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Thai politics seen as a risk factor
for stock market in 2006
Political developments pose a major risk factor for the
Stock Exchange of Thailand, said securities analysts. Despite the risks, the
brokerage houses project that the SET index should be able to climb into the
800 range, thanks to economic expansion.
According to analysis published by the Kim Eng (Thailand) Securities
brokerage house, political volatility remains the major risk factor for Thai
stock trading. This is because the government has so far failed to resolve
unrest in the south, which has protracted for over two years.
Meanwhile, incidents of corruption have risen, and the government is making
noisy efforts to silence criticism from the media, an act that destabilizes
the government itself.
The government is also facing two critical battles looming - a possible
no-confidence debate in March and the Senate election in April.
In any case, the Thai economy, which the brokerage house expects would grow
by 5 percent this year as a result of the recovery of the agriculture and
tourism sectors, should enable the Stock Exchange index to grow by another
16 percent towards 800 points. Thai shares are still considered a good
investment considering their relative low price to earning ratio.
Sumek Jantrasuriyarat of Bualuang Securities also singled out political
volatility as a significant risk factor that can affect investor confidence
both domestically and internationally. Bualuang Securities projects the
operating profit of listed companies to grow at only 4 percent this year,
compared to 18 percent in 2005 and 48 percent in 2004. This is because the
profitability of key industries such as energy, and commodities has already
hit its peak.
But excluding the energy and commodities sectors, Sumek said the
profitability of other listed companies should stay healthy, as most
companies have already adjusted to the rise in operational costs. (TNA)
6% GDP growth for 2006 attainable
The Permanent Secretary for Finance, Suparut Kawatkul,
said that the prime minister’s target for the Thai economy to grow by 6
percent this year is attainable because of robust activity in the private
sector.
However, Suparut cautioned that the economy this year might not grow at the
same rate as last year. Suparut said 2006 is likely to be a bumper year for
Thailand’s private sector, whose performance is expected to improve upon
last year on the back of many positive indicators, including both export and
investment activities. He said the planned investment by the state sector in
development of several mega-infrastructure projects should be a boon to
economic growth in 2006.
The trend for this year is such that public sector investment will be the
key driver of the economy, instead of consumer purchases by the Thai public
as was the case in 2005, he said. The Thai economy expanded healthily in the
fourth quarter of 2005 and that momentum should still have an impact carried
over to this year. As a result, the target of 6 percent GDP growth desired
by the prime minister should be attainable, especially with backing from
investment in infrastructure projects. (TNA)
Thai economy likely to grow 4.7% this year, says J.P. Morgan
The Thai economy is expected to grow 4.7 percent this
year, driven by state-supported mega-projects, exports and private
investment, according to a leading investment bank.
Speaking at the Economic Language Program, Vorapak Tanyawong, president of
J.P. Morgan (Thailand), said that the global economy is likely to expand 3-4
percent this year, while the Thai economy will grow 4.7 percent.
The mega-projects will play a key role in driving the Thai economy. The
production capacity in the private sector is expected to increase to 80
percent to accommodate new investment.
Should the exports expand up to 17 percent, the country’s economy would grow
more than projected, he said.
He said local interest rates are likely to increase further with a 14-day
repurchase rate to peak at 4.25 percent in the third quarter of this year.
After that it will gradually decline in the same direction with the US
interest rates.
He projected that a 10-year bond rate would rise up to 6.5 percent in the
third quarter before gradually dropping to 6 percent in the fourth quarter.
On the exchange rate, he expects that the Chinese yuan would strengthen by
13 percent, boosting other Asian currencies, including the Thai baht, which
is likely to appreciate to 40 to the US dollar and 39.80 to the dollar late
this year.
On the stock market, J.P. Morgan forecasts that the Stock Exchange of
Thailand (SET)’s index would climb up to 780 points late this year.
The stock investment atmosphere will remain favorable although it would not
be very bullish. An investment return is expected to stay at around 10
percent, higher than forecast at 4-5 percent.
