The CPI rose 1.62 per cent to 102.27 last month from 102 in July, said Pimchanok Vonkorpon, director-general of the ministry’s Trade Policy and Strategy Office. Headline inflation hit 1.46 per cent in July after easing to 1.38 per cent a month earlier.

Pimchanok cited a 0.31 per cent rise in fresh food prices after two months of contraction, and energy prices’ advance for a 21st straight monthly rise of 9.05 per cent in August, for increase in CPI.

Of the 422 products and service items used for gauging inflation, the prices of 226 items such as milled rice, baked products, cabbage, Chinese cabbage, electricity and liquefied petroleum gas rose last month. No price changes were recorded for 84 items. About 112 items including fresh fruit and meat saw a drop in prices.

Food prices including non-alcoholic beverages, which make up 36 per cent of the consumer inflation basket, edged higher by an annual 0.77 per cent – led by rice, flour and cereal products, fresh vegetables, eggs and dairy products, seasonings and condiments and non-alcoholic drinks.

Prices of transport and communication, which make up about 24 per cent, climbed 3.86 per cent while fuel prices jumped 12.03 per cent.

Core inflation, which strips out volatile items such as fresh food and energy, was 0.75 per cent, compared with 0.79 per cent in July.

On an eight-month average, headline inflation was 1.12 per cent and core inflation was 0.71 per cent.

The country’s producer prices rose for the fourth straight month in August, inching up 1.8 per cent from the same period last year, following the expansion of agricultural produces. Manufacturing product prices went up 1.6 per cent and construction material prices jagged up 3.3 per cent for a 14th straight month in August.

Prices of steel and steel products rose 9.1 per cent, reflecting an adjustment in production costs.

Pimchanok said that August inflation came not only from the demand side with higher energy prices, but also the effect of costs among some agricultural and non-agricultural products.

The rise in August inflation, the sixth monthly increase in a row, came within expectation from higher prices of energy and the price adjustment of some agricultural products, she said.

The overall indicators reflected that both public and private consumption and spending were at satisfactory levels, while employment, government revenue collection, manufacturing and money circulation continued to facilitate consumption, she said.

Higher energy prices and the volatile baht, as well as the fact that wage increases generally lag behind inflation, have had an impact on some products. But private-sector demand will likely be stabilised by the government’s accelerated budget disbursement for the mega-projects, as well as recoveries in the global and Thai economies, she said.

“[Headline] inflation is expected to reach 1.5 per cent in the fourth quarter of this year. Food prices will mainly affect the inflation rate. Tobacco and alcoholic beverages will have no impact as well as oil prices,” she said.

She expressed confidence that the annual headline inflation rate will stay within the framework at no more than 1.2 per cent for the whole year. Thai exports are forecast to grow 8.5-9 per cent this year.

In regard to the rising prices of steel sheets used for making cans, the Department of Internal Trade has accepted a request for a price increase from a producer. The department has yet to make a decision.

The former colonial-era islands of Hong Kong and Macau as well as nine other southern Chinese cities, including Guangzhou and Shenzhen, are now inter-connected for the first time by one of the world’s longest highways whose construction is just completed.

This and other infrastructures as well as specific promotional policies are expected to turn the area into a new economic and investment magnet.

According to Stephen Phillips, director-general of Invest Hong Kong, Thai firms in real estate, retail, textile manufacturing, restaurant sectors and other service providers, as well as tech start-ups are among the targeted investors for the greater bay area.

With the 55-km highway linking Hong Kong and Macau with mainland southern China, the area is also seen as a major connection point for China’s Belt and Road initiative.

He said Hong Kong, which has long been a destination for large Thai firms to set up holding companies due to favourable tax and other incentives, is also a regional hub for innovation and new technologies, especially robotics, fintech and biotech as well as Internet of Things (IoT) solutions.

Regarding Thai firms, he said, several niche brands have been successful in the Hong Kong market, including those for cosmetics, |hotels and spa, restaurants, and healthcare.

As an investment promotion unit of the Hong Kong government, Invest Hong Kong also aims to promote international school operators to expand into Hong Kong and nearby markets.

In addition, fintech start-ups should also consider raising funds in Hong Kong due to favourable tax rates and financial incentives for research and development granted by the government.

Thai firms can also explore opportunities to partner with Chinese firms for projects under the Belt and Road Initiative.

Besides major US, Japanese, UK and French investors, Hong Kong has also attracted more foreign direct investment from Asean countries in the past several years.

The former British colony is also a popular destination for multi-national firms’ regional headquarters, many of which also have factories in nearby Shenzhen and other southern Chinese cities.

In 2017, Hong Kong attracted a total of 402 foreign investment projects which created a total of 6,000 jobs. Due to its favourable tax regime, Hong Kong is also a popular location for corporate treasury, foreign exchange, cash and other management activities.

