The Thai National Shippers’ Council revised down its forecast for export growth to a 10 per cent contraction year on year from its previous estimate of an 8 per cent contraction due to a number of risk factors, chairman Ghanyapad Tantipipatpong said on Tuesday (July 7).
This revision is based on an exchange rate of Bt31 to the US dollar. The baht stood at Bt31.12 to the dollar on July 5.
The risk factors include continued appreciation of the Thai currency, global economic slowdown which has affected demands by trading partner countries and disrupted logistics systems in export destinations due to Covid-19 related lockdowns.
The only positive factor is the continued expansion of the export of farm and food products as well as medical supplies amid the Covid-19 pandemic.
Exports in May contracted 22.5 per cent year on year to US$16.278 billion (Bt507 billion), while imports dropped 34.91 per cent to $13.583 billion.
From January to May, exports dipped 3.71 per cent to $97.898 billion, while imports fell 11.64 per cent to $88.808 billion.
WHA Group makes successful Bt4-billion bond offering
Jul 07. 2020
WHA Group CEO Jareeporn Jarukornsakul
By THE NATION
WHA Corporation Public Company Limited witnessed significant demand for its 1/2020 bond offerings worth Bt4 billion from June 30 to July 2, according to the company.
There are three tranches of the bond – a 3-year term maturity in 2020 amounting to Bt2.05 billion, a 4-year maturity in 2024 of Bt1.45 billion and a 5-year maturity in 2025 amounting to Bt500 million. Interest rates are a fixed 3.30, 3.75 and 4.20 per cent, respectively.
WHA said it would use the proceeds from the issuance of the bond on debt repayment, capital expenditure, new investment for business expansion, and/or working capital to support business operations.
Tris Rating assigned the bond an A rating as of March 24. The bonds were distributed via three underwriters – Kasikorn Bank, Siam Commercial Bank and UOB Bank.
WHA Group CEO and chairwoman Jareeporn Jarukornsakul said she is confident the business will perform very well in the second half of the year, with continuous growth of the logistics business.
In addition, the company plans to launch its 10th industrial estate in the Eastern Economic Corridor, bringing the number of WHA’s industrial estates across Thailand and Vietnam to 12.
The company forecasts higher water volume sales than the first half, with the drought situation easing. It’s power business is expected to reach 590 equity MW in operation by the end of 2020 from the current 569 MW.
WHA said its digital business is also growing well as a result of the Covid-19 pandemic. The firm has signed contracts with customers to provide 109 racks of data centre services.
The company has received a licence from the National Broadcasting and Telecommunications Commission to test a 5G network with leading service providers at its industrial estates.
In addition, the firm aims to monetise assets to WHA Premium Growth Freehold & Leasehold Real Estate Investment Trust (WHART), and Hemaraj Leasehold Real Estate Investment Trust (HREIT) worth approximately Bt3.23 billion and Bt1.35 billion, respectively, in the fourth quarter of 2020.
WHART and HREIT have witnessed occupancy rates of 91.9 per cent and 95.3 per cent, respectively, as of the first quarter, the company added.
The price of gold rose by Bt100 per baht weight in morning trade today (July 7), the Gold Traders Association reported.
As of 9.29am, the buying price of a gold bar was Bt26,150 per baht weight and selling price Bt26,250, while gold ornaments cost Bt25,681.04 and Bt26,750, respectively.
At close yesterday, the buying price of a gold bar was Bt26,050 per baht weight and selling price Bt26,150, while gold ornaments were priced at Bt25,574.92 and Bt26,650, respectively.
The price under Comex (Commodity Exchange) to be delivered in August rose by US$3.5, or 0.2 per cent, to $1,793.5 (Bt55,660) per ounce at close yesterday.
Investors were buying gold as a safe haven asset due to uncertainty amid an unhealthy increase in new Covid-19 cases worldwide and the weakening dollar.
The Stock Exchange of Thailand (SET) Index rose by 15.50 points, or 1.13 per cent, to 1,387.77 in the morning session today (July 7).