Stocks in the energy, building material, consumer product and banking
sectors will remain attractive for investment.
“We consider the Thai stock market as one of the four interesting emerging
markets for investment. The other three are China, Singapore and Taiwan. We
believe the SET index will continue to go up albeit not at a very bullish
mood,’’ he said.
Still, Vorapak said J.P. Morgan was monitoring the current account deficit
since there would be imports of raw materials, machinery and equipment in
support of the mega-project implementation.
The situation is still no cause for concern because more foreign capital
continues to flow into Thailand. (TNA)
Increased sugar cane prices don’t affect alternative energy projects
Government-supported alternative energy projects will not
be affected by the current rising price of sugar cane, Prime Minister
Thaksin Shinawatra said.
The prime minister told journalists that other crops like cassava could also
be used as a substitute to sugar cane in the production of ethanol - a key
component of alternative energy.
He conceded, however, that the rising prices of sugar cane, believed to have
been caused by a supply shortage due to last year’s droughts, had affected
sugar-related industries, namely soft drink and dessert businesses.
Individual households are unlikely to be affected much by the increased
sugar prices, as their sugar consumption is only about two kilograms per
month, according to the premier.
The Thai leader said he had instructed concerned agencies to check overall
stocks of sugar on the domestic market so that alleged hoarding by local
traders and other problems could be properly addressed.
The government is also considering a proposal from sugar cane growers to
remove sugar as one of the government’s controlled product items and allow
its prices to move in accordance with the market mechanism. (TNA)
Bank of Thailand plans continued tight reign on inflation in 2006
The Bank of Thailand (BoT) will continue to keep a close
watch on inflation in the face of many risk factors that can further fuel
inflation.
Bandid Nijtathavorn, deputy governor of the Bank of Thailand said inflation
is likely to remain high during 2006, after hitting its peak in the final
quarter of 2005 - and potentially the first quarter of 2006 - because of the
continuing impact of rising prices of goods and fuel. Keeping inflation in
check over the next several months remains the priority and the primary
factor of consideration for the Monetary Policy Committee, which sets the
country’s interest rates.
The Thai economy will continue to grow in 2006 thanks to robust exports,
Bandid said. Thailand’s domestic recovery and spending will also be
sustained. However, uncertainties the Thai economy must watch for include
the possible volatility of the global economy brought about by energy prices
and the simultaneous rise of interest rates in many countries, along with
the ballooning current account deficit in the US, the world’s largest
economy.
The Deputy Governor said that on the domestic front, continuing economic
growth translates into more investment and more appetite for imported energy
and capital goods. These demands could threaten long-term economic
stability, and therefore BOT will concentrate on economic stability.
Another factor of uncertainty for the Thai economy, Bundhit said, has to do
with foreign and domestic investor confidence. Investor confidence cannot be
threatened by developments that can erode it to the extent of slowing
investment activities. (TNA)
SIM Card registration
deadline extended indefinitely
The government-imposed deadline for registration of SIM
cards in pre-paid cellular phones has been indefinitely postponed due to
technical reasons. The deadline, earlier set for Dec 31, 2005, has been
extended at the request of the telephone service providers. For this reason,
those consumers who have not yet had their SIM cards registered may continue
to use their pre-paid phones, ICT Permanent Secretary Kraisorn Pornsuthee
said.
Though their phone lines remain active, customers are bound to comply with
the SIM card rules shortly.
ICT Minister Sora-at Klinpratoom earlier demanded that all pre-paid phone
users nationwide, especially those in the far South region, have their SIM
cards registered for security reasons. About 90 percent of pre-paid phone
users living in the three southern border provinces have already had their
SIM cards registered. (TNA)
New saving bonds to be issued to public
The Bank of Thailand (BOT) will issue a series of new
saving bonds, worth Bt14 billion, to the general public this year. The bonds
will have different maturity periods.
The new saving bonds, worth Bt2 billion each, can be subscribed through
Kasikorn Bank (KBANK) branches across the country.
