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Covid-proof Vietnam launches showcase to lure Thai investors

EconJan 26. 2021

By The Nation

Vietnam launched a push to lure Thai investors on Tuesday, touting its status as one of the few economies that grew in 2020.

The Vietnamese Embassy in Bangkok showcased a “Golden Opportunity for Thai Investors in Vietnam”, hosted by the Thai-Vietnam Business Council and Vietnam’s Amata VN Plc.

Vietnam’s Ambassador to Thailand Phan Chi Thanh affirmed that his country’s economy had expanded 2.91 per cent last year in the teeth of Covid-19, thanks to its early control measures.

Vietnam’s GDP growth from 2016-2020 averaged 5.9 per cent, among the highest growth in the world. Its outlook for 2021 is also bright, with GDP of 6.5 to 7 per cent expected by the World Bank, International Monetary Fund and Asian Development Bank.

“Factors contributing to large investment in Vietnam were high political stability, abundant labour, a big market size of up to 100 million people, and strategic connectivity to Asean, China and the world markets,” said the ambassador.

These factors had made Vietnam a target destination for investors from more than 132 countries. Thailand currently ranks ninth for foreign direct investment in Vietnam with 603 FDI projects totalling about US$13 billion (Bt390 billion).

Tuesday’s showcase heard the investment climate in Vietnam for the next five years is expected to get even brighter as the country embarks on a new Social and Economic Development Strategy for 2021-2030 and Five Year Plan (2021-2025).

“Vietnam is still a destination for foreign investment, including Thailand, because it is a large and growing market,” noted Thai Foreign Ministry spokesman Tanee Sangrat.

However, he said the success of Thai investments in Vietnam over the next few years depended on continuation of the current investment policy and support by the Vietnamese government, as well as Vietnam’s economic growth. The ability of Thai businesses and investors in Vietnam to collaborate and unify with each other will be the key to future growth and survival, he added.

Sanan Angubolkul, chairman of the Thai-Vietnam Business Council, said the Vietnamese market has high purchasing power thanks to its large working-age population and low level of household debt.

Also, its export volume has grown rapidly. Last year, Vietnam recorded $281.5 billion in exports with a positive trade balance of $19.1 billion thanks to its 17 trade agreements.

At the same time, Vietnam offers tax incentives and other benefits to ease business, promote investments, construct public infrastructures, he said.

Said Somhatai Panichewa, director and CEO of industrial estate developer Amata VN (AMATAV): “We believe in the growth of Vietnam, which is why we have been in Vietnam for more than 26 years [running] six projects totalling 2,500 hectares [15,625 rai] with investment capital of about $840 million or about Bt27.2 billion.”

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Thai stock market bucks Asian trend to rise 0.75%

EconJan 26. 2021

By The Nation

The Stock Exchange of Thailand (SET) Index closed at 1,512.83 on Tuesday, up 11.21 points or 0.75 per cent. Total transactions amounted to Bt87.82 billion with an index high of 1,514.82 and a low of 1,490.37.

In the morning session, an analyst at Krungsri Securities forecast the SET would fall to between 1,490 and 1,495 after the $1.9-billion US stimulus package hit trouble in Congress, and lockdowns around the world continue to slow economic recovery.

He added that the decline in foreign fund inflows and the rising Covid-19 case count in Thailand would affect investment direction.

The 10 stocks with the highest trade value today were EA, SCGP, KTC, KBANK, CBG, PTT, GPSC, SCB, CPALL and DELTA.

As of 4.30pm, the price of oil dropped by US$0.02 or 0.04 per cent to $52.75 per barrel, while gold dropped by $2.70 or 0.15 per cent to $1,852.50 per ounce.

Other Asian indices were on the fall:

Japan’s Nikkei Index closed at 28,546.18, down 276.11 points or 0.96 per cent.

China’s Shang Hai SE Composite Index closed at 3,569.43, down 54.81 points or 1.51 per cent, while Shenzhen SE Component Index closed at 15,352.42, down 357.77 points or 2.28 per cent.

Hong Kong’s Hang Seng Index closed at 29,391.26, down 767.75 points or 2.55 per cent.