A stock analyst at Krungsri Securities expected the index to rise between 1,385 and 1,400 points on hopes of a V-shaped economic recovery after many countries eased their lockdown measures.
“The market gained positive sentiment after news that the US services index in June rose to 57.1, while euro zone retail sales in May increased by 17.8 month-on-month and the China services purchasing managers’ index in June rose to 58.4,” the analyst said.
“However, we advise investors to beware of market volatility as the number of US coronavirus cases continue to increase, causing some states to postpone moves to ease lockdown measures,” he added.
He recommended that investors buy:
– Energy stocks that benefit from the rising crude oil price, such as PTT, PTTEP, Top, PTTGC, IRPC, SPRC and IVL.
– Marine shipping stocks that benefit from a rising freight rate, such as PSL, TTA, RCL, AMA and PRM.
– Stocks that benefit from the Cabinet’s domestic tourism stimulus measures, such as Mint, Centel, ERW, AOT and AAV.
– Stocks whose second-quarter performance are expected to improve, such as Top, PTTGC, SPRC, BGrim, CKP, Tasco, STA and SPALI.
The SET Index dropped by 1.86 points, or 0.14 per cent, on Friday, closing at 1,372. Total transactions amounted to Bt71 billion.
Net buys by foreign investors amounted to Bt384 million in stocks and Bt10 million in bonds. There were 7,124 net TFEX SET50 contracts.
By Syndication Washington Post, Bloomberg · Vildana Hajric · BUSINESS, US-GLOBAL-MARKETS
U.S. stocks jumped, with gains in tech shares pushing the Nasdaq Composite to a record high. The dollar fell for a fifth day and Treasurys dipped.
The S&P 500 Index posted its fifth-straight increase, its longest winning streak since December, as Amazon.com Inc. shares rose past $3,000 for the first time. Tesla Inc. extended a five-day rally to more than 40%. The dollar slid to the weakest since June 10 as risk-on sentiment sapped demand for havens.
The Stoxx Europe 600 Index climbed 1.6% while developing-nation stocks added 2.5% as a huge rally in Chinese markets pushed a global equity benchmark toward a one-month high.
Stock markets started the week in an upbeat mood after a front-page editorial in China’s Securities Times on Monday said that fostering a “healthy” bull market after the pandemic is now more important to the economy than ever. The Shanghai Composite Index posted its biggest advance since 2015, fueling bullish spirits around the world, even as investors kept a wary eye on the coronavirus infections sweeping across parts of the U.S.
“Investors have recognized that as bad as the economy in the U.S. is, it’s not as bad as what people thought it would look like in March and April,” said Nancy Prial, the co-chief executive officer at Essex Investment Management. “The market has started to sense we might see better than anticipated results fairly broadly across a wide spread of companies.”
The MSCI World Index is now at the highest level since early June, with investors putting their faith in an economic recovery powered by historic government stimulus.
But of course there’s a long way to go before the economy gets back to normal. Goldman Sachs Group Inc. cut estimates for U.S. growth this quarter and said consumer spending appears likely to stall this month and next. Still, economists led by Jan Hatzius said other economies have proved it’s possible to resume activity and changes in behavior such as wearing masks will help too.
Elsewhere, copper was on the cusp of erasing this year’s losses after virus-related disruptions tightened supplies. Precious metals advanced.
Alicia Levine, chief strategist at BNY Mellon Investment Management, said she’s telling clients to stay in the stock market amid stimulus measures from the Federal Reserve and U.S. government.
“That is still our message,” Levine said in an interview on Bloomberg TV and Radio. “It’s extraordinary. I think we’re all scratching our heads, but the market is telling me you’ve got to be in it.”
These are the main moves in markets:
Stocks
– The S&P 500 Index increased 1.6% at the close of trading in New York.
– The Stoxx Europe 600 Index gained 1.6%.
– The MSCI Asia Pacific Index climbed 2.2%.
– The MSCI Emerging Market Index climbed 2.6%.
Currencies
– The Bloomberg Dollar Spot Index declined 0.3%.