Meanwhile, some analysts have suggested that President Xi Jinping aims to develop the greater bay area into a high-tech metropolis which can compete with Silicon Valley in the US while combining the strengths of Hong Kong’s capital markets and Macao’s casinos with southern China’s manufacturing sector.

It was at its highest level in 14 months.

The ministry attributed the latest rise to increases in the prices of fresh food products of 0.31 per cent and energy of 9.05 per cent.

Without those two factors, inflation rose 0.75 per cent in August compared with the same month last year.

The Fed will meet next on September 25-26, and the market is expecting a third rate increase this year. The key factor to keep an eye on is the FOMC rates outlook. If higher, the market may take this negatively as tightening is taking place faster than anticipated. In Europe, ECB will have a policy meeting on September 13 and the market will keep watch on any guidance on policy tightening.

Italy has been in the limelight this month as the new government will reveal its first budget. It is anticipated that the budget deficit might breach the 3 per cent of GDP rule that is applied across all EU members. Italian government is still sitting on high debt at around 130 pe cent of GDP, a similar level seen during the recent European crisis. Investors continued to dump Italian bonds last week, sending its yield to a new high this year.

Trade tensions between the US and China is creating an overhang as Trump has reiterated to apply another US$200bn tariffs on Chinese goods. Besides, the US auto tariff is now more likely if the NAFTA deal is successful.

Thanawat Patchimkul

Head of Research

DBS Vickers Securities (Thailand)

The officials behind the fund on Wednesday submitted an application for the IPO to the Securities and Exchange Commission (SEC) after the originally envisaged fund-raising timeline had been pushed back.

The proceeds of the flotation will be used to finance the construction of expressways.

Prapas Kong-Ied, director of the State Enterprise Policy Office (Sepo), said that the TFF forms part of the government’s alternative financing sources for the country’s infrastructure development through public offerings, which will help speed up funding and lessen the government’s fiscal burden.

Chanvit Nakburee, Sepo deputy director-general and spokesman, said that about 45 per cent of future revenue will come from the Chalong Rat Expressway (Ram Intra-At Narong) and the 55-kilometre Burapha Withi Expressway (Bang Na-Chon Buri) for 30 years, owned by the Expressway Authority of Thailand (Exat). These projects would be backed by the fund’s units.

The long-promised fund was scheduled to make an initial public offering in March last year under an earlier schedule. The government aims to tap private-sector financing and use it to bolster economic growth. The Cabinet in May last year approved a plan to use the two expressways as underlying assets for the TFF.

Previously, Prapas said that the Ministry of Finance aimed to raise Bt45 billion through the fund’s IPO from the general public and, after that, the remaining fund units would be placed to institutional investors including insurance firms, the Social Security Fund and the Government Pension Fund.

Sudthisak Wattanavinid, deputy governor and acting governor of Exat, said that the proceeds of the IPO will be used to finance the two expressways linking Bangkok to the west and the east.

Prapas said that the Future Fund was likely to launch its IPO to the general public soon after it gains approval from the SEC.

The units will be offered to general investors through a small lot first, according to the SEC’s requirements.

In other infrastructure developments, Khon Kaen province is awaiting a key meeting of the Commission for the Management of Road Traffic, which will be chaired by Deputy Prime Minister Somkid Jatusripitak in September.

The meeting will consider the first phase of Khon Kaen’s smart city project, for construction of a 22.6-kilometre light-rail line from Samran to Tha Phra at a cost of about Bt30 billion, according to a director of Khon Kaen municipality.

If the commission decides to authorise the local municipality to own the project, the next step will be for Khon Kaen Transit System Co Ltd (KKTS) to hire a financial adviser for fund-raising on the stock exchange on expectation to mobilise funds through an infrastructure fund this year.

KKTS is a joint venture, approved by the Ministry of Interior, that would see five municipalities in Khon Kaen province operate the transport project in the province’s Mueang Khon Kaen district. The municipalities are Khon Kaen City, Sila, Mueang Kao Subdistrict, Samran Subdistrict and Tha Phra Subdistrict.

If the commission makes a clear decision to allow Khon Kaen to be the project owner, the commission will adjust the mass transport system plan in provinces such as Nakhon Ratchasima, Khon Kaen, Chiang Mai, Pitsanulok and Phuket, the Khon Kaen municipality official said.

“We (Khon Kaen) are cleared to invest by ourselves. As planned, we will raise funds this year and start construction late in the year. The project is expected to be completed by2022,” he said.

One light-rail route from the north to the south of Khon Kaen is forecast to yield an economic internal return rate (EIRR) of 12.56 per cent, less than for the start of all five routes’ EIRR at 21.67 per cent.

Khon Kaen’s light-rail transit project will help boost the province’s economic activities and people’s income, said Kemchat Somchaiwong, chairman of the Khon Kaen Chamber of Commerce. Khon Kaen’s gross provincial product (GPP) is an average of Bt190,000 per person a year.