The profits of commercial banks and non-banking entities may be under pressure now that the Bank of Thailand (BOT) has issued measures to help debtors.
The central bank recently ordered them to cut down the interest rates they charge for credit cards, personal credit and hire purchase by 2 to 4 per cent in a bid to help people struggling with debt due to the Covid-19 crisis.
Anekpong Putthapiban, assistant director at Asia Plus Securities, said BOT’s move may have an adverse impact on commercial banks’ net interest margin due to the decline in real interest rate depending on the number of debtors participating in these measures.
“For every 0.10 per cent drop in net interest margin, banks’ profit forecast this year will decrease by about 5 per cent,” he said.
He also said that for every 1 per cent interest rate cut by leasing companies, such as Aeon Thana Sinsap (AEONTS), Srisawad Corporation (SAWAD) and Muangthai Capital (MTC), their net profit forecast this year will drop by 3 to 9 per cent.
“AEONTS’s net profit will be affected by the new interest rate ceiling on credit cards because they charge approximately 20 per cent, but the new interest rate ceiling is 16 per cent,” he said. “However, the impact on SAWAD and MTC’s net profit are limited because they charge for personal loans at 24 per cent, which is less than the new interest rate ceiling of 25 per cent.”
He advised investors to avoid investing in leasing companies, because most leasing firms’ stock prices rose to its base value and received a negative factor from BOT’s interest rate control measures.
Meanwhile, a stock analyst at Yuanta Securities said BOT’s measures will affect the profit earned from credit-card interest the most.
“Therefore, we expect Krungthai Card and AEONTS’s profit forecast this year to drop by 4.1 per cent and 2.1 per cent respectively,” the analyst said.
The Bank of Thailand (BOT) has announced that it will develop a prototype payment system for businesses using the Central Bank Digital Currency (CBDC), which will build on the knowledge learned from Project Inthanon. The project’s scope will include conducting a feasibility study and developing a process that integrates CBDC with an innovative business platform, the central bank said on Thursday (June 18).
The digital currency is being launched to enhance the competitiveness and readiness of the business sector to enter the digital age and will first be introduced with large corporates.
BOT takes a step towards pushing the use of digital currency The Bank of Thailand (BOT) signed an agreement on Thursday (June 18) with corporate giant SCG and Digital Ventures to trial the use of digital currency. Seen in the photo are, left to right: Thammasak Sethaudom, vice president, Finance and Investment, and chief financial officer at SCG; Mathee Supapongse, deputy governor of the Bank of Thailand; and Orapong Thien-Ngern, chief executive officer and chairman of the executive committee of Digital Ventures.
The CBDC prototype will initially be integrated with the procurement and financial management systems of Siam Cement Public Company Limited and its suppliers. The system will be developed by Digital Ventures Co Ltd.
The prototype is expected to serve as a financial innovation that enables higher payment efficiency for businesses such as boosting flexibility for fund transfers and making payments easier.
“It is like using the baht currency in digital form,” assistant BOT governor Chantavarn Sucharitakul said.
By using this digital currency, Siam Cement can integrate smart contracts when the company makes business deals with suppliers, she added.
The project will begin in July and should run until the end of the year, after which the BOT will publish a summary and outcome.
Project Inthanon, a collaboration between the BOT and eight leading financial institutions, launched to study and develop “proof of concept” for domestic wholesale transfers using CBDC was successfully accomplished in January with the completion of a cross-border transfer prototype co-developed with the Hong Kong Monetary Authority (HKMA).
The next step will see the BOT, HKMA and participating financial institutions continuing to collaborate on experimental use of CBDC to other cases, which the BOT will later announce in detail.
The central bank strongly believes continuous collaborations and development in financial innovation with the business sector will help lay a strong foundation in building technological capacity and readiness for financial services and businesses rapidly entering the digital age.
Moreover, BOT remains open to private sector engagements to further promote the innovation and explore potential uses for future adoption of the currency, a statement from the bank said.
