Assistant managing director Nattaporn Triratanasirikul said that, if China can control the number of infections within the next month or two and the situation elsewhere, particularly in Italy and South Korea, can be contained in the second quarter – and if the number of infections in Thailand does not increase too rapidly in that period – GDP growth is still likely to fall, from KResearch’s previous estimate of 2.7 per cent to 0.5 per cent.

Although this decrease seems significant, she said, the estimate is applied to a fast-changing situation, and if the contagion eases within the first half of the year as is expected, GDP growth could be stronger in the last quarter.

She emphasised that this situation is unlike what happened in 1997 because it has been caused by external shocks, while the 1997 crisis was the result of an imbalance in economic mechanisms and the business sector. It was quite difficult to tackle and slow to return to normalcy.

The tourism sector will likely be the hardest hit by Covid-19, Nattaporn said. Thailand is expected to lose Bt410 billion in tourism revenues, accounting for 2.4 per cent of GDP, while the number of foreign tourist arrivals may decline by 8.3 million, representing a contraction of 20.8 per cent year on year.

Thai exports could see a 5.6-per-cent contraction against KResearch’s prior estimate of minus-1 per cent as the virus’ broader spread further dampens the global economy.

The shrinkage foreseen in exports is also due to weakening demand, while Thailand’s manufacturing sector has been adversely affected by the disruption of supply chains at home and especially in China.

Domestic consumption and investment will likely slow because consumers have been reluctant to spend and travel. This in turn might hurt the Thai retail business, with turnover projected to drop by more than Bt100 billion.

Given this, close attention must be paid to liquidity within the business sector and domestic employment, being critical issues that the public sector must maintain as its top priorities, plus budgetary disbursement and the likelihood that the government will approve additional budget.

Regarding monetary policy, if GDP growth shrinks during the first and second quarters, it is likely the Bank of Thailand will trim its policy rates by at least 0.25-0.5 per cent in of 2020, prompting commercial banks to follow suit.

Although a policy rate cut might not be a panacea for quickly reinvigorating economic activity during this abnormal period, it could help the business and household sectors ease their financial burdens somewhat.

Looking into the second half, if the virus situation improves, economic activity and GDP could resume growth.

Regarding the commercial banking business, a steep decline in economic growth, especially during the first half, might hurt interest and fee income.

Interest income from loans in particular will be the most affected because loans have been hit by additional interest rate cuts. KResearch has revised its 2020 loan growth forecast down to less than 1 per cent (from 3 per cent), which would be lower than the 2.2-per-cent growth reported at the end of 2019.

As a result, allowance for impairment on loans might increase in line with rising NPL ratio from the 2.98 per cent seen at the end of 2019. KResearch will have to monitor the situation under the new accounting standards during the first quarter before assessing their future directions once more.

Nevertheless, the central challenge for Thai commercial banks for now is to assist their customers via various measures in collaboration with the public sector so that they can get through this difficult time.

Meanwhile, the impact of the Covid-19 outbreak on operating results of commercial banks has been acknowledged by investors to a certain extent, and the results will likely be consistent with those of overseas financial institutions.

Futures rose in Hong Kong, Japan and Australia, with regional shares set for a fourth day of gains. The S&P 500 index surged more than 4% after Congress authorized nearly $8 billion for virus prevention. The Bank of Canada joined this week’s wave of global central bank stimulus and speculation grew that governments will provide more help as the outbreak claimed more lives. Joe Biden’s surprise surge in Tuesday’s presidential primaries added to bullish sentiment.

In a sign investors see more U.S. stimulus coming, shorter-dated Treasury yields declined as 10-year ones advanced, steepening the curve. Australian bonds opened lower and gold slipped. The yuan strengthened, erasing all losses since the coronavirus outbreak.

“At the moment the market takes this as credible enough, that is to say there is some recovery coming ahead as a result of the current action,” said Ben Emons, managing director of global macro strategy at Medley Global Advisors.