South Korea’s KOSPI Index closed at 3,140.31, down 68.68 points or 2.14 per cent.

Taiwan’s TAIEX Index closed at 15,658.85, down 287.69 points or 1.80 per cent.

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Property tax breaks offered for another year

EconJan 26. 2021Finance Minister Arkhom Termpittayapaisith

By The Nation

The Cabinet has approved a package of tax relief to support people and businesses affected by the Covid-19 crisis.

The government has extended the 90-per-cent cut on land and building tax for another year, Finance Minister Arkhom Termpittayapaisith reported after Tuesday’s Cabinet meeting.

Payments of the 0.02 per cent tax on homes have been reduced by 90 per cent (first homes worth less than Bt50 million are exempted tax). Farmers pay no tax on their land, though the tax cut also applies to the 0.01 per cent rate on the value of agricultural land use. Vacant land, subject to a rate of 0.3 per cent, is also covered.

To support homebuyers and the property sector, the home transaction fee was cut from 2 per cent to 0.01 per cent and the mortgage registration fee from 1 per cent to 0.01 per cent. The cuts cover this year’s transactions on residential units worth up to Bt3 million.

The cuts will cost local governments about Bt40.6 billion in lost revenue, to be compensated by central government next fiscal year, said Arkhom. The tax relief would ease financial burdens during economic hardship, he added.

The government also extended the e-filing deadline for annual personal income tax from March 31 to June 30.

E-filing of withholding tax and value-added tax is also extended by 15 days, he added.

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Thai banks’ resilience will be tested as moratoriums expire: S&P

EconJan 26. 2021

By The Nation

The government’s relief measures have blunted the impact of Covid-19 on Thailand’s banks, but financial resilience will be tested in 2021 as loan moratoriums are set to progressively expire, the S&P Global Ratings said on Tuesday.

It expects banks’ asset quality to deteriorate in the next 12-24 months and the non-performing loan (NPL) ratio to increase up to 6 per cent of total loans.

“Reported NPLs have remained benign in 2020, averaging 3.3 per cent for the banks we rate, only modestly higher than 2019’s systemwide average of 3 per cent. This resilience comes despite a second wave of Covid-19 infections late last year,” S&P said.

The proportion of the loan book under moratorium has reduced to an average of about 20 per cent for major rated Thai banks, compared with systemwide average of 31 per cent in the initial phase of the moratorium in mid-2020.

S&P, however, opined that temporary relief measures are unlikely to eliminate risks for weaker and more vulnerable debtors, although they may lessen the strain and delay recognition of problem loans.

The central bank extended debt moratoriums for the more vulnerable retail and small to medium-sized enterprise (SME) borrowers until June 2021.

Credit risk is already heightened in Thailand, given the very high household debt. Another vulnerability is the tough environment for export-oriented SMEs, some of which are getting priced out by more cost-efficient manufacturers in neighbouring Vietnam and Cambodia, S&P said.

The rating agency expects credit losses for the banking sector to remain elevated at 1.9 per cent of outstanding loans this year, from 1.2 per cent in 2019. Credit costs have increased across the board, which has dragged down the return on assets of rated banks to 0.7 per cent in 2020, versus the systemwide average of 1.4 per cent in 2019.

S&P believes proactive provisioning coupled with good capital levels will continue to provide a cushion to downside credit risks. Rated Thai banks have beefed up already high provision coverage ratios to about 155 per cent as of end 2020.

S&P expects banks will continue to build buffers in 2021 to defend against higher delinquencies as loan moratorium and relief measures are phased out. Even though large domestic banks maintained healthy Tier-1 capital adequacy ratios of over 15 per cent, the regulator has instructed banks to limit 2020 dividends to 50 per cent of profits and not to exceed 2019’s payout ratio.

S&P is forecasting a U-shaped recovery in 2021 with GDP growth of 5 per cent for Thailand. This revival is needed to stabilise credit conditions. A prolonged delay in the country’s economic recovery would deepen the downside scenario for domestic banks, given high household leverage and the weakness in the SME sector, S&P warned.

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Thai banks’ bad debt to rise by ‘up to 15% this year’

EconJan 26. 2021

By The Nation

Thai banks’ non-performing loans (NPLs) will rise significantly this year as Covid-19 continues to take a toll on the economy, experts say.