– The euro gained 0.5% to $1.1307.
– The British pound rose 0.1% to $1.2492.
– The Japanese yen rose 0.1% to 107.37 per dollar.
Bonds
– The yield on 10-year Treasurys rose one basis points to 0.68%.
– Germany’s 10-year yield was little changed at -0.44%.
– Britain’s 10-year yield rose one basis point to 0.2%.
Commodities
– West Texas Intermediate crude fell 0.1% to $40.61 a barrel.
Thai funds that invested in small- and mid-cap stocks have generated better returns in the first half of the year than funds that invested in large-cap stocks during the Covid-19 crisis, experts said.
The Covid-19 outbreak caused a severe impact on the Thai stock market during the first half of this year, causing the Stock Exchange of Thailand (SET) Index to dropped below 1,000 points. Although the index has rebounded, the index still contracted 15.2 per cent.
According to Morningstar Research (Thailand) data, as of June 30 this year the top 10 Thai funds that invested in large-cap stocks generated the highest returns of minus 5.17 per cent and the lowest of minus 9.80 per cent, while the top 10 Thai funds that invested in small- and mid-cap stocks generated the highest returns of 7.75 per cent and the lowest of minus 2.70 per cent.
Among Thai funds that invested in small- and mid-cap stocks, two Krungthai Asset Management (KTAM) funds, namely Krung Thai mai Equity Fund (KT-mai) and Krung Thai Mid-Small Cap Equity Fund (KTMSEQ), generated returns of 7.75 per cent and 3.29 per cent, respectively.
Thai funds that invested in small- and mid-cap stocks were able to generate outstanding returns because the Market for Alternative Investment (mai) and SET indices in the first half of this year dropped to minus 3.8 per cent and minus 12.7 per cent, respectively.
Meanwhile, the SET100, SET50 and SET indices dropped sharply to minus 16.4 per cent, minus 17.2 per cent, and minus 15.2 per cent, respectively.These funds had focused on investment in financial, hospitals and public utility stocks that escaped from the Covid-19 fallout and have a very small proportion of investment in large-cap stocks.
On the contrary, returns of Thai funds that invested in large-cap stocks at more than 70 per cent decreased due to the decline in commercial bank and energy stocks. Commercial bank stocks were pressured by rising bad debt, while energy stocks were pressured by falling crude oil price.
Chayanee Juengmanon, senior analyst at Morningstar Research (Thailand), said that the Covid-19 outbreak had caused a severe impact on large businesses’ performances, especially commercial banks and energy companies, resulting in the decline in returns of funds that invested in large-cap stocks.
“However, funds that invested in small- and mid-cap stocks have risks more than funds that invested in large-cap stocks during the market volatility, so we advise investors to evaluate funds whether the fund is capable of taking risks or not before investing,” she said.
Meanwhile, Somchai Amornthum, the assistant to the chief executive officer of the Strategic Asset Allocation and Fund Marketing Department at KTAM, said that funds that invested in small- and mid-cap stocks had become popular among investors because small- and mid-cap stocks gained positive sentiment from the government’s lockdown easing.
“However, these funds would be under pressure from market volatility as we expect the index this year to move sideways between 1,350 and 1,450, while the index next year is expected to rise to 1,530,” he said.
“Therefore, we advise investors to gradually invest in funds that have invested in small- and mid-cap stocks to speculate on returns in the long term for more than three years.”
Jul 07. 2020From left, economists Yunyong Thaicharoen, Charl Kengchon, Burin Adulwattana and Somprawin Manprasert share their views on the economic outlook post-Covid crisis at an exclusive roundtable hosted by Nation Group and Nation TV on July 2.
By The Nation
Up to 30 per cent of total bank loans may be restructured under the government’s scheme, while local corporates may need up to Bt1.7 trillion liquidity injection to survive the Covid-19 fallout, economists warned, predicting that it will take a while for the economy to fully recover.
The Thai economy this year is expected to contract even deeper than it did during the 1997 Asian financial crisis, said Charl Kengchon, executive chairman at Kasikorn Research Centre.