As risk assets recover, traders remain on edge amid a rise in virus cases around the world. The S&P 500 has surged about 6% this week, a rebound that began late Friday when the Federal Reserve pledged support. It remains almost 8% below last month’s all-time high.

Elsewhere, oil fluctuated amid a split between Saudi Arabia and Russia over whether deeper production cuts are required to offset the demand hit from the coronavirus epidemic.

These are the main moves in markets:

– – –

– The S&P 500 index advanced 4.2%.

– Futures on Japan’s Nikkei 225 added 1.4%.

– Hang Seng futures earlier rose 0.7%.

– Futures on Australia’s S&P/ASX 200 index gained 1.8%.

– – –

– The Bloomberg Dollar Spot index increased 0.2%.

– The euro decreased 0.4% to $1.1133.

– The yen fell 0.4% to 107.51 per dollar.

– The offshore yuan rose 0.4% to 6.9226 per dollar.

– – –

– The yield on 10-year Treasuries rose four basis points to 1.04%.

– The yield on two-year Treasuries fell two basis points to 0.68%.

– Australia’s 10-year yield rose eight basis points to 0.8%.

– – –

– West Texas Intermediate crude held at $47.18 a barrel.

– Gold fell 0.3% to $1,636.33 an ounce.

The rebound comes amid an especially volatile window of trading, with coronavirus panic spawning a brutal sell-off that had erased trillions in value from global markets. On Tuesday, the Federal Reserve delivered its first emergency rate cut since the 2008 financial crisis — bringing the benchmark down 50 basis points. But the central bank’s move seemed to reinforce panic on Tuesday, rather than easing it, sending the three major U.S. indexes down and landing them back in correction territory.

Yet on Wednesday, it became clearer that the former vice president had captured primary wins in 10 states, including Texas, a showing that propelled him to the front of the field. Sanders, I-Vt., may still score the day’s biggest prize, California, where he is leading.

“Bernie Sanders’ socialist program includes lots of proposals to increase taxes and regulations, which would weigh on the economy and corporate earnings,” said Ed Yardeni, president of Yardeni Research. “The market’s sell-off last week on Sanders’ primary victories and rebound on Monday after Biden’s big win in South Carolina and this morning after Super Tuesday suggest that domestic U.S. politics may matter as much as the global health crisis to investors.”

The Dow surged hundreds of points in the final minutes of the session, closing at 27,091, up 1,173 points on the day. The Standard & Poor’s 500-stock index finished up 4.22%, while the tech-heavy Nasdaq composite index closed with a 3.85% gain. Mike Bloomberg’s retreat from the Democratic presidential primary and a report showing unexpected growth in the U.S. service sector added to Wall Street’s feel-good vibe.

“Investors are shifting from the coronavirus to politics, and the market knows how to play politics better than the virus,” said Howard Silverblatt of S&P Dow Jones Indices. “But stocks could turn on a dime if there is a new memo on the coronavirus.”

Health-care stocks roared nearly 6%, leading all 11 market sectors, in response to Biden’s performance. That eased the industry’s worries about Sanders and his Medicare-for-all plan. Cigna and UnitedHealth Group were up more than 10% in afternoon trading. Humana saw a 12.7% spike while Anthem closed in on nearly 14.4%. UnitedHealth, a Dow component and industry barometer, had its best day in a decade. Big Pharma also had a good day, with Pfizer and Johnson & Johnson flying 5%.

“Sanders’ win would be perceived as an increased risk for health insurers since he proposes a free comprehensive national health insurance program for all Americans, potentially leading to the elimination of the existing health insurance system,” said CFRA Research analyst Sel Hardy in a note published Wednesday. “Biden on the other hand, proposes a more moderate change to the private insurance system that will build on the Affordable Care Act, aiming to give more affordable choices on insurance plans, reducing health care costs, and making the healthcare system less complex.”

On Wednesday, the International Monetary Fund announced that it is proposing $50 billion in emergency funding to combat the coronavirus for low-income and emerging market countries. IMF managing director Kristalina Georgieva said the outbreak was a global problem “calling for a global response.”

