Stimulus packages may result in lower contraction in year’s last quarter
EconOct 09. 2020Thanavat Phonvichai, president of the University of the Thai Chamber of Commerce (UTCC)
By The Nation
The government’s many stimulus packages should reduce the previously estimated economic contraction in the fourth quarter, said Thanavat Phonvichai, president of the University of the Thai Chamber of Commerce (UTCC).
The Centre for Economic Situation Administration on Tuesday approved a new stimulus measure granting income tax deduction of up to Bt30,000 per person to help boost their spending on goods and services.
The measure, which is awaiting Cabinet approval, will run from October 23 until December 31 and apply to the 2020 tax year. Around 4 million people are expected to be eligible for this scheme.
The government recently launched two other stimulus measures worth more than Bt60 billion to boost domestic consumption and people’s purchasing power.
Thanavat said all stimulus packages are estimated to inject Bt110 billion into the economy, which should boost growth in the fourth quarter to 2 to 3 per cent, bringing the previously estimated contraction down to between minus 4 and minus 5 per cent from minus 6 to minus 7 per cent.
Meanwhile, the consumer confidence index in September dropped to 50.2 from 51 in August, marking the first fall over the past five months, according to UTCC survey. The survey was conducted on 2,244 respondents.
This drop was due to people’s concern over political stability and the resignation of economic guru Predee Daochai from the finance ministry’s post.
New Finance Minister Arkhom Termpittayapaisith is set to take office on Monday.
The respondents were also worried about slow economic recovery and possible job losses in the future due to the Covid-19 outbreak, which has crippled the tourism sector.
Thanavat added that if the economy fails to recover in the fourth quarter, it may result in the loss of 500,000 jobs in the tourism sector.
Thailand needs to set up a corporate bond guarantee fund in order to rescue tourism-related industries that have been hit hard by the Covid-19 pandemic, Tada Phutthitada, president of the Thai Bond Market Association (Thai BMA), said on Thursday.
The fund may be set up by the government with a fund size of Bt50 billion, which would enable it to guarantee corporate bonds up to Bt125 billion, or 2.5 times, he said.
Tourism-related industries, such as hotels, could raise funds by issuing bonds with three-year maturity and the guarantee fund will compensate investors when issuers default on payment.
Three years maturity would be enough as tourism is likely to recover from the coronavirus outbreak, he said.
The bond guarantee fund will be similar to Malaysia’s Danajamin, a financial guarantee for bonds and Sukuk issuance. Malaysia has been successful in implementing the bond guarantee fund, supporting businesses to raise funds via issue of bonds and create investor confidence, said Ariya Tiranaprakij, senior executive vice president of Thai BMA.
The Thai government may make use of the Bt400-billion Covid-19 recovery fund, which has been little utilised, she said. Or money could be drawn from the central bank’s Corporate Bond Stabilisation Fund, which has not been utilised much since its launch in April, she said.
Thailand currently has the Thai Credit Guarantee Corporation, but it provides only bank loan guarantee.
In the first nine months this year, companies issued bonds worth Bt540 billion. They are expected to raise funds via bonds for the rest of the year, said Tada, and forecast total corporate bonds worth Bt800 billion for this year.
Outstanding bonds in the first nine months rose 5.09 per cent to Bt14.2 trillion from the end of last year. The issuance of government bonds contributed to the rise of outstanding bonds, but outstanding corporate bonds dropped.
Banks decreased their short-term debenture issuance, while energy firms increased their long-term bond issuance.
Between January and September, foreign investors sold government bonds worth of Bt71.3 billion, comprising Bt64.1 billion short-term bonds and Bt7.3 billion long-term.
Thai bond holdings of foreign investors dropped from Bt916.8 billion to Bt848.8 billion, representing 6 per cent of total outstanding bonds.
Foreign investors are waiting to see the outcome of the US presidential election. They want to see how US election will affect the Thai economy. Thai government bonds remain attractive due to the lower inflation rate relative to those of neighbouring countries, but market uncertainty remains, Tada added.
An expert at Asia Plus Securities expected the Stock Exchange of Thailand (SET) to hit 1,500 points next year due to high liquidity and the return of foreign funds, but pointed out five negative factors that would pressure the index in the remainder of this year.
Asia Plus Securities’ executive vice president of research, Therdsak Thaveeteeratham, expected listed companies’ profit next year to average Bt72.51 per share from Bt56.65 per share this year, as the quarterly profit is expected to bottom out since the second quarter of this year.
He expected the SET to hit 1,450 points next year and 1,526 points if the Bank of Thailand’s Monetary Policy Committee cut the interest rate one more time this year.
“The positive sentiment that would help boost the SET is high liquidity of Bt15.5 trillion, higher than the index market capitalisation of Bt13 trillion. According to previous statistics, the cash is likely to flow into the index when the deposits are higher than the index market capitalisation, especially when the interest rate is likely to stay at a low level for 1-2 years because the return on deposit was not high,” he said.
“In addition, foreign funds are likely to return to the market after they continued selling until their shareholding in the Thai stock market fell to 25.8 per cent currently.
Meanwhile, large investors have opened 510,000 accounts this year from the previous 300,000 accounts which helped boost the price of small-cap shares.”
However, he said the SET would be pressured by five negative sentiments:
▪︎ Second wave of Covid-19: This fear has caused several countries to impose lockdown measures and caused global stock markets to face correction in September.
▪︎ Domestic political situation: Investors should follow this factor closely because the past political rallies had caused the SET to fall by 6.2 per cent, while the rally organised by the Free People’s movement caused the index to fall by 7.4 per cent.
▪︎ US presidential election: Going by trends in the previous three elections, the SET will fall one month before and after the election, but the index is likely to rise one year after the election. Therefore, investors should buy shares one week before the election when the market faces correction. If Joe Biden wins the election, cash is likely to flow into the US due to his policy to raise tariffs on US companies.
▪︎ SCG Packaging (SCGP) listing on SET: Eighteen mutual funds decided to sell large-cap shares to buy SCGP shares worth Bt23 billion. Meanwhile, SCGP would be listed in the SET50 or SET100 automatically, as its market capitalisation was around Bt140 billion to Bt150 billion, so Thanachart Capital (TCAP) and The Erawan Group (ERW) would be delisted from SET50 and SET100, respectively.
▪︎ SET’s old short sales and ceiling/floor regulations: Various risks will cause more impact on the SET due to its old short sales and ceiling/floor regulations.
Therdsak added that the government’s “Shop Dee Mee Kuen” (Shop and Payback) measure to stimulate domestic consumption would help boost shares in the retail group, advising investors to buy Central Retail Corporation (CRC), SPVI and Jay Mart (JMART) shares as their prices were currently cheap.
Jobless claims declined last week while remaining elevated
EconOct 09. 2020Waiters assist diners at a restaurant in New York on Sept. 26, 2020. MUST CREDIT: Bloomberg photo by David Dee Delgado.
By Syndication Washington Post, Bloomberg · Olivia Rockeman · BUSINESS, US-GLOBAL-MARKETS, CAREER-WORKPLACE The number of Americans seeking unemployment benefits fell for a second week while remaining elevated, as the labor market makes scant progress amid risks of further weakness without additional federal stimulus.
Initial jobless claims in regular state programs decreased by 9,000 to 840,000 in the week ended Oct. 3, with the prior week’s figure revised higher by 12,000, Labor Department figures showed Thursday. Continuing claims, the total number of Americans on state benefit rolls, fell to 11 million in the week ended Sept. 26, a bigger-than-expected drop.
Even so, seven months into the pandemic, initial claims are still about four times the pre-virus level, and higher than the peak of the 2007-09 recession. For the latest week, economists expected initial claims of 820,000 and for continuing claims of 11.4 million, according to median estimates in a Bloomberg survey.
The report came with the same major caveat as last week: The figures from California, the most populous state, used numbers identical to the previous week because the state temporarily halted acceptance of new applications for two weeks to improve its systems and address a backlog of filings.
“The stubbornly high level of claims may already be starting to reflect the large corporate job cuts announced last week. The report continued to exclude California’s numbers as the state put applications on hold for two weeks, announced on Sept. 19, to revamp its system,” Bloomberg economist Eliza Winger said.
The slight drop in new claims underscores the gradual improvement that the labor market has seen since the initial lockdowns of the pandemic eased. Even so, recent layoff announcements from companies including Walt Disney Co. and Allstate Corp. as well as multiple airlines could start showing up in the numbers in the coming weeks.
At the same time, President Donald Trump’s mixed messages on additional federal stimulus have fueled more uncertainty across the world’s largest economy as Federal Reserve Chair Jerome Powell warns it will face longer-lasting scars and a weak recovery without sufficient aid.
“Even as filings are declining, levels remain extraordinarily high,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note. “Employment growth has already slowed and without fiscal support that protected jobs, risks are skewed to the downside for payrolls going forward.”
U.S. stocks opened higher after the jobless claims report, while 10-year Treasury yields and the dollar both fell.
The confusion comes as unemployment persists for many Americans. While continuing claims fell by 1 million, that could reflect recipients exhausting regular benefits and moving to state programs that provide extended benefits. Also, the number of Americans transitioning onto Pandemic Emergency Unemployment Compensation — a federal program for people who have exhausted state benefits — increased by 153,700 to 1.96 million in the week ended Sept. 19.
The biggest increases in new unemployment claims on an unadjusted basis were in Florida, Illinois, Virginia and Massachusetts, which may reflect cuts at major airline hubs. New Jersey, Pennsylvania, Louisiana and Michigan saw declines.
The total number of Americans claiming Pandemic Unemployment Assistance — a federal program for self-employed and gig workers — decreased by 433,500 to 11.4 million in the week ended Sept. 19, while initial filings dropped by 44,270 last week to about 464,400.
Wall Street is helping private equity recycle its aging assets
EconOct 08. 2020Pedestrians walk past the New York Stock Exchange on a nearly empty Wall Street in New York on March 30, 2020. MUST CREDIT: Bloomberg photo by Gabby Jones.
By Syndication Washington Post, Bloomberg · Benjamin Robertson · BUSINESS, US-GLOBAL-MARKETS Private equity firms are prolonging the shelf lives of their aging assets with deals that are proving increasingly popular with managers, but not with all investors.
Firms under pressure to offload assets from their expiring funds are opting to repackage them into new vehicles as the pandemic curbs the usual exit routes via sales or IPOs. This once obscure corner of the private equity industry has grabbed Wall Street’s attention, with the likes of Goldman Sachs joining investors and Citigroup advising on deals.
Buyout firms are becoming more inventive as business models that usually cap a fund’s lifespan at a decade prove too rigid for covid-stricken markets. As well as offering an alternative exit route for investors wanting to cash in their holdings, so-called general partner-led secondary deals allow firms to keep top-performing assets and juice even more returns from them — often meaning even higher fees.
“The market used to be the Wild West,” said Harold Hope, head of Goldman’s secondaries investment unit in New York. “Even two years ago we saw some managers go to their investors with GP-led deals and get shot down. Deals are more stable now. There are better standards.”
In July, Goldman led investors in a $1 billion deal that enabled private equity firm Riverstone Holdings to shift renewable energy firm Enviva Holdings into a new separate fund. When Permira decided to repackage four companies from its maturing flagship fund in May, Coller Capital led investors in an $829 million deal. In both cases, some investors cashed out entirely.
But with the manager as both buyer and seller, the deals come with a health warning. Investor body Institutional Limited Partners Association has cautioned about conflicts of interest and urged that investors are on board, while the Securities and Exchange Commission has waved similar red flags. Another concern is that managers can undervalue assets when moving them, and so trigger higher performance fees upon their next revaluation.
“Managers might try to take advantage of covid-depressed prices and set themselves up with nice lower valuations,” said Simon Saitowitz, a specialist in secondaries deals and partner at law firm Fried, Frank, Harris, Shriver & Jacobson. In the past few months, he’s fielded more requests for GP-led restructurings than for the whole of last year.
When London-based Permira carried out its May transaction, the firm sought to allay investor concerns by keeping the same terms for those that opted to stay in, said a person familiar with the deal. Around a third of the original investors took the opportunity to exit, said the person. A spokesman for the firm declined to comment.
The advisory side has typically been dominated by boutiques like Evercore Inc. and Campbell Lutyens, but no longer. Citigroup has worked on the transactions since 2017 and now has a 17-person team, according to Anthony Diamandakis, global co-head of asset managers.