This is the second digital currency to be launched in the region after the Monetary Authority of Singapore launched its prototype in November last year.
By The Washington Post · Eli Rosenberg · NATIONAL, BUSINESS, US-GLOBAL-MARKETS, CAREER-WORKPLACE An additional 1.5 million workers filed for unemployment benefits for the first time last week, a drop of 58,000 claims from the week before.
The continued elevated level of jobless claims raises new questions about whether steep job losses during the pandemic could last longer than hoped, economists say.
This year, amid the novel-coronavirus pandemic, there have been 13 straight weeks in which more than 1 million people have filed for unemployment for the first time. In February, before the virus took hold in the United States, the weekly jobless claims were about 200,000 a week. The previous record was 695,000 in 1982.
Hopes that the reopening of businesses that had been forced to close would see jobbless numbers drop precipitously, helping to speed the economy’s recovery at a comparable rate to its fall. But such a “V-shaped” recovery does not appear to be materializing as job losses remain severe several months into the pandemic.
Another 760,000 people filed initial claims for Pandemic Unemployment Assistance, a supplemental program created by Congress for self-employed and gig workers. And the total number of people receiving benefits fell slightly, to 20.5 million. More than 45 million people have filed for unemployment at some point during the pandemic.
Analysts said the weekly numbers pointed to steep challenges the country faces in its recovery.
“The fact that we’re not seeing a huge decline in continuing claims as the economy starts to reopen suggests that firms in directly affected industries are only partially recalling some employees,” said Nick Bunker, an economist at Indeed Hiring Lab. “And that’s not going to lead to a huge snap back.”
“We all looked for confirmation of hopes that these claims would continue to decline,” said Mark Hamrick, a senior economic analyst at Bankrate. “But we see the decline was just [over] 50,000. That’s less of an improvement we’ve seen in recent weeks.”
The economic outlook is complicated by continuing coronavirus outbreaks across the country: Twenty-one states are seeing an increase in their daily average of new coronavirus cases this week compared to last week, according to data compiled by The Washington Post. New infections surged nationwide.
The numbers of people heading back to work or gaining new jobs has kept pace nominally with those still filing for unemployment for the first time, raising questions about whether the recovery is stalling.
The weekly unemployment insurance data remains an imperfect measurement. It does not capture which industries shed jobs or why, nor does it necessarily reflect the exact time period a person filed for unemployment benefits – instead revealing the time a state first processed the claim. So there are unanswered questions about whether some of the backlogs that plagued state unemployment agencies early in the crisis are still being worked through, affecting the data.
Attempts to battle wide-scale fraud have slowed application processing in states including Maine, Michigan, Pennsylvania and Washington. In Kentucky, hundreds of people lined up outside of the Capitol on Wednesday, seeking help with stalled claims in an estimated eight-hour wait, some of the tens of thousands who have had trouble with their claims in the state.
President Donald Trump and his economic team have expressed hopes of a swift recovery. And the most optimistic forecasters have suggested that as the economy reopens, businesses that had forcibly shuttered will be able to bring back their workers. But Bunker, of Indeed, said the pace of rehiring was slowing even as the country opens up.
“In the May jobs report we saw an increase in employment and a drop in unemployment rate due to an increase in businesses that got hit really hard initially,” he said. “What we may be seeing now is that pace of rehirings is slowed or that the recovery could be stalling out, but it’s not 100% clear from the data.”
There have been other positive indications: Retail sales spiked 17.7% in May, though they continue to be down nearly 8% since February.
But analysts and key economic leaders such as Federal Reserve Chair Jerome Powell continue to warn that despite bright signs, the economic pain could be deep and long lasting for many sectors of the economy.
The unemployment rate remains the highest it has been since the Great Depression. The official rate for May was 13.3%, but the Bureau of Labor Statistics said that it would have been closer to 16.3% if not for an error in the data collection process.
Since February, nearly 20 million jobs have been lost and the unemployment rate has risen about 10 percentage points, Powell told a Senate committee this week. He said the decline in a key measure of economic growth, gross domestic product, during this pandemic is likely to be the most severe on record.
There are other problems on the horizon. The $600 weekly supplement for unemployed workers will end by August. Unemployment benefits could also begin to expire for workers after the summer in some states with shorter durations allowed on unemployment insurance.
Jun 18. 2020A worker walks past empty tables inside a restaurant in Montclair, N..J., on June 15, 2020. MUST CREDIT: Bloomberg photo by Gabby Jones.
By Syndication Washington Post, Bloomberg · Reade Pickert · BUSINESS, US-GLOBAL-MARKETS
Applications for unemployment benefits in the U.S. fell less than forecast last week, showing only gradual improvement from the worst of the pandemic-related layoffs even as states re-open more of their economies.
Initial jobless claims for regular state programs totaled 1.51 million in the week ended June 13, down slightly from an upwardly revised 1.57 million in the prior period, Labor Department figures showed Thursday. The 58,000 weekly drop was the smallest since claims began to retreat in early April.
Continuing claims — the total number of Americans claiming ongoing unemployment benefits in state programs — decreased to 20.5 million in the week ended June 6, compared with a median projection of 19.9 million. Those figures are reported with a one-week lag.
“The employment data are very unconvincing, it’s one of the things causing the markets to stall,” said Aneta Markowska, chief financial economist at Jefferies. “Without employment starting to cooperate or participate in the recovery, you’re not able to sustain the consumer spending which helps drive the market.”
A separate report Thursday showed manufacturing in the Philadelphia region unexpectedly expanded in June. The Federal Reserve Bank of Philadelphia’s index of general business activity soared to 27.5 from minus 43.1 a month earlier as orders and sales picked up. The 70.6-point swing was the largest in records back to 1968.
U.S. stocks recovered from early losses while the 10-year Treasury note was little changed approaching midday.
By several metrics, the economy has rebounded at a faster pace than many anticipated. Payrolls at companies increased by several million in May and consumer spending on cars, restaurant meals and more soared last month, exceeding expectations as states loosened restrictions. But the jobless claims data remain a glaring blemish that shows churn and volatility in a labor market that entered the year in solid shape.
The number of Americans applying for jobless benefits exceeded the 1.29 million median estimate in a Bloomberg survey of economists for the latest week, which coincides with the survey period for the monthly employment report.
The labor market recovery “is going to be a long recovery, and today was a reminder that it’s not going to improve every week in a straight line,” said Brett Ryan, senior U.S. economist at Deutsche Bank Securities. He added that the data suggest the June employment report, out early next month, may not be as positive as forecasters would have expected.
Fed Chair Jerome Powell underscored this dichotomy to lawmakers Tuesday when he said, “We would expect to see large numbers of people during this period coming back to work during this second period — call it the bounce back or the beginning of the recovery,” Powell said. “Then we think, and I think most if not all forecasters think, that will leave us well short of where we were in February.”
Given the unprecedented surge of claims in recent months, many economists look to the non-seasonally adjusted figures for a more accurate read on claims. Unadjusted continuing claims actually climbed by almost 26,000 to 18.7 million, boosted by an almost quarter-million jump in California from the previous week. Unadjusted initial claims dropped by more than 128,000 last week.
In addition to California, unadjusted continuing claims rose almost 110,000 in Texas and Oregon saw a more than 144,000 jump.
In the week ended June 13, states reported 760,526 initial claims for Pandemic Unemployment Assistance, the federal program that extends unemployment benefits to those not typically eligible like the self-employed. The total number of unadjusted continuing claims in all programs edged lower to 29.2 million in the week ended May 30.
Krungsri Research expects the Thai economy to make a U-shaped recovery and return to pre-outbreak levels by the fourth quarter of 2022, though sectors affected by the spread of Covid-19 will recover at different times.
Dr Somprawin Manprasert, chief economist and head of Krungsri Research, said: “The Covid-19 outbreak has unprecedently affected the Thai economy. Thus, Krungsri Research is keeping its 2020 GDP projection unchanged at 5 per cent contraction and it is likely that the economy will gradually recover, while business sectors will have to adapt to new trends, which will be clearer in 2021.”
The Covid-19 outbreak has affected not just current economic activities, but also those that are medium- and long-term, in four ways: businesses forced to close due to lockdown measures, a drop in overall demand, disruption in global supply chains and a change in consumer behaviour.
These four points will determine a path of sectoral recovery. The sectors hit by the lockdown measures will have severely contracted, but they will also recover faster than other sectors.
However, sectors affected by the change in consumer behaviour will take a longer time to recover, so therefore, relief measures and business adjustments will be different and vary depend on each sector’s path of recovery.
As per Krungsri Research’s analysis of the impact Covid-19 has had on the business sector, 26 out of 60 sectors or 46 per cent are severely affected by the outbreak. Meanwhile, 24 sectors are moderately hit, while 10 are only suffering mild impacts.
The research house expects the health and food-manufacturing sectors to return to the pre-outbreak level by 2021, while the retail, wholesale, electricity and natural gas sectors that have been severely affected, may rebound relatively faster than other business sectors.
However, sectors affected by the change in demand, such as airlines and hospitality industry, will take a longer time to recover.
Tourism is one of the key sectors to have sustained the largest damage from the outbreak, while sectors related to public gatherings, like concerts, performances or matches, will also take a longer time to recover.
“Most sectors in Thailand are unlikely to recover to the pre-crisis state by 2021, though Thailand has a strong health-management sector, which has allowed us to efficiently control the outbreak in the first half of 2020.
“However, the outbreak has severely affected the global economy and led to a change in daily behaviour. Hence, we expect the global economy to bottom out in the second quarter, though negative consequences will last into the next year,” Somprawin said.
“Funds from the government’s relief measures will be released in the system in the third quarter, which will help shore up the economy.
“However, it remains to be seen whether assistance measures will be effective enough to revive the economy and able to create jobs that will generate more money to circulate in the economy and ensure that households have sufficient income to repay their debts thus mitigating risks in the financial sector, and whether there are appropriate measures to help each sector get back on the path to recovery,” he added.
Almost eight in 10 Thais (79 per cent) are using contactless payments more often than they did two years ago, according to a study released by Visa on Thursday (June 18).
The study, which tracks consumer payments habits across Southeast Asia, also revealed three in four Thai respondents who are not using contactless payments today, are interested in doing so in the future.
Suripong Tantiyanon, country manager for Visa Thailand, said: “It is heartening to see Thai consumers embracing new payment technologies, especially the use of contactless cards for payments. The shift in behaviour and the rise in confidence can be attributed to an industry effort to educate the general public on the benefits of contactless and an increase acceptance points. Contactless payments are still in the early stages of adoption in Thailand, but we are optimistic for their growth due to the speed, convenience, security and global acceptance.”
Top reasons consumers cited for adopting contactless payments are: not needing to carry cash (68 per cent), innovative way to pay (58 per cent), and faster payment (55 per cent).
On frequency of contactless payments, 82 per cent of respondents said they used cards at least once a week.
Top places for contactless card payments were overseas destinations (17 per cent), supermarkets (12 per cent), and retail shops (11 per cent).
The study also delved into demographics: While Gen Y is more likely to use contactless cards (55 per cent), use among older Gen X users was significant (45 per cent). The younger generation uses contactless payments more frequently, with three in 10 making payments more than four times a week, while only one in five Gen X users will make the same number of payments.
State of the Nation: Cashless Society
Based on the findings, over two in five respondents (43 per cent) said they carry less cash now than they did two years ago.
Increasingly, Thai consumers are confident in going cashless, said Visa. Two in five (38 per cent) believe they can last more than a month without cash. In contrast, nearly six in 10 (58 per cent) believe they could only get by for 24 hours without paying by cash.
When asked how long it would take for Thailand to become a cashless nation, 40 per cent of the people surveyed believe it will take between two to five years, 27 per cent thought it would take between six to 10 years, and 7 per cent believe it could happen next year.
The Stock Exchange of Thailand (SET) Index dropped 3.20 points or 0.23 per cent, closing at 1,372.98 today (June 18), with transactions amounting to a total of Bt70.282 billion with an index high of 1,377.39 and a low of 1,358.11.
In the morning session, a stock analyst at Krungsri Securities said he expected the index to fall to between 1,360 and 1,365 due to uncertainty over a second wave of Covid-19 infections as the subsequent slowdown of economy.
“Investors are worried that the US and China will issue lockdown measures to curb the contagion again after the number of new cases in the US rose to 26,000, while China has reintroduced emergency,” the analyst said.
“The stocks of banks and financial institutions will be under pressure after the Bank of Thailand told them to cut their interest rate by 2 to 4 per cent from July 1 to the end of the year in order to ease people’s suffering from the Covid-19 fallout.”
The top 10 stocks with the highest trade values today were SUPER, AOT, KBANK, SAWAD, CPF, MINT, KTC, BAM, DIF, and TASCO.
As of 4.30pm, crude oil rose by US$0.25 or 0.66 per cent to $38.21 per barrel, while gold dropped by $10.40 or 0.60 per cent to $1,746.00 per ounce.
Changes in other Asian indices were mixed:
Japan’s Nikkei Index closed at 22,355.46, down 100.30 points, or 0.45 per cent.
China’s Shanghai SE Composite Index closed at 2,939.32, up 3.44 points, or 0.12 per cent, while Shenzhen SE Component Index closed at 11,494.56, up 73.72 points, or 0.65 per cent.
Hong Kong’s Hang Seng Index closed at 24,464.94, down 16.47 points, or 0.067 per cent.
South Korea’s KOSPI Index closed at 2,133.48, down 7.57 points, or 0.35 per cent.
Taiwan’s TAIEX Index closed at 11,548.33, up 13.74 points, or 0.12 per cent.
The Asian Development Bank (ADB) has downgraded its forecast for the Thai economy to a 6.5 per cent contraction due to the severe impact of Covid-19.
In April, the ADB predicted the Thai economy would sink 4.8 per cent this year.
The new forecast makes Thailand the worst-hit economy among Asean countries, followed by Singapore’s 6 per cent contraction, while Vietnam is predicted to be the top performer with 4.1 per cent expansion.
ADB also paints a gloomy future for developing countries in Asia.
Developing Asia will barely grow in 2020 as Covid-19 containment measures hamper economic activity and weaken external demand, according to a new set of ADB forecasts released on Thursday (June 18).
IADB forecasts growth of 0.1 per cent for the region in 2020, down from the 2.2 per cent forecast in April and marking the slowest growth for the region since 1961.
Growth in 2021 is expected to rise to 6.2 per cent, as forecast in April. Gross domestic product (GDP) levels in 2021 would remain below what had been envisioned and below pre-crisis trends.
Excluding Hong Kong, South Korea, Singapore and Taiwan, developing Asia is forecast to grow 0.4 per cent this year and 6.6 per cent in 2021.
“Economies in Asia and the Pacific will continue to feel the blow of the Covid-19 pandemic this year even as lockdowns are slowly eased and select economic activities restart in a ‘new normal’ scenario,” said ADB chief economist Yasuyuki Sawada. “While we see a higher growth outlook for the region in 2021, this is mainly due to weak numbers this year, and this will not be a V-shaped recovery. Governments should undertake policy measures to reduce the negative impact of Covid-19 and ensure that no further waves of outbreaks occur.”
Downside risks include multiple outbreak waves in the coming period and sovereign debt and financial crises cannot be ruled out, said the bank. It also identified risk of renewed escalation in trade tensions between the United States and China.
East Asia is forecast to grow 1.3 per cent in 2020 – the only subregion to experience growth this year – while growth in 2021 would recover to 6.8 per cent. Growth in China is forecast at 1.8 per cent this year and 7.4 per cent in 2021, compared to the April estimates of 2.3 and 7.3 per cent.
Hit hard by Covid-19, South Asia is forecast to contract by 3 per cent in 2020, compared to 4.1 per cent growth predicted in April. Growth prospects for 2021 are revised down to 4.9 per cent from 6.0 per cent. India’s economy is forecast to contract by 4 per cent in fiscal year 2020, ending on March 31, 2021, before growing 5 per cent in FY2021.
Economic activity in Southeast Asia is expected to contract by 2.7 per cent this year before growing by 5.2 per cent in 2021. Contractions are forecast in key economies as containment measures affect domestic consumption and investment, including Indonesia (-1.0 per cent), the Philippines (-3.8), and Thailand (-6.5). Vietnam is forecast to grow 4.1 per cent in 2020. While that is 0.7 percentage points lower than ADB’s April estimates, it is the fastest growth expected in Southeast Asia.
Central Asia’s economic activity is expected to contract by 0.5 per cent compared to the 2.8 per cent growth forecast in April due to trade disruptions and low oil prices. Growth is forecast to recover to 4.2 per cent in 2021.
Restricted trade flows and declining tourism numbers have dampened economic outlook for the Pacific subregion. The subregional economy is forecast to contract by 4.3 per cent in 2020 before rising to 1.6 per cent growth in 2021.
Inflation for developing Asia is forecast at 2.9 per cent in 2020, down from a forecast of 3.2 per cent in April, reflecting depressed demand and lower oil prices. In 2021, inflation is expected to ease to 2.4 per cent.
The price of gold rose by Bt50 per baht weight in morning trade on Thursday (June 18), the Gold Traders Association reported.
As of 9.26am, buying price of a gold bar was Bt25,350 per baht weight and selling price Bt25,450, while gold ornaments were priced at Bt24,892.72 and Bt25,950, respectively.
At close on Wednesday (June 17), buying price of a gold bar was Bt25,300 per baht weight and selling price Bt25,400, while gold ornaments were priced at Bt24,847.24 and Bt25,900, respectively.
The Gold Spot Index price on Thursday morning moved to around US$1,725 (Bt53,708) per ounce after the price dropped slightly by 90 cent to $1735.6 per ounce at close on Wednesday.
The gold price was pressured by the strengthening dollar, while investors reduced gold in their assets after European stock indices rose.
The price in the Hong Kong gold market rose by HK$40 to $15,960 (Bt64,126) per tael this morning.
The Stock Exchange of Thailand Index dropped by 13.72 points, or 1.00 per cent, to 1,362.46 on Thursday morning (June 18).
A stock analyst at Krungsri Securities expected the index to fall to between 1,360 and 1,365 due to uncertainty following the second wave of Covid-19 cases, as it would slowdown the economy.
“Investors are worried that the US and China would issue lockdown measures to contain the spread of Covid-19 again after the number of new cases in the US rose to 26,000, while China has raised its emergency level back,” the analyst said.
“In addition, bank and financial stocks would be under pressure after the Bank of Thailand asked financial institutions to cut interest rate by 2-4 per cent, starting from July 1 until the end of this year in order to relieve people’s suffering from the Covid-19 impact.”
He recommended investors to buy:
▪ Stocks whose second-quarter performance will improve, such as CKP, TASCO, STA, and RS.
▪ Defensive stocks, such as INTUCH, TTW, and DIF.
▪ Marine shipping stock that benefit from rising freight rate, such as PSL, TTA, AMA, and PRM.
The SET Index rose by 9 points on Wednesday, or 0.66 per cent, closing at 1,376. Total transactions amounted to Bt71.5 billion.
Net sale by foreign investors amounted to Bt1.861 billion in stocks, while net buy of bonds was Bt11.492 billion. There were 11,020 net short TFEX SET50 contracts.
A worker walks past empty tables inside a restaurant in Montclair, N..J., on June 15, 2020. MUST CREDIT: Bloomberg photo by Gabby Jones.
Dr Somprawin Manprasert
