The S&P 500 dropped for the second time in three sessions, with investors cautious after Iran threatened a military response to a U.S. airstrike that killed a top general four days ago. Chipmakers buoyed the benchmark.

Havens showed little reaction to the bellicose Iranian rhetoric, with West Texas crude falling below $63 a barrel and gold slightly higher. The dollar advanced versus the yen, while the 10-year Treasury yield rose to 1.82% after indicators pointed to a resilient U.S. economy.

“Markets are to some degree calming down from the trash talk that we’ve seen over the last couple of days,” said Matt Forester, chief investment officer at BNY Mellon’s Lockwood Advisors, about the U.S.-Iran conflict. “The issue is whether there will be heightened conflict in the future. I don’t think markets know yet. This could easily flare back up again.”

Even as investors appeared to have started the first full trading week of 2020 in a defiantly upbeat mood, the unfolding crisis in the Middle East, which triggered a broad sell-off on Friday, returned to the forefront Tuesday. Traders are now waiting to see how Iran fulfills its threats.

Here are some events to watch for this week:

–Federal Reserve officials Richard Clarida, John Williams, James Bullard and Charles Evans speak on Thursday.

–The U.S. monthly employment report is due Friday.

These are moves in major markets:

Stocks

–The S&P 500 index fell 0.3% as of 4 p.m. New York time.

–The Stoxx Europe 600 index gained 0.3%.

–The U.K.’s FTSE 100 index was little changed.

–The MSCI Asia Pacific index climbed 0.9%.

Currencies

–The Bloomberg Dollar Spot index increased 0.3%.

–The euro declined 0.5% to $1.1147.

–The British pound fell 0.4% to $1.3119.

–The Japanese yen decreased 0.2% to 108.53 per dollar.

Bonds

–The yield on 10-year Treasuries rose two basis points to 1.82%.

–Germany’s 10-year yield gained less than one basis point to -0.29%.

–Britain’s 10-year yield added two basis points to 0.792%.

Commodities

–West Texas Intermediate crude dipped 1% to $62.63 a barrel.

–Gold rose 0.3% at $1,574.00 an ounce.

As the SMEs have been experiencing high risk stemming from the US-China trade tensions, uncertainty of the global economy, export contraction and the strengthening of the baht, the Cabinet on Tuesday approved an assistance package proposed by the Finance Ministry, Lavaron Sangsnit, director-general of Fiscal Policy Office, told a press conference.

For those who need more liquidity to run their business, the state-owned Thai Credit Guarantee Corporation (TCG) has set aside a credit guarantee facility worth up to Bt60 billion. Eligible are those have business potential but whose ability to repay debt had reduced , those who are on the list of non-performing loans, or those who restructure their debts with banks and get new loans from those banks. The TCG insurance will cover 40 per cent of total loan losses incurred by SMEs for banks.

The Government Savings Bank (GSB) will offer soft loans to commercial banks worth up to Bt15 billion at 0.1 per cent annually. Then those banks will charge SMEs an interest rate lower than the market rate, or at 4 per cent for a seven-year loan.

Banks can re-lend to SMEs that are in the supply chain, those that are not among 10 S-Curve businesses. Banks could also give loans to SMEs placed on the non-performing loan list but who have been successful in getting their debt restructured with banks.

The GSB will also launch SMEs Extra Liquidity with loans of Bt 50 billion. Each borrower could get up to Bt50 million with interest rate based on the minimum loan rate (MLR) minus 1 percentage point. Currently the MLR is 6.375 per cent, meaning that SMEs will be charged just 5.357 per cent per annum. Borrowers could have up to a six-year contract with a one-year grace period for principal payment.

The TCG will extend credit guarantee for SMEs that are needed for immediate support under the PG5-PGS7 programme for another five years. Banks are allowed to restructure debts with these SMEs.

The Small and Medium Enterprise Development Bank of Thailand will offer soft loans worth Bt5 billion to micro-SMEs. The SME bank will charge an interest of just 1 per cent per annum, a maximum loan term of seven years and a one-year grace period of principal payment. Eligible borrowers are those who have business potential or those who have debt restructured.