The Bank of Thailand recently projected that the GDP will contract 8.1 per cent, though there is a risk that it will drop even further due to the threat of a second wave of Covid-19 infections, he said at an exclusive roundtable hosted by the Nation Group and Nation TV on July 2.
This crisis is different from the one in 1997-1998, because banks now are far stronger, he said.
“The most important thing to focus on now is the asset quality, as restructured debts were estimated to be 21 per cent of Bt15 trillion of total bank loans in the first quarter, and it might spike to 29.9 per cent in the second quarter,” he said.
Though the government has implemented financial aid to support corporates, these measures wrap up in October. If by then the economy rebounds and businesses survive, then banks will not have much trouble with the quality of assets, but if it doesn’t, then banks will have huge problems with a large number of debts needing restructuring. This is when we will see if the government implements extra support measures, he said.
“Everyone is like a Covid-19 patient, surviving with the help of ventilators, but what happens after that is still not clear. Nobody knows if businesses will be able to come back,” he said.
Another key issue is the rate of unemployment, Charl said, adding that businesses need large sums of money to keep their employees, so the government may need to provide more support via the national budget.
It is also the government’s job to boost confidence in the economy, so banks are willing to lend and affluent consumers are willing to spend. Thus, changes to the tax policy may be necessary, he added.
Somprawin Manprasert, head of Krungsri Research and chief economist at Krungsri Bank, said the government has been successful in controlling the spread of the virus, but it was at the cost of an economic downturn.
“How long can we continue to live like this?” he asked. “According to stress-test trials, we found that corporates need an injection of Bt1.7 trillion to survive the crisis. As many as 90,000 companies are suffering from liquidity squeeze,” he said, adding that the government’s repeated stimulus packages may not answer the problem – an injection of cash would be better.
“If government policies fail to address economic woes, the recovery will be L-shaped, and it may take more than three years for the economy to recover,” he warned.
The Krungsri Research team has predicted that the economy will contract 10.3 per cent this year, only growing 2.9 per cent next year, before expanding 4 per cent in 2022. The economy is only expected to return to pre-crisis levels in 2023.
Despite Thailand having large international reserves, economic policies have not yet been effective in using available resources, he added.
Burin Adulwattana, chief economist at Bangkok Bank, said the impact the virus has had on the economy is possibly the worst in 120 years.
“A stronger baht is also making exports worse, while other economies are also weakening, and the Thai tourism and auto industries are contracting sharply,” Burin said.
The expected number of foreign arrivals is only expected to hit 9 million, compared to more than 30 million yearly normally, he said.
The economy has also been constrained by the dwindling labour force, while the country becomes an ageing society, he said.
Planned investment in the Eastern Economic Corridor (EEC) may not be enough to upgrade the economy into a 4.0 economy that is driven by information technology.
While 30 per cent of the labour force is in the agriculture sector, which accounts for just 8 per cent of GDP, the challenge is to boost their productivity or help them migrate to the industrial sector.
The high tax environment does not encourage highly-skilled foreign workers to move to Thailand either, he said, adding that they prefer to work in Hong Kong or Singapore where the tax rate is much lower.
Yunyong Thaicharoen, first executive vice president of Economic Intelligence Centre (EIC) at Siam Commercial Bank, said the ongoing crisis is worse because it affects both demand and supply sides. Though the government has started relaxing lockdown restrictions, debts and fragility of small and medium-sized enterprises (SMEs) remain issues of concern.
“Recovery will be U-shaped because Thailand depends too much on the global market, while every country is affected now. We have revised our projection of the GDP to contract 7.3 per cent from the previous projection of a 5.6 per cent shrinking,” he said.
Though the government has responded quickly in supporting the economy, its next step should be to support targeted groups that need immediate help, he said. While further lowering interest rates may not help much, the most important thing is to help banks gain more confidence and give liquidity support to SMEs, he said.
“Covid-19 has exposed the Thai economy’s weak point, which is our limited technology capacity. China, for instance, successfully upgraded its technology and so it was able to restore consumer confidence quickly. Now Thailand’s biggest challenge is to have a clear roadmap and strong cooperation between public and private sectors,” he added.
