Fitch: Rising regional risks could erode Thailand's resilience

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CONFERENCE
Rising regional risks could erode Thailand's resilience: Fitch
The Nation

Regional risks could affect Thailand's resilience, said Fitch Ratings (Thailand).

BANGKOK: -- The outlook is stable now for the country’s sovereign rating, as well as on major Thai financial institutions and corporations. Yet, the rating agency noted that eroding buffers, the potential for further regional volatility, and rising private sector leverage pose risks. The agency made the remark at Fitch Ratings’ annual Thai conference in Bangkok on September 27.

Andrew Steel, Head of Asia-Pacific Corporates, remarked that Fitch sees ongoing disruption to financial markets resulting from changing monetary policies of the world’s major central banks.

This disruption, combined with asset quality deterioration, has the potential to negatively impact credit markets across the Asia-Pacific region and cause difficulties for corporates in many sectors as refinancing of the previous ’hot money’ flows falls due over the next 12-18 months. That said, the magnitude and impact of risks in the Asia-Pacific credit markets remain far lower than those of concern in the US or European markets, said Steel.

Bank of Thailand governor Prasarn Trairatvorakul was the guest of honour at the event and provided the keynote opening address. Heads of Fitch’s Asia-Pacific analytical teams also discussed the prospects, challenges and credit implications for their respective sectors.

Fitch’s Head of Asia-Pacific Sovereigns, Andrew Colquhoun, noted that credit profiles have strengthened since 1997 in various ways, including for most countries much higher foreign reserves and reduced external indebtedness. However, those buffers have been eroding for some economies including Thailand.

Fitch thinks the resilience of Emerging Asian sovereign credit profiles will depend to a large degree on the credibility and consistency of macro policy management. Thailand’s sizable net external creditor position and moderate public debt provide a considerable buffer and the economy has not been afflicted with the kind of volatility experienced by Indonesia or India.

However, Thailand’s combination of an eroding current account surplus, low real interest rates and a widening fiscal deficit coupled with high private sector leverage are outliers among Emerging Asian economies that could still prove to be sources of vulnerability.

A risk for the region and Thailand has been the rapid build-up of credit and whether this will lead to substantially higher credit losses when economic conditions become more challenging, said Mark Young, Head of Asia-Pacific Financial Institutions.

For Thailand, one of the concerns relates to the build-up of household credit that has occurred since 2010, which is partly due to the high auto loan growth that stemmed from tax incentives, he added. While Fitch expects overall loan growth to decline in the short term, a sizeable part of the growth that occurred was outside the commercial banks in the government-owned specialised financial institutions and private savings cooperatives which are more susceptible to credit losses due to their lower income borrowers.

A roundtable discussion addressed the outlook and challenges in the banking, corporate and infrastructure sectors in Thailand. The panelists comprised of Boontuck Wungcharoen, chief executive, TMB Bank; Chawan Theungsang, executive director, Emerald Capital Asia Ltd. and Win Phromphaet, CFA, head of investment, Social Security Office of Thailand. The discussion was moderated by Vincent Milton, Managing Director of Fitch Ratings (Thailand) