Strengthening baht will benefit energy firms, airlines, say stock analysts

By The Nation

 

The baht has been highly volatile over the first two quarters of this year, weakening about 10 per cent against the US dollar in the first quarter, moving from about Bt30 to the dollar to about Bt32.7. However, over the past two months, it has risen by about 5 per cent, staying at about Bt31.3 against the dollar. 

 

Sunthorn Thongthip, a senior director at Kasikorn Securities, said the US currency has been the weakest in three months. Economic recovery has led to large investments in risk assets, while the unrest in the US has also contributed to the weakening of the dollar. Populist policies that have led to a budget deficit of $4 trillion – an all-time high – has also weakened the currency. 

 

Now, however, with the Covid-19 pandemic hitting a decline, many countries are reopening their businesses, which is starting to benefit Thai exports. Also, he said, Thailand’s economy is showing signs of improvement, which is strengthening the baht. 

 

A stronger baht will benefit energy, electricity and airline companies, but the losers will be the electronics and food sectors. 

 

Energy and electricity firms have higher dollar debts, hence every time there is a Bt1 rise against the dollar, their profits will be boosted by 2 to 15 per cent. Airlines will also save on fuel costs when the baht rises, so their profits could jump between 80 and 100 per cent. 

 

Electronics and food companies, however, largely earn in dollars, so when there is a Bt1 rise, their profits will be pulled down by 7 to 18 per cent. 

 

However, the Banpu Public Company is different from other energy firms because it holds a large amount of dollar assets, while its debts are in the Thai currency. Hence, every Bt1 rise in the currency will bring its profit down by 62 per cent this year. The company did, however, make exchange rate gains in the first quarter when the baht was weak, he said. 

 

Asia Plus Securities believes the baht will not appreciate as much as it did last year, rising from Bt33 on December 15, 2018, to Bt29.68 on December 31, 2019. Thailand this year will have a smaller account surplus due to a slowdown in exports and drop in tourist arrivals due to the fallout of the coronavirus pandemic. It said the tourism sector may only recover at the end of the year.

 

Source: https://www.nationthailand.com/business/30389346

 

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Thai importers of oil and petroleum products gain:

 

"Energy and electricity firms have higher dollar debts, hence every time there is a Bt1 rise against the dollar, their profits will be boosted by 2 to 15 per cent. Airlines will also save on fuel costs when the baht rises, so their profits could jump between 80 and 100 per cent". 

 

Thai exporters who have their export bills settled in USD loose:

 

"Electronics and food companies, however, largely earn in dollars, so when there is a Bt1 rise, their profits will be pulled down by 7 to 18 per cent". 

 

The BOT trade off when managing the Baht is lower export volumes/profits versus cheaper fuel and energy, a difficult choice.

 

 

We will see just how good this is for those industries when there are no tourists coming to change their currency into over priced Thai Baht

 

I can guarantee you the rich Thais sure as heck are not going to be purchasing Thai Baht 

Cheap petrol/diesel, oil products, cheap transportation costs, cheap electricity, what's not to like for the masses.

 

A rich Thai won't be purchasing Baht but they almost certainly will be earning them, big difference from most expats and tourists.

don't know even were to start with this garbage

 

in summary he is trying to foolishly claim a stronger baht is good for the Thai economy - what is he smoking

 

and just to add - the stronger baht according this should have seen a huge drop in consumer energy prices - it hasn't - also the drop in oil prices hasn't been reflected either, so who exactly benefits from a strong baht ?, certainly not the consumer - certainly not exporters including tourism which accounts for 90% of GDP

 

 

40 minutes ago, smedly said:

don't know even were to start with this garbage

 

in summary he is trying to foolishly claim a stronger baht is good for the Thai economy - what is he smoking

 

and just to add - the stronger baht according this should have seen a huge drop in consumer energy prices - it hasn't - also the drop in oil prices hasn't been reflected either, so who exactly benefits from a strong baht ?, certainly not the consumer - certainly not exporters including tourism which accounts for 90% of GDP

 

 

Exports account for 60% of Thai GDP, not 90% and tourism accounts for 20% of all exports.

 

Thailand uses some sort of system of price averaging when it comes to oil and oil products. In the same way that BOT tries to smooth out the peaks and valleys in the exchange rate in order to protect exporters from wild price swings, the government (or a government body) does the same with oil products in order to protect consumers from the same thing. Electricty pricing is probably a good example, the price of electricity to the end consumer in Thailand does not vary daily or weekly, instead the price averaging system smoothes out the peaks and valleys to maintain a stable end price. 

1 hour ago, webfact said:

Now, however, with the Covid-19 pandemic hitting a decline, many countries are reopening their businesses, which is starting to benefit Thai exports.

And as the value of the baht keeps rising exports will reduce as has been stated by experts here in Thailand and will keep tourists away unless they can control the baht but have never been able to so far .

Strong baht will have negative effect on Thai economy.This is a world wide problem many countries are facing,however most advanced countries look to the medium term to control and assist their country in the recovery. Thailand once again seems to have a different set of economic and fiscal plans compared to the rest. OK as long as the rich Thais and Hiso keep getting richer.Let the farmers and workers struggle that's their lot in life.