Jul 06. 2020Jerome Powell, chairman of the Federal Reserve, during a news conference in Washington on March 3, 2020. MUST CREDIT: Bloomberg photo by Andrew Harrer. Location: Washington, United States
By Syndication The Washington Post, Bloomberg · Christopher Condon
Jerome Powell isn’t “even thinking about thinking about” raising interest rates, but investors still wonder what it would take for the Federal Reserve chair to start taking his foot off the gas.
U.S. central bankers dropped some strong hints on the answer to that question this past week.
The minutes of the Federal Open Market Committee’s June 9-10 meeting, released July 1, showed “a number” of policy makers favor tying future moves for interest rates and asset purchases to inflation. They even suggested they’ll wait until inflation overshoots the Fed’s 2% target before making substantial changes.
That surprised some Fed watchers, but perhaps it shouldn’t have.
Just before the covid-19 pandemic hit, officials were heading into the home stretch of an extended policy framework review that was already pointing to a major shift in the way the Fed interprets its price-stability mandate.
Chided for long overestimating where they forecast inflation would go — only to see it fall repeatedly short — several FOMC members had resolved to push it at least modestly above target.
That the lessons from the framework review — rooted deeply in fundamental ideas about how the economy has changed over decades — would merge into the FOMC’s month-to-month decision making was probably inevitable. But it was uncertain when and how that might happen.
The recent minutes make clear these two rivers are poised to flow together in coming months as officials lay out guidelines for future policy.
“If you say you’re going to adopt this new framework, what do you do to show people that it means something?” said Michael Feroli, chief U.S. economist at JPMorgan Chase. “This is one way of backing it up.”
The discussion at the June FOMC meeting — at which officials forecast they’d keep rates near zero through 2022 — reflected a shift that had long been underway.
Following the Great Inflation of the 1970s and ’80s, the Fed’s posture was one of constant vigilance against upward-moving prices. Officials, and economists generally, came to realize only slowly that inflation had grown less and less responsive to shocks and especially to declines in unemployment.
The Fed’s favorite measure of price pressures averaged a scant 1.3% in the five years through 2019, even as joblessness dropped to a half-century low.
Gradually, policymakers became more alarmed that inflation was, in fact, running too low — to the point where it was robbing the Fed of its ability to fight recessions by keeping interest rates too close to zero even in good times.
The framework review was the Fed’s attempt to find new ways of lifting long-term inflation back to the 2% target.
In January of this year, the FOMC hadn’t quite finalized that review, so no official conclusions had yet been made nor official policy changes put in place. But a number of committee members made clear they wanted to do away with the old approach of always aiming to move inflation precisely to 2%, without regard to past misses.
Having undershot for so long, many now wanted to push inflation a bit above the long-run goal, seeking inflation that averaged 2% over time.
“It was more than tolerating inflation above target, it was actively setting policy to achieve outcomes higher than the target for a period of time,” said Michael Gapen, chief U.S. economist at Barclays Capital.
Within that context, it’s not surprising that the minutes reveal a preference to build an inflation threshold into the coming forward guidance.
“A number of participants spoke favorably of forward guidance tied to inflation outcomes that could possibly entail a modest temporary overshooting of the committee’s longer-run inflation goal,” the minutes read.
The record also went on to show that “various participants” stressed the importance of completing the framework review “in the near term” along with revising the Fed’s Statement on Longer-Run Goals and Monetary Policy Strategy. Officials have said that document would be altered to reflect the major conclusions of the review.
Stephen Stanley, chief economist at Amherst Pierpont Securities, said the framework review nudged policy makers into favoring forward guidance that incorporates inflation goals instead of unemployment goals, or a combination.
“Putting more emphasis on the inflation number is a function of some of the changes they’ve come around to that, in turn, were mainly related to how they view how the structure of the economy has changed,” he said.
What the minutes do not reveal is whether the Fed is likely to keep fastened to zero until inflation overshoots 2%, or simply keep rates below what they judge to be a neutral setting until that point.