BC Partners recently decided to postpone a listing of academic publisher Springer Nature, which could have been Germany’s biggest IPO in more than a year, Bloomberg News reported this month. It also considered a potential GP-led deal for the investment, people with knowledge of the matter said. A spokesperson for BC Partners declined to comment.
Rarely used until about a decade ago, the value of GP-led deals surged to a record $26 billion last year. Since the pandemic upended markets, managers who wouldn’t normally talk to secondaries experts are interested, said Gabriel Boghossian, partner in the private equity team at Stephenson Harwood. He even interrupted a holiday to work on three such deals.
The growth in demand points to booming interest in the broader secondaries market, where some $80 billion of fund assets were traded in 2019, according to Evercore. Some of the biggest private equity players in the space include Ardian, which raised an industry record $19 billion fund in June, and Coller Capital, which has this year been raising money for its latest flagship secondaries fund.
While the virus spurred GP-led exits to account for a record 41% of the secondaries market in the first half of this year, their volumes plummeted in line with industry activity. The number of all types of completed sales by private equity firms fell to the lowest in five years in the period, according to data compiled by Bloomberg.
U.S. private equity firm GCM Grosvenor last month said it expects GP-led deals to return to record volumes in the next couple of years as pent-up demand and less transactions in underlying portfolios send firms into the secondary market.
But as a portion of the wider market, this year could prove the strategy’s most popular yet. The deals are on track to make up 50% of all secondaries transactions by year-end, compared with 33% in 2019, said Nigel Dawn, global head of private equity advisory at Evercore, which advises on the transactions.
“Managers are saying ‘we need more time’,” said Dawn.
By The Washington Post · Eli Rosenberg · NATIONAL, BUSINESS, US-GLOBAL-MARKETS The number of new claims filed for unemployed remained at historically high levels, according to data released Thursday by the Department of Labor.
The number of initial claims inched down – from 849,000 to 840,000 last week. The number of new claims for gig and self-employed workers dropped from about 650,000 to 460,000.
All told, about 25.5 million people are collecting some kind of unemployment insurance. The number of jobless claims have fallen from their peak in the spring, but the rate has slowed in recent months.
“The story is, we’ve hit a plateau in unemployment claims,” said Robert Frick, corporate economist at Navy Federal Credit Union. “That is going to hurt the jobless rate and lead to more people eventually leaving the labor force.”
The numbers come in the final weeks before the presidential election on Nov. 3. President Trump has touted the fact that some of the labor market’s indicators from the worst of the coronavirus pandemic have improved, such as the unemployment rate.
Yet unemployment claims remain above the pre-pandemic record of 695,000 a week.
Frick said that the high level of jobless claims continuing more than six months into the pandemic was a bad sign for the economic recovery.
“We’ve been here so long, and I’m not seeing the kind of job creation that would lead us to believe that these claims are going to fall,” he said.
Economists, as well as Federal Reserve policymakers, have been warning the recovery could deteriorate without further aid from Washington for struggling businesses and households.
EconOct 08. 2020A logo stands on the wall outside the World Trade Organisation (WTO) headquarters in Geneva, Switzerland, on March 2, 2020. MUST CREDIT: Bloomberg photo by Stefan Wermuth.
By Syndication Washington Post, Bloomberg News · Bryce Baschuk · BUSINESS, WORLD, US-GLOBAL-MARKETS, AFRICA, ASIA-PACIFIC
The campaign to lead the World Trade Organization during the most turbulent period of its 25-year existence has entered its final stage.
Playing out against the backdrop of a pandemic, a worldwide recession, the U.S.-China battle for trade supremacy and the American presidential election, there couldn’t be more at stake. But the decision by Brazilian Roberto Azevedo to step down as director-general at the end of August, a year before his term ends, also offers an opportunity for the U.S., the European Union and other nations to reshape the organization.
1. What’s at stake?
The Geneva-based WTO’s mission of economic integration is under threat from protectionist policies around the globe, and without reform it risks being sidelined during the biggest economic crisis in a century. The world’s largest economies agree that the organization must evolve to address the shifts in technology and the global trading system that have occurred since 1995. If members can align behind a candidate committed to modernization, it could break bureaucratic logjams and help unleash a wave of global growth at a time when it is needed most. If that isn’t possible, the WTO risks receding further into irrelevance.