Siam Commercial Bank (SCB) president Apiphan Charoenanusorn forecasts her bank’s bad debt will increase due to the pandemic’s impact on debtors.

“However, we believe the bank will be able to deal with NPLs as most debtors have received the bank’s assistance so far.”

She added that SCB would have to set up more reserves to cope with future uncertainty.

Naris Sathapholdeja, head of TMB Analytics, forecasts commercial banks’ NPLs this year will rise by up to 15 per cent to Bt604 billion compared to Bt525 billion last year, with an NPL ratio of 3.6 per cent, up 12 per cent compared to 3.2 per cent last year.

“However, commercial banks’ NPLs will not increase sharply because they have methods to manage NPLs, such as selling debts and debt restructuring,” he said.

Kitichan Sirisukarcha, senior president of research at CGS CIMB Securities, expects net profit at seven Thai banking giants – Kasikornbank, Bangkok Bank, Kiatnakin Phatra Bank, Siam Commercial Bank, Krungthai Bank, TMB Bank and Tisco Bank – to grow 5 per cent on last year to Bt118 billion this year.

He forecasts that figure will rise 22 per cent in 2022 to Bt143 billion as Covid-19 recedes and the economy improves.

“The seven banks’ NPLs this year will stand at 4.9 per cent compared to 4.2 per cent last year, while their reserves will increase to Bt209 billion compared to Bt199 billion last year,” he predicted.

He advised investors to buy Bangkok Bank (BBL) shares at a target price of Bt146, Kasikornbank (KBANK) at Bt156 and SCB at Bt109, forecasting they would be traded at a price-to-book-value (P/BV) ratio of between 0.75 and 0.8 compared to 0.45 last year.

Related story: Thai banks’ resilience will be tested as moratoriums expire: S&P

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Investment in FIFs should pay off this year: analyst

EconJan 26. 2021

By The Nation

Foreign Investment Funds (FIFs) are likely to grow this year if there is no significant change in Thai stocks, senior analyst from Morningstar Research Chayanee Juengmanon said on Tuesday.

She said money that flowed into FIFs over the past three weeks were investments in Chinese and tech shares.

“At the end of 2020, the net value of FIFs was Bt840 billion, up 27.5 per cent year on year. Based on this, FIFs account for 21 per cent of the Thai mutual funds market, up from about 10 per cent in 2016,” she said.

Meanwhile, she said, Chinese equity funds had the highest asset value of Bt120 billion, up 185 per cent year on year from its high returns of nearly 19 per cent.

However, she said investors should be careful when investing in FIFs as their returns will not be the same as the previous year.

“At the end of last year, returns on mutual funds led by tech shares stood at 48.97 per cent, global shares at 23.73 per cent, Asian shares 18.98 per cent, healthcare shares 22.63 per cent, Chinese shares 18.89 per cent and emerging market shares at 9.36 per cent,” she said.

She said the returns in Thai equity funds this year would rise in line with the recovery in the Thai stock market once the government is able to control the new round of Covid-19 infections.

“The returns of large Thai equity funds at the end of last year dropped by 10.41 per cent, but its 10-year average return was 4.77 per cent, higher than China, Japan and emerging markets,” she said.

“However, the returns of Thai shares may depend on the economic conditions and whether the growth of innovative business models can keep pace with the changing world,” she said.

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SET reacts to hurdles in US economic stimulus package

EconJan 26. 2021

By The Nation

The Stock Exchange of Thailand (SET) Index fell by 5.00 points, or 0.33 per cent, to 1,496.62 in the morning session on Tuesday.

The SET is expected to fall to between 1,490 and 1,495 due to uncertainty over the delay in the rollout of the US economic stimulus package after trouble in the Senate, and slowdown in economic recovery amid several countries’ lockdowns, said Krungsri Securities’ analyst.

He added that the decline in foreign funds flow and rising number of Covid-19 cases in Thailand would affect investment direction.

He recommended that investors buy:

▪︎ PTTGC, TOP, IVL, EPG, VNT, SCGP, CBG, ROJNA, TVO, STGT, CPF, RCL, PSL, SYNEX, COM7, XO, WICE, JMT, MTC, SAWAD and KCE, whose fourth-quarter turnover is expected to improve.