The World Health Organization said Tuesday that covid-19, the disease caused by the virus, has killed about 3.4% of those diagnosed with the illness — a higher rate than estimated previously. On Wednesday, the number of new coronavirus deaths reported outside China exceeded those reported inside the country — the center of the outbreak — for the first time.

Markets also were rattled as the yield on 10-year Treasury notes sank to an all-time low Tuesday. Bonds are a safe haven for investors in times of turmoil, and bond yields decrease as bond prices increase. Gold, another safe haven, climbed 2.9% Tuesday and has continued to rise, now trading at $1,647 per ounce.

“The 10-year treasury is a great barometer to measure fear,” Wayne Wicker, chief investment officer at Vantagepoint Investment Advisers, wrote in commentary Wednesday. “With a closing yield Tuesday at an all-time low of less than 1%, markets are reflecting a heightened amount of uncertainty related to the coronavirus and macroeconomic implications.”

European markets mirrored U.S. optimism Wednesday, with the benchmark Stoxx 600 index, Germany’s DAX and France’s CAC 40 all up more than 1.4% in midday trading. Britain’s FTSE 100 climbed 1.6%. Asian markets closed to mixed results, with Hong Kong’s Hang Seng closing down 0.25% and Japan’s Nikkei 225 weakly positive.

Fears about the coronavirus presence in the United States has spiked as the death toll reached 11 on Wednesday, and new research has revealed that the virus had probably been spreading undetected in California and Washington for weeks. Americans are beginning to face disruption to their work and travel, and the list of major events canceled in the face of the outbreak grows by the hour. Many grocery stores and pharmacies report being cleaned out of bottled water, disinfectant products and shelf-stable and frozen foods.

Investors are looking forward to ADP payroll numbers and fresh manufacturing data Tuesday to further suss out the damage the coronavirus has done to the global economy. Analysts are predicting global economic growth could slow to the lowest levels since the financial crisis this quarter.

This 23rd bidding will focus on the Gulf of Thailand.

The department is expected to open bidding for three zones on a production-sharing-contract basis. The bidding is estimated to see investment of at least Bt1.5 billion.

Sontirat said he would meet executives of public and private energy businesses today (March 5) to discuss their possible roles in helping stem the spread of the Covid-19 virus.

These businesses are a key engine for the economy and have raw materials for producing goods such as hand-gels and facemasks, he noted.

If approved, the measures will come into effect immediately, he added.

He made the remark after a meeting today with executives of 17 airlines who asked for a cut in aviation and office rental fees.

Airliners have suffered declining passenger volume due to the Covid-19 outbreak. A few have announced drastic cost-cutting measures, including slashing monthly pay of their top executives.

The airline executives share a common view that it will take one year to 18 month before the situation would return to normal.

Among the airlines represented in the meeting were Thai AirAsia, Thai Lion Air, Nok Air, Bangkok Airways, and Nook Scoot.

The national carrier Thai Airways International will discuss with Saksayam on the same issue today.

Once the Revenue Department publishes  investment conditions and tax incentives of the funds in the Royal Gazette, the Association Investment Management Companies will make an announcement on the terms of investment transaction approved by the SEC, she said.

The SSF mutual fund scheme was initiated by the Finance Ministry to offer investors an alternative for long term savings, and will replace the long-term equity fund(LTF) which expired at the end of last year.

Individual investors in SSFs are eligible to a tax deduction of up to 30 per cent of their annual taxable income, capped at Bt 200,000. Total tax reduction must not exceed Bt 500,000 a year, taking into account the tax deduction under provident fund and other types of retirement mutual funds.

Investment in the SSFs is not limited to equities as it includes bonds and alternative investments. Investors have to hold the investment units for 10 years, but not required to invest every year. However, tax privileges under SSF is lower than that of LTF.

Minister Uttama Savanayana said today (March 4) that the ministry would propose the first set of relief measures to the meeting. If approved, they will be forwarded to the Cabinet on March 10.

He has assured that the measures would be in line with fiscal discipline. If they failed to lift the economy, he still has other options at his disposal , Uttama said.

Under the handout plan, money will be transferred to low income earners and freelancers, totalling more than 10 million. Their monthly salary must not be more than Bt15,000 and will have to register for the give-away.

He added that the handout will be Bt1,000 per person and will be transferred to them via PromptPay channel. He has already assigned the ministry’s permanent secretary to work out details of the transfer process.

Other measures include extension of soft loans by the Government Housing Bank to commercial banks, which will in turn lend to affected businesses. There will also be tax incentives to discourage companies from laying off employees.

However, he insisted that the government would not cut value-added tax.

Tourism and Sports Minister Pipat Ratchakitprakarn said he would propose to the economic ministers’ meeting on Friday that the government allocates Bt5 billion to promote a “Eat, Stay, Travel” campaign, aimed to boost domestic tourism.

The campaign will hand out Bt1,000 each to 5 million eligible Thais, he said, adding that the participation process would be similar to that of the “Eat, Shop, Spend” campaign.

Registrants who have received the money will have to travel to other provinces and stay there for at least one night. They will have to start the journey within three months. If the Cabinet approved the campaign, it could begin next month.

The Joint Standing Committee on Commerce, Industry and Banking, has revised downward its forecast of Thai economic growth this year to between 1.5 per cent and 2 per cent from its previous projection of 2 to 2.5 per cent. The revision was based on assumption that the Covid-19 outbreak worldwide would pass its peak in the middle of this year and economic activities return to normal in the fourth quarter, it said.

The revision was based on assumption that the Covid-19 outbreak worldwide would pass its peak in the middle of this year and economic activities return to normal in the fourth quarter, it said.

While the government is preparing strong measures to revive the economy, the joint committee believes that the results might not be strong enough to offset the board damages already caused by the epidemic, especially in the tourism and industrial supply chain sectors .

The committee has maintained its export forecast this year at minus 2 per cent and zero per cent.

Speaking at a separate event this week , the Monetary Policy Committee (MPC)’s Secretary Titanun Mallikamas said the MPC has been closely monitoring development of the Covid-19 outbreak.

On February 5, the MPC voted unanimously to cut the policy rate by 0.25 of a percentage point from 1.25 per cent to 1 per cent, effective immediately.

The reduction was in line with the MPC’s estimate that Thai economic growth would be lower than its previous forecast, due mainly to the new coronavirus outbreak and drought.

Several banks have already stepped in to offer relief measures to individual and business customers hit by the outbreak impact, especially those in the tourism sector.

The Council of Economic Ministers will hold a meeting this Friday on pressing issues following the impact of the Covid-19 coronavirus on the economy, said National Economic and Social Development Council secretary-general Thosaporn Sirisumphand on Tuesday (March 3).

The Covid-19 outbreak will hit southeast Asian banking sectors through weaker economic growth, slower credit growth and dampened profitability, with banks in tourism-dependent Thailand and China-exposed Singapore likely to be the most affected, according to Fitch Ratings release.

On the global front, on Tuesday (March 3) theUS Federal Reserve trimmed its benchmark rate by 50 basis points to a range of 1 per cent to 1.25 per cent in a bid to protect its economic expansion from the spreading coronavirus.

On March 3, the World Bank Group announced that as Covid-19 has affected more than 60 countries, the bank is making available an initial package of up to $12 billion in immediate support to assist countries coping with the health and economic impacts of the global outbreak.

This financing is designed to help member countries take effective action to respond to and, where possible, lessen the tragic impacts posed by Covid-19, according to its statement.

However, Singaporean and Thai banks have sufficient loss-absorption buffers to withstand this pressure, although the impact will depend on the extent and duration of the outbreak.

Banks in Singapore and Thailand have announced relief measures, which should alleviate some near-term asset quality and profitability pressures.

For Singapore, the measures include a moratorium on principal repayments for 6-12 months on SME property loans and some retail mortgage loans.