The SME bank will also offer loans worth up to Bt20 billion for SMEs, aimed at promoting the local economy. Those eligible will be on the bank’s bad debt list who have had their debts restructured.

GSB will also offer loans worth Bt45 billion to SMEs at 4 per cent interest rate in the first two years. The GSB will also pay the TCG credit guarantee fee for SMEs for four years.

State-owned Krung Thai Bank will top up its SME loans by more by Bt10 billion, leading to total SME portfolios loans up to Bt60 billion. The interest rate will start at 4 per cent per annum and KTB will pay TGC guarantee fee for SMEs for four years.

The TCG will also pay compensation to

banks participating in the PGS8 programe, in order to discourage banks from taking legal action against debt defaulters and encouraging banks to facilitate loan restructuring.

The TCG also offers direct guarantee worth up to Bt5 billion and each SME could get up to Bt10 million insured amount.The TCG will charge a guarantee fee according to risk-based pricing and insured period no more than 10 years.

The Bank of Thailand will consider relaxing the loan reserve ratio for commercial banks and specialised financial institutions, said Lavaron.

A member of Thai Bankers’ Association will help SMEs with debt restructuring. Each bank will set as target for supporting SMEs

Tax measures to support SMEs.

Income tax exemption will be applied to debtors who get debt forgiven by creditors engaging in credit card and personal loan businesses.

Exemption of taxes including income tax, value-added tax, specific business tax will be applied for transaction of assets or services involved in debt restructuring.

Firms that undergo debt restructuring are exempted from income tax, value-added tax, specific business tax and stamp fee for related transactions of real estate being placed as loan collateral.

The Revenue Department will also suspend existing regulations related to debt write-off for restructuring debt.

Those engaged in debt restructuring will get a reduction in registration fee, mortgage fee for home and residential condominium units from 2 per cent to 0.01 per cent.

The central bank has demanded banks to make change to prepayment fine whereas banks usually impose interest charge on the full loan amount extended to small and medium-sized enterprises(SMEs) and individual clients. Under new calculation method, interest charge must be based on the balance amount. Banks are also required to set a grace period for prepayment’s interest rate charge. The new way of interest rate calculation is aimed at encouraging competition in debt refinancing market, said Veerathai.

Banks are also required to change the way they calculate interest charge for default on mortgages, SME loans, and personal loans. Currently banks impose interest rates on a balance amount. New interest charge must be based on the installment amount as it will be lower. Banks should reduce interest rate or cancel interest rate on existing clients who are currently on loan default list.

Banks were also asked to offer a grace period on interest payment should a debtor fail to pay his debt on time due to genuine financial difficulties. This new way of debt restructuring will be fairer and reduce the affordability risk, according to the central bank.

In case of banks cancelling ATM or debit cards before the expiry date, banks have to pay back a proportional amount of the card fee to clients and when banks issue new cards to replace old ones, they can no longer impose fee charge. However, should the cost of issuing a new card is high, banks can charge clients accordingly, it said.

The central bank also asked banks to adopt four guidelines on interest rates and fee charges: The charges have to reflect real service cost. Banks should not impose excessive burden on clients and have to take into accounts their ability to pay. Banks must not demand duplicate fees from clients. Banks have to disclose list of fee charges to the public.

The central bank will make available each bank’s interest rates and fee charges to the public in order to encourage competition in the market.

The central bank assures the new measures would make people have more confidence in the financial system and support service providers to operate sustainably.

This was stressed at a Government Office meeting on Monday to discuss solutions to improve the country’s ranking for starting a business evaluated by the World Bank’s Ease of Doing Business report.

Government Resolution No 2 issued on January 1 sets a target for Vietnam jumping 10-15 spots on the ranking.

Vietnam currently ranked 115th out of 190 economies in facilitating business establishment indicators in 2019, losing 11 spots against the previous year, with eight procedures in total.

The Government Office plans to submit a proposal to the Prime Minister about cutting procedures by half.

Minister, Chairman of the Office of the Government Mai Tien Dung said it was critical to enhance cooperation among ministries and promote the transition from paper-based to online procedures to boost reforms.

According to Director of the Government Office’s Administrative Procedure Management Department Ngo Hai Phan, a number of reforms must be carried out.