2. What’s precipitated the crisis?
The WTO’s appellate body, the main forum for settling worldwide trade disagreements, lost its ability in December 2019 to rule on new dispute cases. That resulted from a U.S. refusal over the previous two years to consider any nominees to fill vacancies on the panel. WTO members can still bring disputes to the trade body and receive an initial ruling, but that can be appealed into legal limbo. The U.S. imposition of hundreds of billions of dollars worth of tariffs against China, and use of the WTO’s national security loophole to levy duties on steel and aluminum, have also weakened the organization.
3. What is the WTO’s selection process?
The chairman of the WTO general council launched a selection procedure in June to confirm the trade body’s next director-general. The WTO general council has been narrowing the field of candidates by holding confidential consultations with each of the WTO’s 164 members. The second phase of consultations, with five candidates still in contention, was completed on Oct. 8, when the WTO announced the two finalists. The last phase of the selection process runs until Oct. 27, after which the WTO will seek to name a consensus winner.
4. Who is still in the running?
Two women, which is significant since the WTO has never had a female leader in its 25-year history. They are Nigeria’s Ngozi Okonjo-Iweala, who served two stints as finance minister and one term as foreign affairs minister, and South Korea’s trade minister Yoo Myung-hee. Okonjo-Iweala, 66, has experience working at international governance bodies as a former managing director of the World Bank and as a chair at the Global Alliance for Vaccines and Immunization. She is running as an outsider, arguing that she can bring a “clear set of eyes” to a deeply dysfunctional organization.
Yoo, 53, has had a 25-year career in government, during which she helped expand her country’s trade network through bilateral accords with China, the U.K. and the U.S. Yoo told Bloomberg TV in September that she wanted the WTO to offer a meaningful platform for the U.S. and China to discuss their trade disputes. She vowed to play the role of mediator, if chosen to lead the organization and to work as a force for multilateralism.
5. What kind of leader are nations looking for?
Governments hope the next director-general can persuade members to complete much-needed reform of the organization. Trade officials in Geneva broadly argue that Azevedo’s successor should have sufficient leadership authority and capability to marshal broad support around the WTO’s reform agenda. The remaining contenders are current or former ministers, something that trade officials had previously said was an important characteristic for a future director general.
6. Is there a nationality requirement?
Other than being a national from a WTO member country, no. However, the issue of nationality can be a key factor for some WTO members who may view a candidate’s citizenship status as a plausible reason to oppose them. In July, China opposed an American nominee to serve as the interim director-general and as a result the organization is now leaderless.
7. Are there any other considerations?
The candidate must also thread a narrow diplomatic needle by displeasing neither the U.S. nor China, whose bitter conflict over a growing array of issues including technology and the pandemic is testing their fragile economic truce. The administration of President Donald Trump has actively sought to undermine the WTO’s ability to function, saying it has infringed on American sovereignty and enabled China to become a big economic player globally at the expense of U.S. jobs and manufacturing. Adding to the unpredictability factor, Trump — who has called the WTO the worst trade deal the U.S. has ever signed — is up for re-election in November, so America’s tolerance for a candidate who looks too favorably on China might be tested. Meanwhile, China has engaged in a multi-year campaign to expand its diplomatic influence by installing key personnel at the top levels of international decision-making bodies.
8. What happens if no candidate is selected?
The WTO will remain leaderless until members select a permanent director-general. That’s because governments failed to choose an interim caretaker prior to Azevedo’s departure on Sept. 1 and the WTO’s four deputy directors-general are jointly overseeing the organization’s housekeeping matters. If WTO members are unable to select a leader by consensus, a vote requiring a qualified majority could be held as a last resort — an unprecedented step in the organization’s history.
Lifting lockdowns amid high infections won’t boost GDP, IMF says
EconOct 08. 2020People wearing protective masks exit the Brighton Beach subway station in in the Brooklyn borough of New York on Oct. 5, 2020. MUST CREDIT: Bloomberg photo by Mark Kauzlarich.