For Thai banks, they include a moratorium on principal for up to one year for tourism-related loans, and relief measures on credit-card and personal-loan debt. Other markets have announced stimulus packages, and Thailand, Indonesia, Malaysia and the Philippines have cut interest rates.

Singaporean banks’ direct exposure to Greater China, which averages 24 per cent of gross loans, is another potential area of stress.

Fitch has outlined scenarios in which China’s GDP growth slows to 5.2-5.7 per cent in 2020, compared with a forecast of 5.9 per cent before the outbreak.

Singaporean banks’ China exposure is mainly lending to top-tier corporations, short-term trade loans or liquidity placements with major Chinese banks, which are typically lower risk, but would still be tested by an economic slowdown in China.

Their exposure to Hong Kong, which forms 13 per cent of gross loans, could also be hit, given the more fragile state of the Hong Kong economy and the exposure being more diverse than in China.

Even before the Covid-19 outbreak, Fitch’s sector outlook for the Singaporean banks was negative, which reflected potential for further asset quality and profitability weakness. Its rating outlook remains stable due to the banks’ sound loss-absorption buffers, with the average common equity Tier 1 (CET1) ratio at 14.4 per cent at end-2019, and their highly stable funding and liquidity buffers, which leave sufficient headroom for ratings to withstand economic challenges.

However, a prolonged outbreak may affect Fitch’s assessment of Singaporean banks’ operating environment, which stands at ‘aa’ with negative outlook, and this may in turn affect the banks’ Viability Ratings (VRs).

Thailand’s dependence on tourism means the SME sector, which accounts for 33 per cent of banks’ portfolios, is likely to be significantly affected by the Covid-19 outbreak.

Fitch’s stable sector outlook already incorporates slower economic growth and subdued earnings, but a further slowdown could affect this assessment.

The impact on non-performing loans (NPLs) should be mitigated by the banks’ high excess provisions, adequate capital buffers with average CET1 ratio of 16.0 per cent at end-2019, and the relief measures.

The rating outlook for Fitch-rated state-owned banks remains positive, mirroring that on the sovereign (BBB+/Positive). However, a more extensive and prolonged outbreak may affect upward rating momentum for the sovereign.

Indonesian banks with significant presence in tourism-dependent Bali are likely to be most affected by Covid-19.

These are mainly the largest banks in the industry, foreign-owned banks and small banks headquartered in Bali, such as local regional development bank, PT Bank Pembangunan Daerah Bali (A(idn)/Stable). Profitability is likely to be affected by lower revenues and higher provisioning, but many of the banks’ IDRs are based on support from higher-rated parents and their VRs are supported by satisfactory earnings and capital buffers. Indonesian banks’ average ROA of around 2.0 per cent and average CET1 ratio of 21.9 per cent at end-2019 were among the highest in the region.

In Vietnam, reduced tourism, disrupted manufacturing supply chains and weaker external demand are likely to put pressure on corporate profitability, and may weigh on banks’ asset quality, although tourism-related sectors are only a small part of Fitch-rated banks’ credit portfolios.

Banks are likely to face slower credit and profit growth rather than take heavy hits to asset quality. However, Vietnam banks have very limited capital to buffer against prolonged weakening in profitability, or to stimulate credit growth if directed by the government.

An economic slowdown would also test the quality of the newly extended consumer loans. The rating outlook for Vietnamese banks is positive, in line with that of the sovereign (BB/Positive), although upward sovereign rating momentum could be affected by an extended outbreak.

Malaysian banks’ credible underwriting standards and sufficient earnings and capital buffers should help to contain any rating impact. However, China is Malaysia’s largest export market, meaning a sharp Chinese slowdown would erode corporate earnings.

The Philippine economy’s exposure to Chinese flows is relatively light and the banking system’s credit exposure to the hospitality sector is also less than 2 per cent of the portfolio. Over the longer term, remittances from key markets, such as Hong Kong, Singapore and the Middle-East, could decrease. However, the domestic economy is starting from a strong position, and rated banks are sufficiently capitalised.