Representatives from the private sector urged Thai exporters to focus on new markets to replace the drop in shipments to the US and China, two of Thailand’s current top trading partners.

From January to February this year, principal exports from Thailand to China and the US dropped significantly. China-bound exports of automatic data processing machines and parts fell by 18.9 per cent year on year, while rubber exports fell by 26.8 per cent and, most significantly, exports of motor cars, parts and accessories fell by 65 per cent, according to data from the Commerce Ministry.

“The trade war has become a long-term problem for Thai exporters, and the situation may likely worsen in the long-term as the two countries struggle to find a compromise solution,” Vikrom Kromadit, the top executive of Amata Corporation Plc, warned.

The businessman suggests that Thai exporters seek opportunities to expand their production base in CLMV (Cambodia, Laos, Myanmar and Vietnam) countries.

“The CLMV is a fast-growing region with lower labour costs than Thailand. The area is a potential long-term solution for Thai exporters,” he said, adding that Thai manufacturers should look to move their production base to these countries and export Thai goods from there to cut costs in the long-run and remain competitive amid the US-China trade war.

In a separate interview, Yunyong Thaicharoen, first executive vice president and head of Siam Commercial Bank’s Economic Intelligence Centre said, “To adapt to the trade war, Thai exporters should look to new markets and keep a close eye on the changing business trends.”

Yunyong suggested that exporters should make more use of e-commerce and try to gain a better understanding of consumer trends abroad, especially in the current market landscape that is constantly changing.

The trade war is likely to continue in the long term. Hence, going forward, Thai exporters should make the trade war challenge a baseline case in their business strategy, said Somkiat Tangkitvanich, president of the Thailand Development Research Institute (TDRI).

Somkiat suggested that since the US has imposed tariffs on various Chinese goods, Thai exporters should look for opportunities to replace Chinese goods in the US market.

The TDRI president’s suggestion is in line with the Commerce Ministry’s strategy to boost Thai exports to the US through “food diplomacy”.

“It is undeniable that the US-China trade war has both direct and indirect negative impacts on Thai exports. However, there are also indirect benefits to Thailand from the ongoing trade war, which Thailand needs to capitalise on,” said the director-general of the Commerce Ministry’s Trade Policy and Strategy Office, Pimchanok Vonkorpon.

“Many Chinese goods are losing market share in the US because of the tariffs. This has opened up gaps in the market which Thai products can fill,” Banjongjitt Angsusingh, director-general at the ministry’s Department of International Trade Promotion, said.

“One way Thai businesses can break into the US market is through food diplomacy,” she added.

Food diplomacy refers to the use of Thailand’s cultural and culinary influence in foreign markets to boost Thai exports, she explained. For example, there are many Thai restaurants across the US. In supporting these businesses, Thailand can boost its export of key seasoning ingredients used in Thai food, creating a new way for Thailand to penetrate the US market.

The Commerce Ministry is also urging exporters to cash in on the negotiated free trade agreements with various countries to boost Thai exports, particularly, with Thailand’s top trading partner, China. In 2018, trade value with China stood at US$80.136 billion (Bt2.545 trillion), increasing by 8.7 per cent year on year.

“We aim to boost Thai-Chinese trade by 12 per cent this year and have set a target of $140 billion for 2021”, said Auramon Supthaweethum, director-general of the Department of Trade Negotiations (DTN) under the Commerce Ministry.

The ministry will promote exports of farm produce and processed products to China from small and medium enterprises in the Thai agricultural industry. Thailand has a free trade agreement (FTA) with China that also covers agricultural exports, Auramon stated.

“However, there are many exporters in the agricultural sector who are not aware of their FTA privileges when exporting to China. They also may not possess the required knowledge on regulatory standards, intellectual property licensing and effective strategies,” she said.

In 2018, only 58.4 per cent of Thailand’s total exports to China enjoyed privileges under the trade deal, according to the Commerce Ministry.

Year-to-date, foreign investors have bought US$1.1 billion (Bt35 billion) net of Indonesian stocks, followed by $728 million of Philippine stocks and $161 million in Vietnam equities. On the other hand, they sold $244 million of Thai shares and $434 million of Malaysian stocks.

Meanwhile, in the Asean bond markets, foreign investors bought a hefty $4.6 billion of Indonesian bonds and $1.1 billion of Malaysian bonds year-to-date. In contrast, they sold $729 million of Thai bonds during the same period.

We believe Indonesia, Philippines, and Vietnam will continue to be the sweet spots for foreign investors due to their superior economic growth. Malaysian stocks could face further outflows in the near-term as its economy is growing at a decelerating pace with negative inflation during the last two months.

Thai stocks are expected to remain sluggish over the next 1-2 months as investors wait for a clearer picture in politics.