The first set of five-year bonds will be issued during January 16-25, the
second seven-year bonds during February 15-24, the third five-year bonds
during March 15-24, the fourth seven-year bonds during April 17-26, the
fifth five-year bonds during May 15-24, the sixth during June 15-26 and the
seventh five-year bonds during July 14-25.
All the bonds are part of the central bank’s bond projects for the 2005-2006
fiscal year, worth Bt16 billion.
The first two sets of the bond projects, worth Bt16 billion, were issued
during August-December 2005, including the Bt7 billion five-year bond and
the Bt9 billion seven year bond, according to the BOT.
State-guaranteed bonds are known to be a good source of alternative savings
for members of the general public. (TNA)
Finance Ministry to revamp taxation structure
The Finance Ministry plans to go ahead
with restructuring the taxation structure in its entirety to help improve
competitiveness of the Thai private sector as various free trade agreements
will bring down tariffs to zero over the next 15 years.
Finance Ministry Spokesman Somchai Sajjapong said the Finance Minister has
appointed a committee to look into the reform of Thailand’s taxation
structure. The Committee, chaired by Permanent-Secretary for Finance Suparut
Kawatkul, has set up a sub-committee chaired by Somchai to review the
structure as well as identifying how to help the Customs Department offset
the loss in revenue in tax collection.
The subcommittee, which has met twice to date, has conducted comparative
studies between the tax system of Thailand and that of other nations in the
region with an aim to assess how Thailand can approach income tax, corporate
tax, excise duties and value-added tax collection in the future. It will
also assess the country’s revenue projection over the next decade as a basis
for reform. He said reform is pressing because there are many duplications
of laws and duties, such as the Tabacco Act and the Revenue Act.
Another important consideration for the tax system reform is sufficiency
among the local administrative bodies which are currently tasked to collect
certain types of tax among themselves. However, the government allocates
between 4-5 billion in budget for local administrative bodies and this
budget is likely to increase to 100 billion baht. (TNA)
Listed companies must shape up or become takeover targets
Listed companies should
adjust and strengthen their capital position to brace up for foreign
competition which is expected to arrive when the various Free Trade Area
agreements that Thailand has signed with many countries come into effect, a
leading financier warns.
Unless they adapt, and allow their share prices to sink, they will be
vulnerable to hostile takeover attempts which have become a fashionable
practice in the Asia-Pacific region, said Dr. Kongkiat Opaswongkarn,
president of the Federation of the Thai Capital Market Organisations.
In drafting the Thai capital market development plan for 2006-2010, the
Federation found that the mergers and acquisitions (M&As) trend is an
emerging challenge to Thailand’s listed companies, in view of the fact that
there were 25,000 M&As worth Bt80 trillion (US$1.95 billion) across the
world in 2005, up from 21,000 cases involving Bt65 trillion (US$1.59
billion) in 2004.
Asia-Pacific is the region where M&As are most active, posting a 3 percent
growth in 2005 compared to 2004. Japan ranks second in the global league
where M&As activities are concerned, overtaking the UK and second only to
the US.
In this global and regional context, listed Thai companies should pay
attention to ensuring that the price-to-earning ratio of their shares does
not fall too low, as that makes them vulnerable to a takeover.
At the same time, listed companies ought to strengthen their capital base to
improve their performance so that they can compete with multinationals and
be ready to face the possibility of hostile takeover bids.
“The tide of globalization is strong indeed. Executives of listed companies
can no longer sit still. They have to grow their companies by strengthening
the capital, or perhaps merging with other local companies to withstand
competition from multinationals. In the end, only strong and distinct
players can survive,” said Dr. Kongkiat.
Santi Wilassakdanon, president of the Federation of Thai Industries said
that FTAs are not an exclusive factor for M&As. He said if the Thai economy
is weak, Thai companies will subsequently be weakened and that opens up the
opportunity for a takeover. Companies must therefore keep themselves strong
at all times. (TNA)
Thailand’s inflation likely
to peak in January or February
Thailand’s inflation rate is
expected to peak this month or next month, as pressure from surging oil
prices has eased, according to a leading brokerage house.