By Syndication Washington Post, Bloomberg · Eric Martin · BUSINESS, US-GLOBAL-MARKETS
Lifting lockdowns is unlikely to lead to a decisive and sustained economic boost as long as covid-19 infections remain elevated, because people will probably keep avoiding social interactions out of fear of contracting the virus, the International Monetary Fund said.
New IMF research shows that while government lockdowns contributed significantly to the global recession, the slowdown was also driven in large part by people continuing to exercise voluntary social distancing, the fund said in a blog post Thursday accompanying a chapter from its updated World Economic Outlook. The fund will publish new forecasts on Oct. 13 during its annual meeting with the World Bank.
The findings, using high-frequency mobility data from Google and job openings from Indeed Inc., should warn policy makers against lifting lockdowns amid elevated infections in the hope of jump-starting economic activity, IMF said. The findings call for reconsidering the idea that lockdowns involve a trade-off between savings lives and supporting the economy, the fund said.
“Addressing the health risks appears to be a pre-condition to allow for a strong and sustained economic recovery,” IMF economists Francesco Grigoli and Damiano Sandri wrote.
The IMF and World Bank will hold their annual meetings next week, moving to a virtual format due to the outbreak rather than their usual in-person gatherings in Washington. While the IMF will make a small upward revision to its 2020 forecast and the global picture is less dire than three months ago, the recovery will be long and uneven, Managing Director Kristalina Georgieva said earlier this week.
The Small and Medium Enterprise Development Bank of Thailand (SME D Bank) has joined forces with General Electronic Commerce Services (GEC) on improving SMEs’ e-commerce potential via The Hub Thailand platform to increase their market channels and revenue.
After presiding over a memorandum of understanding signing ceremony, Industry Ministry permanent secretary and SME D Bank chairman Kobchai Sangsitthisawat said that as the Covid-19 crisis has severely impacted SMEs, the bank aims to enhance their potential to expand market channels, especially the e-commerce market which is witnessing high growth, to boost their revenue in this new normal era.
SME D Bank president Nartnaree Rattapat said the bank and GEC will enable the enterprises to sell products via The Hub Thailand platform to take advantage of online shopping trends.
“Also, the bank is prepared to grant low-interest loans to SMEs which need more capital,” she said.
GEC president and CEO Rathapol Bhakdibhumi said the company will prepare an e-marketplace system on The Hub Thailand platform to assist SMEs on sales.
Governor, BMA officials check on progress of BTS Gold Line
EconOct 08. 2020Photo Credit: Nation Photo by Tanachai Pramarnpanich
By The Nation
Bangkok governor Pol General Aswin Kwanmuang, accompanied by Bangkok Metropolitan Administration officials, visited the Bangkok Mass Transit System (BTS) Gold Line’s Krung Thonburi station on Thursday to check its progress.
The line’s construction began in 2018, and 96 per cent has been completed.
The Gold Line was initially scheduled to go into operation this month, but that has been postponed to December due to a delay in the delivery of bogies and improvement of its entrances.
The construction of the 2.75-kilometre Gold Line, which has four stations, is divided into two phases. The first phase covering 1.8km comprises three stations – Krung Thonburi, Charoen Nakhon and Klong San.
The line will be operated using an automated guideway transit system and will feature three unmanned Bombardier Innovia APM 300 trains that can reach a maximum speed of 80km per hour.
Each train comprises two passenger bogies that can contain 276 passengers. Approximately 42,000 commuters per day are expected to use the Gold Line when it opens.
Thanavat Phonvichai, president of the University of the Thai Chamber of Commerce (UTCC) 
Waiters assist diners at a restaurant in New York on Sept. 26, 2020. MUST CREDIT: Bloomberg photo by David Dee Delgado. 
Pedestrians walk past the New York Stock Exchange on a nearly empty Wall Street in New York on March 30, 2020. MUST CREDIT: Bloomberg photo by Gabby Jones. 
A logo stands on the wall outside the World Trade Organisation (WTO) headquarters in Geneva, Switzerland, on March 2, 2020. MUST CREDIT: Bloomberg photo by Stefan Wermuth. 
People wearing protective masks exit the Brighton Beach subway station in in the Brooklyn borough of New York on Oct. 5, 2020. MUST CREDIT: Bloomberg photo by Mark Kauzlarich. 
Photo Credit: Nation Photo by Tanachai Pramarnpanich 