▪︎ CBG, ICHI, OSP and RBF, which benefit from news about hemp.

The SET Index closed at 1,501.62 on Monday, up 3.74 points or 0.25 per cent. Total transactions amounted to Bt82.77 billion with an index high of 1,505.47 and a low of 1,491.63.

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Gold gets slight boost as market watches fate of US stimulus package

EconJan 26. 2021

By The Nation

The price of gold rose by Bt50 per baht weight in morning trade on Tuesday, the Gold Traders Association reported.

As of 9.28am, the buying price of a gold bar was Bt26,250 per baht weight and selling price Bt26,350 while gold ornaments were priced at Bt25,772 and Bt26,850, respectively.

At close on Monday, the buying price of a gold bar was Bt26,200 per baht weight and selling price Bt26,300 while gold ornaments were Bt25,726.52 and Bt26,800, respectively.

Spot gold price moved to US$1,858 (Bt55,667) per ounce in the morning, while the Comex (Commodity Exchange) gold to be delivered in February dropped by $1 to $1,855.2 per ounce on Monday due to the strengthening dollar.

Meanwhile, the market is keeping an eye on US economic stimulus measures in which President Joe Biden would have to lower the stimulus limits to be approved by Congress.

The Hong Kong gold price rose by HK$20 to $17,140 (Bt66,252) per tael, the Chinese Gold and Silver Exchange Society reported.

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‘Unstoppable’ luxury stocks inspire comparisons to strong U.S. tech

EconJan 26. 2021The pandemic is still raging throughout large parts of the world, yet investors keep pushing luxury-goods stocks higher, undeterred by near-record valuations. MUST CREDIT: Bloomberg photo by Tomohiro Ohsumi

By Syndication Washington Post, Bloomberg · Albertina Torsoli

The coronavirus pandemic is still raging throughout large parts of the world and China is facing a resurgence of the outbreak, yet investors keep pushing luxury-goods stocks higher, undeterred by near-record valuations.

The combination of robust Chinese spending growth and a strong start to the earnings season is seen supporting stocks such as LVMH, Hermes International and Kering SA, all of which reached record highs in the past two months. The quality of the businesses and their substantial position in the stock market are causing some investors to compare the companies to U.S. technology behemoths.

“We view European luxury companies as the European stock market equivalent of U.S. tech: businesses that are unrivaled in their global dominance,” said Giles Rothbarth, manager of the Blackrock European Dynamic Fund. Some companies in the sector with the best prospects are still attractive even after recent share price performance, he said.

Cartier owner Richemont, the first major luxury player to report sales for the last three months of 2020, set the tone on Wednesday with quarterly jewelry revenue that far exceeded expectations in spite of renewed lockdowns and no recovery in travel, fueling further gains in the sector.

French conglomerate LVMH, one of the biggest stocks in the Stoxx Europe 600 Index and a bellwether for the industry, is likely to “shoot the lights out relative to peers” when it reports results on Tuesday, given the strong momentum at its Dior and Louis Vuitton brands, said Swetha Ramachandran, the manager of GAM’s Luxury Brands Equity Fund.

While high spenders can’t splurge on travel and restaurants with many major economies under lockdown, they are choosing to buy luxury objects instead, powering sales for the best-known brands, she said.

“Megabrands seem unstoppable,” Luca Solca, an analyst at Sanford C. Bernstein & Co., said in an interview. Growth is being fueled by Chinese consumers shopping in their home market at higher prices because of covid-19 and snapping up “what they deem indispensable rather than nice-to-have,” which helps the top brands, he said.

Companies such as LVMH, which just acquired the U.S. jeweler Tiffany & Co., are considered high-quality, cash-generating assets that will continue benefiting from long-term structural trends such as the emergence of the Chinese middle class and from diversified, best-in-class brand portfolios that help reduce risks.

Some analysts see reason for caution, because covid-19 restrictions will still hurt the sector this year and a return to normal could mean customers splashing out on travel and eating out rather than on the latest handbag.