KGI Securities Public Company Limited projected that the inflation rate in
December was likely to stay at 6 percent, compared with 5.9 percent in
November.
The leading brokerage house believes that the country’s inflation rate will
become saturated in January or February, and begin to decline thereafter,
given the fact that fuel price hikes have continued to ease.
The producer price index is likely to decline faster than the consumer price
index.
Such a trend will give a boost to the profitability of listed companies on
the Stock Exchange of Thailand (SET). Local interest rates are also
projected to peak soon, which will contribute to the country’s economic
growth and increased confidence in the Thai stock market. Consumer
confidence is likely to improve, which will help boost local consumption.
KGI suggested that stocks in banking, property and entertainment sectors are
worth investing in since they will benefit from the improved economic
indicators. (TNA)
Finance Minister confident Chang beer wants to list on Thai bourse
Finance Minister Thanong Bidaya voiced confidence that
Thai Beverage Public Company Limited, producer of Chang beer, still wants to
list on the Stock Exchange of Thailand (SET), saying the company’s
negotiation for listing on the Singapore bourse has not yet been finalized.
Charoen Siriwattanapakdi, chairman of Thai Beverage, disclosed on Tuesday
that he has negotiated with Hsieh Fu Hua, chief executive officer (CEO) of
the Singapore Exchange for listing of the company’s shares on the market
since there was mounting opposition to listing of the shares on the Thai
bourse.
Dr. Thanong said he had discussions with Charoen and received his
affirmation that Thai Beverage would give top priority to SET if it decides
to list on the stock market. The company has provided information and has
had many discussions with the Securities and Exchange Commission (SEC) for
quite some time now.
“So, I firmly believe Chang beer will list and stay with the Thai stock
market,” he said.
The minister revealed that he raised a discussion on possible cross trading
of shares between Thailand and Singapore during a previous joint meeting of
the Thai and Singapore cabinets as part of efforts to unify stock markets of
the Association of Southeast Asian Nations (ASEAN).
He said he would not urge SEC to accelerate making a final decision on the
listing of Thai Beverage on the SET because the commission already has a
duty to do so, and it must do it based on public sentiment and social
readiness. (TNA)
Tourist spending is up
Asia-Pacific consumers spent US$5.7 billion (Bt.228
billion) on their Visa cards in the third quarter of this year, a 19 percent
increase over the same period in 2004.
Tourists from the US, UK, Japan, Australia and Hong Kong were the biggest
spenders, accounting for 54 percent of the total Visa spend.
The top six destinations that benefited from the increase in inbound tourist
spent over the third-quarter this year were Australia, China, Thailand, Hong
Kong, Singapore and Japan.
The three biggest individual spenders per transaction were the Russians,
Chinese and Norwegians.
Visitors to Asia-Pacific markets used their Visa cards mainly on retail
goods, accommodation, transportation, sports and leisure activities and
restaurants. (TTG Asia)
Thailand lifts import ban on US beef
The Thai government has decided to lift its ban on beef
imports from the United States provided that every shipment is certified
with a written document that the product is free from bovine spongiform
encephalopathy (BSE), or the feared mad cow disease, according to Deputy
Prime Minister and Commerce Minister Somkid Jatusripitak.
 Deputy
Prime Minister and Commerce Minister Somkid Jatusripitak
Somkid told journalists that the decision was made after a meeting of all
agencies concerning food safety, including those under the Ministries of
Public Health and Agriculture and Cooperatives.
“We’ve decided to lift the ban based on a strict condition that each
shipment of imported US beef must be officially certified with a written
document that it is free from the BSE - the same condition the Japanese
government has imposed on imported US beef,” he noted.
The two-year ban was lifted on January 9. Thailand imposed a total ban on
imported US beef in late 2003 after an outbreak of the mad cow disease was
confirmed in US cattle farms. (TNA)
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