Phan pointed out that although most procedures for opening a business were now conducted online, some paper forms were still required. In addition, to open a bank account, companies must submit their seals and business registration certificates.

He asked the Ministry of Planing and Investment to remove regulations that require paper forms in this regard.

Paper invoices should also be eliminated and replaced by e-invoices, he added.

In addition, national databases on businesses, social insurance and labour had not been merged, Phan said, adding that it was important to link them to facilitate management.

According to administrative reform specialist Nguyen Minh Thao from the Central Institute for Economic Management, if co-ordination among management agencies were enhanced, 25 per cent of time and costs to implement procedures to start a business could be reduced.

A representative from the General Department of Taxation said that promoting cashless payments would significantly help improve management.

“Difficulties for businesses must be adjusted and removed,” Dung stressed.

The World Bank’s starting a business indicator measures the number of procedures, time, cost and paid-in minimum capital requirements for a small-to-medium size limited liability company to start and formally operate in each economy’s largest business city.

The Government of Vietnam targets having at least one million firms by the end of this year, from currently nearly 800,000, requiring significant efforts to boost reforms and improve the business climate. — VNS

January-November exports last year shrank 2.8 per cent year on year to US$227.090 billion, while imports contracted 5.2 per cent year on year to US$218.081 billion, he added.

The council has maintained its forecast of Thailand’s export performance last year at minus 2.5 per cent to minus 3 per cent year on year, based on the baht staying at approximately Bt33 per US dollar.

The council expected zero or a 1 per cent growth in Thai exports this year from 2019.

The forecast was based on the assumption of the average baht value at Bt30.5 per US dollar. The baht was at Bt30.17 per US dollar as of January 6.

If the Thai currency strengthens beyond that level, exports this year may contract by 5 per cent.

Among the positive factors contributing to Thai export growth this year is the Phase 1 trade deal between US and China, expected to be signed on January 15.

On the other hand, risk factors include continuous appreciation of the baht, impact of the drought on farm production and companies depending on farm produce as raw materials.

The statement was made on Tuesday (January 7) at the central bank and analysts’ meeting at the Bank of Thailand (BOT)’s headquarters amid rising concerns over the baht’s exchange rate moving beyond economic fundamentals.

Titanun Mallikamas, assistant governor of the BOT’s Monetary Policy Group, stated that the MPC had maintained the expansion rate of the Thai economy would be lower than the previous forecast.

However, the global economic outlook has started to stabilise. As a result, Thai exports and economic growth will tend to improve in 2020, he said.

Furthermore, an accommodative monetary policy during the recent period will support economic growth and bring the rise of headline inflation towards the targeted rate.

The committee will monitor economic growth, inflation, and financial stability as well as associated risks, in deliberating monetary policy going forward.

The committee said it stands ready to use policy tools as appropriate.

The committee expressed concerns over the appreciation of the baht against trading partners and competitors’ currencies even though the appreciation of the baht has slowed down and recently, its movement has been more two-way. Therefore, the committee suggested closely monitoring exchange rates and capital flows amid elevated external uncertainties as well as the effectiveness of the relaxation of foreign exchange regulations to encourage capital outflows. It will also assess the necessity of implementing additional measures.

The overall Thai financial system is stable but it has continued accumulating vulnerabilities because of an economic slowdown and the prolonged low interest rate. The committee believed that the policy interest rate as well as microprudential and macroprudential measures should be applied in controlling the risk to the stability of the financial system.

The committee thinks that the Thai economy is facing structural problems which should be firmly addressed by all related parties. In the labour sector, for example, the emergence of the ageing society has reduced the number of working population.

More businesses replaced human labour with automation. Employment has been more of outsourcing and sub-contracting. Workers from these kinds of jobs are less stable and endowed with less welfare than the permanent worker. Moreover, it is more difficult for laid-off workers to return to the labour market, especially aged and skills-mismatch workers.

In the investment sector, the continued increase in the current account surplus reflects the structural problem: there is high savings but low investment, especially in the business sector.

Compared to other countries, the Thai investment rate is lower although the savings have continually increased. Therefore, we should encourage both public and private investment which will increase economic growth in the short term and enhance the potential of economic growth in the long term, added the statement.