investment.
Second-quarter growth was also bolstered by continued strength in business investment. Driven by equipment and intellectual property, non-residential outlays rose an annualized 8%, the fourth-straight quarterly advance.
The Commerce Department also released its annual update Thursday, which resulted in mostly minor changes in the pattern of growth and inflation over the last five years. Corporate profits were found to be stronger than originally reported in recent years.
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Digging deeper:
– Excluding the trade and inventories components of GDP, final sales to private domestic purchasers, a gauge of underlying demand, rose at a 16.5% pace after a 16% gain in the first quarter.
– Net exports subtracted 0.44 percentage point from growth.
– Business outlays for structures declined an annualized 7%.
– Services added 5.1 percentage points to second-quarter growth. Outlays for merchandise remained solid as well, rising 11.6%.
– Motor vehicle output shrank an annualized 16.2% in the second quarter; excluding auto output, GDP advanced 7.2%.
Published : July 30, 2021
By : Syndication Washington Post, Bloomberg · Reade Pickert
Big Oil shows confidence the era of large profits is back
Europes largest oil and gas companies showed confidence that the era of big profits is back by significantly boosting returns to shareholders.
Royal Dutch Shell surprised investors on Thursday with a dividend hike of almost 40% and $2 billion of share buybacks. TotalEnergies didn’t manage quite that level of shock and awe, but promised to divert as much as 40% of its surplus cash to stock repurchases.
This marks a major turnaround for the industry, which is trying to persuade investors to stick with it despite mounting concerns about climate change. Until recently, both companies were focused on paying down debt and strengthening their balance sheets in the aftermath of the oil slump caused by the coronavirus pandemic.
What’s changed is a broad rally in commodity prices, in which the surge in crude has been matched or exceeded by natural gas, metals and other bulk raw materials. It’s not just Shell and Total returning money to shareholders, almost every natural resources group from Rio Tinto to Anglo American is either raising dividends or buying back shares.
“We wanted to signal to the market the confidence that we have in cash flows,” Shell Chief Executive Officer Ben van Beurden said on a conference call. In the oil market “supply is going to be constrained and demand is actually quite strong.”
Shell and TotalEnergies both reported big surges in adjusted net income and cash flow for the second quarter, taking the figures back to pre-pandemic levels. That had been largely expected by analysts, but the big improvement in shareholder returns caught them by surprise.
“We knew Shell was set to raise distributions today, but the scale of the increase is significantly above expectations,” Redburn analyst Stuart Joyner said in a note.
Shell has some catching up to do. Last year, it cut its dividend by two-thirds during the depths of the Covid-19 lockdowns. Modest increases to the payout since then did little to boost the company’s appeal, with its market value today still more than a third below pre-pandemic levels despite a full recovery in oil prices.
TotalEnergies, which entered the Covid-19 crisis with less debt and maintained its payout throughout the downturn, has fared better with investors. The French company may buy back as much as $800 million of its shares by the end of the year, assuming oil averages $66 a barrel, and as much as $1 billion if it averages $68, Chief Executive Officer Patrick Pouyanne said on a conference call.
The dividend will grow only when it’s backed by a “structural increase” in cash flow stemming from additional energy production and sales, Pouyanne said.
Other European oil majors are taking a similar approach. BP and Equinor have already made incremental dividend increases and announced more modest buyback plans.
Wooing investors has seldom been more important for Big Oil. The industry is under increasing pressure to turn away from fossil fuels and embrace clean energy as the world grapples with the evident dangers of a warming planet. Most of the European majors have laid out broad plans to achieve net-zero emissions by the middle of the century, but there are questions about how much it will cost and whether profits from renewable energy can match oil and gas.
These doubts have weighed on the industry’s valuation, which overall is still 22% below its level at the end of 2019, said Banco Santander SA analyst Jason Kenney. A period of strong profits and cash flow will make it much easier for these companies to make the transition to clean energy while keeping investors on board.
“The climate crisis requires significant investment to truly shift to low and no carbon energy,” Kenney said. “But there is a huge wall of cash on the horizon from integrated energy companies in the second half of 2021 and certainly by 2022. And financial frames look credible and attractive at current levels.”
Published : July 30, 2021
By : Syndication Washington Post, Bloomberg · Laura Hurst, Francois de Beaupuy, Javier Blas
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