HEADLINES [click on headline to view story]: 

BOT affirms local interest rates on the rise

Long-lasting Thai-Japanese FTA negotiation concluded

Thai economy to grow less than 4%, says top fund manager

SET index still likely to reach 750, says analyst

BOT affirms local interest rates on the rise

Local interest rates will be on the rise in the second half of this year, while inflation rates are likely to ease in the future, according to the Bank of Thailand (BOT).

Speaking after a meeting with representatives of the Thai Bankers’ Association and Foreign Banker’s Association, BOT’s Governor Pridiyathorn Devakula said the discussion focused on the economic direction in the second half of this year to ensure that commercial banks are able to set business goals in a proper manner.

He affirmed that local interest rates would from now on increase, but how much and when they rise depends on the liquidity of each bank.

He noted that the policy interest rate would depend on timing and the economic situation.

Bandid Nijathavorn, BOT’s deputy governor in charge of the Financial Stability Group, said most bankers paid attention to the monetary policy and the direction of interest rates and inflation rates that surged to 5.3% in July.

He said the sharp inflation hike was anticipated by the central bank in a report in July because fuel prices had increased uninterruptedly.

However, the BOT believes the inflation rate will increase at a slower pace since the Thai economy has already been slow to a certain extent.

Tarisa Watanagase, BOT’s deputy governor in charge of the Financial Institution Stability, said local commercial banks had been urged to improve operations and services in preparation for stiffer competition in the future.

She also noted that the adjustment of interest rates by commercial banks depends on the liquidity of each bank.

Tarisa also downplayed a mounting concern that the country’s economic slowdown would put a brake on the loan growth, saying the credit extension expanded 5% in the first quarter of this year and was expected to continue to grow. (TNA)

Long-lasting Thai-Japanese FTA negotiation concluded

The negotiation for the Thai-Japanese free trade area (FTA), covering more than 7,000 product items, has finally been wrapped up.

Pisal Manavapat, deputy permanent secretary for Foreign Affairs, said in his capacity as the head of the Committee on Negotiation for the Thai-Japanese Economic Partnership, that the FTA talks had already concluded at a policy level.

The Thai-Japanese FTA agreement will be signed in April 2006 and put into effect in September the same year, he said.

It will cover more than 7,000 items, or 97% of the total trade value of the two countries.

Thailand is expected to enjoy gains of around 42 billion baht.

Upon the conclusion of the FTA negotiations, officials of both sides will map up a memorandum of understanding (MOU).

The Japanese will present the results of the negotiations at a meeting of the House of Representatives to seek their approval.

Earlier, a source at Government House said that Japanese Trade and Industry Minister Choishi Nagagawa met with Thai Deputy Prime Minister and Finance Minister Somkid Jatusripitak and discussed how to eliminate obstacles of the Thai-Japanese FTA.

After the half hour talk, Dr. Somkid took the Japanese minister to meet with the Thai premier.

Speaking after the meeting, Thaksin said Japan had tried to understand certain concerns expressed by the Thai government.

Thaksin believes that they will soon settle a minor difference in some wording regarding import tariffs for automobiles with more than 3,000-cc engines.

The difference in the matter on small automobiles has already been settled.

In the near future, both sides will hold a detailed discussion regarding automobile issues because Thailand has a policy of promoting itself as the “Detroit of Asia”.

The agreement will not have a negative impact on the Thai automobile industry. According to Thaksin, the agreement will instead boost bilateral trade between the two countries and the liberalization of farm product trade. (TNA)

Thai economy to grow less than 4%, says top fund manager

The Thai economy will grow less than 4% and the Bank of Thailand will have no choice but to raise the policy interest rate by 0.75-1% this year, a leading fund manager has projected.

Piyasavasdi Amaranand, chairman of Kasikornthai Asset Management Co., said yesterday that many institutions have currently decreased their economic growth estimate for 2005 to no more than 4% upon concern over high fuel prices, current account deficits, upward interest trend, and terrorist attack fears.

He said his company estimated that the Thai economy would expand between a range of 3.2-3.8% for 2005.

On a possible interest hike by the United States’ Federal Reserve, he viewed the US discount rate would increase to 4% this year, from 3.25% at current.

This would compel the Bank of Thailand (BOT) to raise the 14-day repurchase rate by 0.75-1% by this year since Thailand is still facing current account deficit problems. (TNA)

SET index still likely to reach 750, says analyst

The Stock Exchange of Thailand’s (SET) index will manage to increase to 750 points by the end of this year despite high market volatility, according to a top securities analyst.

Montri Sornpaisal, president and chief executive officer of Kim-Eng Securities Plc, conceded that the Thai stock market would continue to fluctuate drastically in the third and fourth quarters of this year.

Montri suggested that investors opt for long-term investment and avoid shares whose prices have surged unusually, or what investors call “miracle stocks.”

He said Kim-Eng continues to maintain its projection that the SET index would rally to stay at 750 points by the end of this year.

However, this also depends on how existing negative factors will ease.

Sectors with promising prospects include energy, building materials, contracting, shipping, communications and banks.

Meanwhile, Piyasavadi Amaranand, chairman of Kasikorn Asset Management Co., projected that the secondary market would regain investors’ interest this year because of higher returns at a stable pace.

Since last year, fund flows have shifted from bank deposits and stock market investment to the secondary market because returns are higher and are likely to increase to 3% from 1% at present.

Nevertheless, he said, liquidity is still high in the system, but has not yet flown into the stock market because it remains engulfed with many negative factors.

He added that the Thai bourse still has room for growth since returns are higher than those of bank deposits and debentures. (TNA)