Thanawat Patchimkul Head of Research DBS Vickers Securities (Thailand)

HIGHER TURNOVER MAY TAKE INDEX TO 1,800 PTS

The SET Index moved sideways with more active turnover. We expect a range of 1,600-1,800 points this week. Strategically, we prefer to buy on weakness and sell on strength in line with support and resistance.

Support factors

Monetary easing of central banks worldwide. Starting with the Fed reducing the QT this May, which could lead to global liquidity improvement. Inclusion of NVDRs in MSCI EM, which could prompt at least Bt60 billion in foreign capital into Thai stocks towards the end of May. High crude prices to support the energy group and the SET.

Key pressures

Consistent rise in Thai bourse’s PE in light of cuts in this year’s estimated EPS as a result of more provision for employee protection. Unclear local political developments, which could lead to a new government with insufficient stability. Higher risks to the Thai economy from Thai export contraction on the back of the US-China trade war and local political uncertainties. We recommend big caps with high dividend, low valuations and laggard prices.

1) Refiners: TOP

2) Property: QH

3) Bank: BBL

Research Department

Trinity Securities

Around the world, health service providers struggle to keep up with the pace of change.

In response, most healthcare providers have focused on back-office efficiency and improving simple transactions, while leaving the majority of patient-facing activities unchanged.

Digital technology has a vital role in the healthcare industry, especially for senior and aftercare programmes, according to a report by KPMG.

“A combination of advanced technology can be used in multiple angles of healthcare through real-time data collection from IoT and wearable devices. Advanced analytic tools such as AI, precision medicine and Robotic Process Automation can certainly help hospitals and healthcare providers deliver healthy and quality living to the elderly.”

Navigating this new landscape is challenging for organisations and their leaders as they try to increase productivity and quality through digital technology. There is no doubt, however, that technological transformation will be one of the major differentiators between successful and unsuccessful providers over the next decade. The competing pressures of cost and expectations of quality mean that doing nothing is not a sustainable option.

However, a pattern has emerged as past technological initiatives raised high expectations of the potential from new technology, which then encountered an initial period featuring frustration and reduced productivity. Benefits of the technological shift have generally eventually materialised – often after two or more years – but weathering this “digital dip” has proved an important hurdle and many transformation strategies have been scaled back or even abandoned.

Examining both successful and unsuccessful technological implementation in healthcare, it is clear that success isn’t achieved by replacing analogue processes with digital ones. It’s about rethinking the purpose of services, re-engineering how they are delivered, and capitalising on opportunities afforded by data to adapt and learn.

In its “Digital Health: Heaven or Hell?’ report, KPMG identified seven key lessons from those that have successfully realised benefits and overcome setbacks.

1. Transformation first. Transformation comes from new ways of working, not the technology itself. You need a transformation programme supported by technology – not the other way round. This is the fundamental lesson that underpins everything else.

2. People problems not technology problems. The majority of the issues faced along the transformation journey are people problems, not technology problems. These require sophisticated leadership and change management capabilities.

3. Systems design. There has been insufficient attention to the design of systems. Technologies need to solve problems recognised by the people who are going to use them, be they patients or professionals. This requires a deep understanding of the work, as well as the needs of the worker.

4. Invest in analytics. Far too often providers make significant investments in digital systems but overlook the capabilities to use the data collected – hence the payback is never seen.

5. Multiple iterations and continuous learning. Even with careful design there may need to be a number of iterations in the design of systems. This is a continuous process and there may be several cycles – some quite painful – before systems reach a tipping point where all of this investment starts to pay off.

6. Support interoperability. The inability to share and combine data between different systems is a major hindrance to realising the full benefit of technology in healthcare. A coordinated approach to minimum interoperability standards would help accelerate healthcare providers’ digital journey.

7. Sound information governance and data security procedures. Data sharing requires strong information governance and security, particularly in the face of a growing threat from cyberattacks. Action is required at a national and local level to help organisations hold and share data safely.

Written by Natasak Rodjanapiches, advisory director, KPMG in Thailand.

The number of corporate defaults globally fell to 82, its lowest level since 2014.

“By many measures, 2018 showed improved performance for S&P Global Ratings’ corporate credit globally,” said Diane Vazza, head of S&P Global Fixed Income Research. “Many of S&P Global Ratings’ measures for rating performance and rating stability, as well as the proportion of upgrades, rose to their highest levels since 2014.”

More companies were upgraded than downgraded in 2018, and 73 per cent of companies retained the same ratings by year-end. All companies that defaulted in 2018 that were rated at the start of the year were speculative grade (rated ‘BB+’ or lower), and 74 per cent of these were in the ‘CCC’/’C’ rating category. As a result, the one-year global Gini ratio (a measure of the rank-ordering power of ratings over a given time horizon) rose to 93 per cent in 2018 from 92.7 per cent in 2017, reaching its highest since 2014.

