The price of gold dropped by Bt50 per baht weight in morning trade on Thursday (May 21), the Gold Traders Association reported.

As of 9.25am, buying price of a gold bar was Bt26,100 per baht weight and selling price Bt26,300, while gold ornaments were priced at Bt25,635.56 and Bt26,800, respectively.

At close on Wednesday (May 20), buying price of a gold bar was Bt26,150 per baht weight and selling price Bt26,350, while gold ornaments were priced at Bt25,681.04 and Bt26,850, respectively.

The Gold Spot Index price on Thursday morning moved to around US$1,744 (Bt55,538) per ounce after the price rose by $6.5 to $1,752.1 per ounce at close on Wednesday.

The price of gold gained positive sentiment from several countries’ economic stimulus measures, while investors were buying gold as a safe haven asset due to uncertainty about the efficiency of a vaccine to tackle Covid-19.

Meanwhile, the price in the Hong Kong gold market dropped by HK$35 to $16,135 (Bt66,298) per tael.

A Krungsri Securities stock analyst expected the index to rise to between 1,330 and 1,335 before falling.

The market gained positive sentiment from the rising crude oil price, hopes of the US Federal Reserve issuing additional economic stimulus measures to mitigate the Covid-19 impact, and the Thai Monetary Policy Committee‘s move to cut the key interest rate by 0.25 percentage point to 0.5 per cent.

“The price of crude oil rose to over US$33 per barrel after US crude stockpiles dropped by 5 million barrels,” the stock analyst said.

However, the analyst advised investors to beware of mass sell-offs in stocks as the index’s price to earnings rose to over 17 times and banks’ net interest margin is likely to drop in line with interest rate.

The analyst recommended investors to buy these stocks:

● Energy stocks, such as PTT, PTTEP, TOP, PTTGC, IRPC and SPRC, due to a rise in the price of crude oil.

● Financial stocks, such as KTC, SAWAD, MTC, JMT and BAM, due to a drop in interest cost.

● Stocks whose second quarter performance would improve, such as CKP, TASCO, STA and EPG.

Suvarn Thansathit, executive director at Bangkok Bank Plc, said that the adjustment of interest rates is to complement the government’s policy to help both entrepreneurs and the general public during economic recession as a result of the shutdown order to curb the spread of Covid-19.

“We are committed to helping entrepreneurs and people to overcome this crisis together, as well as to boost the economy that is currently in a fragile state from the effects of both internal and external factors,” he said. “In the past months, the bank has provided several measures to ensure that entrepreneur clients can maintain their liquidity and employment status.”

On Wednesday (May 20), the Bank of Thailand’s Monetary Policy Committee voted 4-3 to cut the key interest rate to 0.50 per cent from 0.75 per cent, which is effective immediately, in response to economic contraction deeper than estimations due to the sharper global contraction.

Kalin Sarasin, chairman of TCC, said the committee has been established to study the impact of the Hazardous Substance Committee’s declaration that the two chemicals would be classified as Type 4 hazardous substances (which prohibits use and possession) as of June 1.

This committee is tasked with collecting the opinions of stakeholders, entrepreneurs, farmers and consumers and come up with solutions for the government to consider. Even though the Hazardous Substances Committee has passed a resolution, it will still have to give all parties time to be ready for a future without these chemicals, he said.

Kalin added that Thailand and other countries use Codex Alimentarius as a globally accepted standard for residues of products arising from the use of pesticides. However, if all parties come out and suggest a solution, TCC will call on the government to reconsider the ban and give time to the private sector and all those involved to make adjustments. He said nobody has been able to discuss the issue seriously due to the Covid-19 outbreak.

The TCC has sent an open letter to Industry Minister Suriya Juangroongruangkit asking for the ban to be enforced on December 31 instead of June 1 as businesses and farmers are not yet ready and many are also adversely hit by the Covid-19 outbreak. If chemical residual value is reset to zero, then there will be a severe shortage of raw materials as well as a food crisis in both Thailand and overseas.

Banning the import of these chemicals will have a wide impact as they are used in the cultivation of plants that are used as raw materials for processing both human food and animal feed like soy, wheat flour, coffee, cocoa, etc.

The app will feature companies that are members of the chamber. If any of the members have laid off workers, the app will match the laid-off employees with other members who are looking for workers.

He added that companies of all sizes that are members are keen to join the app. He added that since the fallout of the Covid-19 crisis will last for a year or two in Thailand, the chamber has called on its members to allow at least 50 per cent of the employees to work from home. He added that many members have allowed up to 90 per cent of their employees to work from home.

Meanwhile, Thailand Development Research Institute (TDRI) president Somkiat Tangkitvanich said Thais may have to live with the effects of the Covid-19 outbreak for another year and a half and it may even take three years before the economy returns to normal. However, he said, working from home appears to have become the new normal.