The stocks are “priced for perfection,” said Francesca DiPasquantonio, a Deutsche Bank AG analyst who recommends buying only one, Richemont, among the 13 she covers. Valuations have become “complacent with no acknowledgment for risks,” she said.

Analysts at RBC Capital Markets say valuations look “stretched,” with luxury stocks as a group selling for about 40 times this year’s estimated earnings versus the 10-year average of 23 times.

That’s pricier even than many of the U.S. tech giants that have been momentum favorites in the stock market for the past year. Google parent Alphabet Inc., for example, fetches about 27 times estimated earnings, Apple Inc. is priced at 33 times and Facebook Inc. sells for 24 times profit.

Many investors are undeterred, saying the industry is benefiting from an economic recovery in China. The market is probably pricing in a much stronger rebound in earnings this year than forecast by analysts, said Cedric Ozazman, chief investment officer at Reyl & Cie. in Geneva.

“I am not afraid of lofty valuations and I’m still very bullish on the sector,” he said. “The strong appetite for luxury names is accelerating in China.”

Deutsche Bank predicts that luxury companies will report 18% sales growth, on average, this year, which is likely to drive a 95% rebound in earnings in spite of a soft beginning to the year due to covid-19, which could potentially affect China’s Lunar New Year holidays next month.

Continued positive earnings surprises will “be essential to maintain such stock levels but we will very probably see more of those,” fueled by price increases in the industry, cost cuts and a shift to online sales, Bernstein’s Solca said.

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Tech leads stock gains ahead of megacap earnings

EconJan 26. 2021

By Syndication Washington Post, Bloomberg · Katherine Greifeld

Technology shares led gains in U.S. stocks as investors awaited earnings from some of the biggest companies.

The Nasdaq 100 climbed amid gains for Apple Inc., Tesla Inc. and Microsoft Corp. The S&P 500 Index ended higher, though gains were limited after the top Senate Democrat said lawmakers said an aid package was unlikely before mid-March and a U.S. health official expressed concern about vaccination delays. GameStop Corp. extended its extreme volatility, more than doubling before paring most of the gains.

The picture was more negative in Europe, with equity benchmarks in France, Spain and the U.K. ending lower. The Stoxx 600 Travel & Leisure index lost 1.9% amid news France may go into another lockdown, the U.K. may tighten border controls and as Israel moved to bar foreign flights from entering the country.

The S&P 500 is coming off its best week since November, and investors are looking for fresh catalysts to push the index higher or at least justify current valuations. That could come from a slate of earnings reports due this week that will shed light on how the biggest tech companies are faring and whether retailers, travel companies and restaurants are seeing any meaningful pickup in business.

“You’ve got 65% of market cap reporting in the next two weeks,” Stuart Kaiser, head of derivatives research at UBS Group AG, said in a Bloomberg Television interview. “The market had rotated into cyclical/value stocks at the end of last year and early into this year, and as earnings have started, I think they’ve been sort of reminded why they liked the leaders to begin with from last year.”

In Asia, stocks gained. Chinese internet firm Tencent Holdings Ltd. jumped 11%, the biggest gain since 2011, as mainland traders sparked a buying frenzy.

Elsewhere in markets, crude oil in New York climbed toward $53 a barrel and the dollar gained. Sovereign bond yields dipped while Bitcoin rebounded above $34,000 before paring the advance.

These are the main moves in markets:

Stocks

– The S&P 500 Index rose 0.4% as of 4 p.m. EST.

– The Stoxx Europe 600 Index declined 0.8%.

– The MSCI Asia Pacific Index advanced 1%.

– The MSCI Emerging Market Index climbed 1.2%.

Currencies

– The Bloomberg Dollar Spot Index rose 0.2%.

– The euro decreased 0.3% to $1.2141.

– The British pound fell 0.1% to $1.3668.

– The Japanese yen was little changed at 103.77 per dollar.

Bonds

– The yield on 10-year Treasurys declined five basis points to 1.04%.

– Germany’s 10-year yield decreased four basis points to -0.55%.

– Britain’s 10-year yield fell five basis points to 0.26%.

Commodities

– West Texas Intermediate crude rose 1% to $52.80 a barrel.

– Gold was little changed at $1,855.01 an ounce.