Kukkong Ruckphaopunt, executive vice president of Bangkok Bank cited BOT governor Veerathai Santiprabhob as saying that a taskforce had been set up to guide the establishment of the system – based on QR codes – for use in all 10 Asean countries.

Veerathai had been attending a meeting to advance the goal of payment connectivity in the region.

Commercial banks would be invited to join the taskforce later, Kukkong quoted Veerathai as saying.

The BOT is expected to call in commercial banks for discussions on the project later. If the arrangements are finalised quickly, the QR code payment system would likely be launched late this year, Kukkong said.

For the system to work, Asean countries must agree on the way that payment information will be transmitted under a uniform standard, which factors in the different currencies, the range of merchants and the codes that will be used.

Officials need to decide whether the central interbank payment system will use ITMX or sponsoring banks, while rules for business also must be finalised.

Once the QR code payment system is finalised, the related parties can determine a logo and a name for the system that will apply in all Asean countries. The logo would have a technical function in enabling scans to be made for payments, in a similar way to how the PromptPay logo with its QR code can be scanned by users, with the payment process recognised by all of Thailand’s banks.

A number of Thai banks have developed international payment systems, but these are limited to bilateral payments.

If the central payment system is developed, all banks in Thailand, including Bangkok Bank, will have the capability for customers to scan the QR codes of banks in Singapore, Vietnam or Indonesia through their mobile banking platforms to enable the payments

“An Asean QR code will be based on bank accounts. When transactions are made, money will be withdrawn from accounts directly, which could prompt competition with card providers such as MasterCard, Visa, American Express and JCB,” Kukkong said.

Without cards, the system will carry no cost, similar to the QR code-based system in use on PromptPay.

To cope with an estimated rise in mobile banking transactions among Asean countries, each bank now has high capabilities and the planned Asean QR code is expected to boost transactions by about 10-20 per cent in an initial period, Kukkong said

Veerathai said that the planned payment system would draw on existing technology that is being developed for Asean payment connectivity. This means that the system will cost less than would be the case if a new system had to be started from scratch, let alone the additional time that this would entail, he said.

The QR code system will enable fund transfers that make use of blockchain technology, making an Asean-wide system more efficient, he said.

“It’s not necessary to set up new payment infrastructure for inter-payment in 10 Asean countries,” he said. “That could take two to three years to complete and such a system could be outdated by then.

“Therefore, what we are doing is to develop existing technology for the application of connectivity. Developing the payment system on the existing technology will help determine business rules and make it easier to enable agreement among the parties.”

The Thailand Development Research Institute (TDRI) said the policies recently flagged by the government are unnecessary for an economy that is growing in the range of 3 to 4 per cent a year.

The government should use its budget to build a long-term economic foundation for the country, such as through investing in public infrastructure and upskilling the workforce, the privately run body said.

TDRI Somkiat Tangkitvanich was referring to a government announcement that it had tasked the Finance Ministry with coming up with ways to stimulate growth in the economy. Healthy annual expansion in gross domestic product (GDP) of up to 4 per cent indicated that stimulatory measures were not justified, Somkiat said.

 For the goal of building a long-term economic foundation for the country, more investment was needed in investment, though he acknowledged the policies already pursued in this area.

He identified as pressing the need for the government to usher in policies to increase the skills of the workforce, saying that more funds should be directed to this goal.

“When the skills of the workforce are increased, workers’ income will also increase,” he said. “This will lessen the need for the government to push out short-term policies to stimulate the economy and instead enable it spend taxpayers’ money on other matters.”

Somkiat conceded the necessity for government welfare that helps low-income earners. “During a time when the world economy is fragile and uncertain, there will be people at the lower level of the economy that will suffer before other groups,” he said.

“When there is an economic recession, stimulating policies are necessary. However, if stimulants are used unnecessarily on an economy that is merely slowing down in growth, it may only produce short-term benefits and can be unhealthy for the economy in the long-run.”

He suggested that the government, in its remaining time, should refrain from stimulatory policies given that government funds are limited. “If the budget is excessively spent in this period, the new government will struggle to meet their promises to the people,” he said.

The permanent secretary of the Ministry of Finance, Prasong Poontaneat, said the details of the economic stimulus package under consideration will be finalised after the Songkran festival. The proposals would then be forwarded for approval at an executive meeting of the ministry to be chaired by Deputy Prime Minister Somkid Jatusripitak.

Somkid has asked the Finance Ministry to consider whether the economy needs further stimulus. His instruction comes in the wake of the private sector cutting its forecast for economic growth this year to 3.8 per cent. The Finance Ministry estimates growth will come in at 4 per cent.

A source from the Finance Ministry said exports are trending much lower than the ministry’s estimates.

The source said, given that a new government may take some time, to be formed, any stimulus measures may not take shape until the third or fourth quarters of this year. The ministry is considering measures to help prevent a further economic slowdown in the second and third quarters of this year, the source said.