JPMorgan’s Feroli expects they’ll stay at zero.
“It would be an aggressive step, but probably one that’s warranted if you believe the logic behind inflation averaging,” he said.
Jul 06. 2020Dr Somprawin Manprasert, head of Krungsri Research and chief economist
By THE NATION
Krungsri Research has revised down its forecast for Thailand’s GDP growth to minus 10.3 per cent for this year from its previous forecast of minus 5 per cent because it expects more of a downside from the prolonged slowdown of economic activities as a result of the Covid-19 outbreak.
The effects of the outbreak are expected to last longer than originally believed and its repercussions are expected to be felt in several sectors.
Dr Somprawin Manprasert, head of Krungsri Research and chief economist, said: “Despite zero new infections in Thailand for more than a month and the easing of the lockdown, as well as measures such as social distancing and ban on international flights, economic activities continue being depressed.
“Hence, Krungsri Research has revised this year’s economic growth forecast to a contraction of 10.3 per cent, lower than the 1998 Asian financial crisis, but expects a gradual recovery with a growth of 2.9 per cent in 2021.”
Globally, Covid-19 cases have exceeded 10 million, and with the possibility of a second wave of the pandemic in many countries, the ban on international flights will be in place longer than initially expected, which will greatly undermine the tourism sector.
Thailand relies heavily on tourism revenue, making it one of the countries badly affected by the Covid-19 outbreak. Foreign arrivals in Thailand are expected to drop by 83 per cent this year.
Though Thailand plans to open its borders under a “travel bubble” policy, the number of tourist arrivals is likely to be less than 1 million per month until the middle of 2021.
The slowdown of economic activities and the subsequent negative consequences may affect about 80 per cent of employment during the peak of Covid-19 outbreak, compared to the previous forecast of 50 per cent. In the last quarter of this year, about 30 per cent of the employment sector is likely to be affected, compared to the previous forecast of 10 per cent, which will undermine household income and consumers’ purchasing power.
Though the reduction of policy interest rate to a record low of 0.5 per cent and the easing of monetary measures may lessen the economic impact to some degree, debts of households and businesses are expected to rise shortly after the economic stimulus measures come to an end.
“Apart from the impact of the Covid-19 outbreak, which could weigh the economy down by 10.6 percentage points this year, the delays in infrastructure investments and drought crisis could drag GDP growth down by 1 and 0.4 percentage points respectively. Though stimulus measures could add about 1.7 percentage points to economic growth this year, the fiscal and monetary easing measures are unlikely to fend off an economic recession and may not be large enough to encourage household spending and private investment,” he said.
“Therefore, Krungsri Research expects the Thai economy to be in a U-shaped recovery, there is a higher risk of the recovery being more L-shaped because the pandemic is likely to hit the economy harder and longer than previously forecast,” Somprawin added.
Oil and gas conglomerate PTT Plc has conducted a feasibility study on restructuring its electricity generation business to futher boost growth and ensure it keeps pace with global energy trends, chief executive officer Auttapol Rerkpiboon said.
PTT’s electricity business includes electricity generated from conventional sources, such as natural gas or coal, and that generated by what he calls “the new energy” such as renewable energy and also an energy storage system.
He added that Global Power Synergy Plc is still PTT group’s power business flagship.
PTT has also assigned other companies in its group, such as Thai Oil Plc, PTT Global Chemical and IRPC to jointly study the possibility of supporting PTT’s new energy business.
From left, economists Yunyong Thaicharoen, Charl Kengchon, Burin Adulwattana and Somprawin Manprasert share their views on the economic outlook post-Covid crisis at an exclusive roundtable hosted by Nation Group and Nation TV on July 2.
Jerome Powell, chairman of the Federal Reserve, during a news conference in Washington on March 3, 2020. MUST CREDIT: Bloomberg photo by Andrew Harrer. Location: Washington, United States
Dr Somprawin Manprasert, head of Krungsri Research and chief economist
PTT CEO Auttapol Rerkpiboon