According to a TDRI study, getting 136 members of staff to work from home for one month has helped the institute save Bt16,000 per staff member.

FTI said that only 24,711 automobiles were produced in April, down 83.55 per cent year on year.

The number of vehicles produced for export had dropped 81.76 per cent, while the number produced for domestic consumption was down 85.35 per cent.

“The production in April dropped to the lowest since 1990, when Thailand only used to manufacture 304,000 automobiles a year,” he said.

Meanwhile, he said, the domestic sale of cars so far this year was 30,109, down 65.02 per cent year on year due to the drop in people’s purchasing power, while the export of automobiles was 20,326, down 69.71 year on year owing to the economic slowdown.

“The value of automobile exports dropped by 65.15 per cent to Bt12.389 billion,” he said, adding that the FTI has cut its production target for the automotive industry from 2 million to just 1 million.

“We are not really sure if the new target will be achieved because nobody has been visiting car showrooms even though the Covid-19 situation has improved,” he said.

“We also have to monitor the state of affairs to see if there will be a second wave of infections. If this condition lasts longer than expected, we will have to evaluate things again.”

Meanwhile, FTI president Suphant Mongkolsuthree said the industrial confidence index in April stood at 75.9, less than the previous month’s 88.

“The index dropped to the lowest since April 2009 due to uncertainty following the Covid-19 outbreak, the government’s lockdown measures and drought,” he said.

“Some businesses, especially small and medium enterprises, have had to slow down their production and investment, as well as lay off employees due to liquidity shortages.”

According to the survey, 69.5 per cent of businesses are concerned about the state of the global economy, especially since the Covid-19 pandemic has caused a drop in purchase orders from overseas.

“Hence, we expect the industrial confidence index in the next three months to drop to 88.8, the lowest since May 2009,” he said.

He added that the government will consider the option of solving loan issues to help businesses, while the Bank of Thailand’s Monetary Policy Committee on Wednesday (May 20) cut the key interest rate to 0.5 per cent from 0.75 per cent in a move to help the economy recover.

In a 4:3 vote, the MPC decided to cut the policy rate by 0.25 percentage points from 0.75 to 0.5 per cent effective immediately, Titanun Mallikamas, secretary of the MPC, said after the committee’s meeting on Wednesday (May 20).

When deliberating their policy, the MPC said its assessment shows that the Thai economy will contract more than previously predicted due to the more-than-expected contraction of the global economy in line with the containment measures imposed worldwide, he said.

The central bank had previously predicted that the GDP would shrink 5.3 per cent this year, while the National Economic and Social Development Council had on Monday (May 18) forecast a contraction of 5 to 6 per cent.

However, some analysts say the contraction can go as far as 10 per cent.

Titanun, meanwhile, warned that headline inflation would be far more negative than previous assessed, and financial stability would be more vulnerable given the economic outlook.

Most MPC members believe a more accommodative monetary policy should alleviate negative impacts as well as reinforce the previously announced fiscal, financial, and credit measures. Nevertheless, three members voted to maintain the policy rate, focusing on expediting the effectiveness of the announced financial and credit measures.

Banks urged to accelerate debt restructuring

The MPC as a whole agreed that financial institutions should work towards ensuring that debt restructuring, particularly for household and SME borrowers, be carried out on a wider scale. Furthermore, lending under the previously announced measures should also be accelerated to address liquidity problems in a targeted and timely manner, the MPC secretary said.

The Thai economy will contract further as tourism and exports have been affected far more than previous expected.

Domestic demand, both private consumption and private investment, will contract further due to higher unemployment caused by containment measures.

Nevertheless, financial and fiscal measures will help to partially alleviate liquidity problems of households and businesses as well as help the economy recover gradually, a press statement from the MPC said.

Urging well targeted, timely govt spending

The MPC said properly targeted and timely fiscal measures remain vital to supporting employment and SMEs and will facilitate economic recovery and potential growth in the near future.

Inflation more negative

The annual average of headline inflation will move more into the negative this year than previously assessed due mainly to the lower energy prices, MPC said.

Core inflation will remain subdued at low levels. The committee, meanwhile, will monitor uncertainties pertaining to the global economy, while the relaxation of restrictions and the likelihood of a second wave of Covid-19 infections in Thailand, as well as the effectiveness of fiscal, financial, and credit measures, will affect recovery in the period ahead, MPC said.

Financial markets stabilised

The MPC has assured that financial markets have been exhibiting stability after the Bank of Thailand implemented stabilisation measures, including the setting up of the Corporate Bond Stabilisation Fund (BSF). Government bond yields have dropped and corporate bond yields in the secondary market are showing less volatility. Bond market functioning is increasingly returning to normal.

Monitoring savings cooperatives

The committee will keep an eye on the savings cooperatives that may be affected by corporate bond investments. The MPC’s comment was prompted by the fact that some of them have invested in corporate bonds issued by Thai Airways International, which will apply for bankruptcy protection.

Ample liquidity

The MPC said that commercial bank loans have expanded, especially in terms of large corporate loans, while consumer loans have decelerated somewhat. Though the level of overall liquidity in the financial system remains ample, it is important that the liquidity is distributed to businesses and households affected by Covid-19. Commercial banks’ lending rates have declined following the previous policy rate cut and the temporary reduction in the Financial Institutions Development Fund (FIDF) contribution.

Worry on appreciation of the baht

The baht has appreciated against the US dollar and regional currencies. The MPC has expressed concern that the baht could strengthen further and affect economic recovery. Therefore, developments in financial and foreign exchange markets warrant close monitoring.

Banks are sound

The financial institution system remains sound. Commercial banks have robust capital and loan-loss provision levels. Nevertheless, there remains a need to monitor risks that may pose vulnerability to the stability of the commercial bank system in the period ahead, particularly defaults by businesses and households after the phasing-out of liquidity support measures. The committee believes that financial institutions will need to accelerate debt restructuring for borrowers and expedite credit extension under various measures previously announced. MPC also deems it necessary for the Bank of Thailand and other related regulatory agencies to prepare measures for coping with rising risks if the debt servicing capability of borrowers were to deteriorate more than expected, as well as ensure sufficient liquidity and continuation of well-functioning and stability of the financial institution system.

Looking ahead, the MPC will monitor developments of economic growth, inflation and financial stability, together with associated risks, including external risks, the impacts of the Covid-19 outbreak, as well as the adequacy of fiscal, financial, and credit measures, in deliberating on monetary policy ahead. The committee said it will stand ready to use additional monetary policy tools if necessary.

Total transactions amounted to Bt67.672 billion with an index high of 1,322.22 and a low of 1,306.96.

A Krungsri Securities stock analyst said he expects the index to remain at between 1,300 and 1,320, adding that the market has gained positive sentiment from the second phase of easing of restrictions and the rising price of crude oil.

“Investors expect the demand for oil to recover after several countries have eased their lockdown measures,” the analyst said.

However, he added that the index would be under pressure now that it has been reported that the study of the new vaccine by the US pharmaceutical company Moderna did not yield enough critical data to prove its success.

“Investors will also be selling off their stocks as the index’s forward price-to-earnings ratio has risen by more than 17 times – the highest among emerging countries,” the analyst said.

The top 10 stocks with the highest trading values today were BAM, GPSC, BGRIM, ADVANC, MINT, SAWAD, PTT, WHA, BBL and KBANK.

As of 4.30pm, crude oil price had risen by US$0.15 or 0.47 per cent to $32.11 per barrel, while gold rose by $7.90 or 0.45 per cent to $1,753.50 per ounce.

US indices were on the rise, while Europe and Asian indices had a mixed day:

Japan’s Nikkei Index closed at 20,595.15, up 161.70 points, or 0.79 per cent.

China’s Shanghai SE Composite Index closed at 2,883.74, down 14.84 points, or 0.51 per cent, while Shenzhen SE Component Index closed at 10,948.48, down 104.37 points, or 0.94 per cent.

Hong Kong’s Hang Seng Index closed at 24,399.95, up 11.82 points, or 0.048 per cent.

South Korea’s KOSPI Index closed at 1,989.64, up 9.03 points, or 0.46 per cent.

Taiwan’s TAIEX Index closed at 10,907.80, up 47.36 points, or 0.44 per cent.

As of 9.29am, the buying price of gold bar was Bt26,150 per baht weight and the selling price Bt26,350, while gold ornaments were priced at Bt25,681.04 and Bt26,850, respectively.

At close of trade on Tuesday (May 19), the buying price of gold bar was Bt26,050 and the selling price Bt26,250, while gold ornaments were priced at Bt25,574.92 and Bt26,750.

The Gold Spot Index price on Wednesday morning moved to around US$1,749 (Bt55,760) per ounce after the price rose by $11.20 to $1,745.6 per ounce at close on Tuesday.

Gold gained positive sentiment after the US Federal Reserve confirmed it will inject cash to increase liquidity in the US economy.

Meanwhile, the price of gold in the Hong Kong market rose by HK$110 to $16,130 (Bt66,350) per tael.

The committee voted 4-3 for the rate cut, which is effective immediately, in response to economic contraction deeper than previously predicted due to the sharper global contraction, he said.

This is the second time this year the MPC has cut the policy rate.

The MPC had decided unanimously on March 20 to cut the key policy rate by 0.25 of a percentage point, from 1.00 to 0.75 per cent, effective from March 23, to reduce the interest burden on borrowers affected by the Covid-19 outbreak and to alleviate the liquidity strain in the financial markets.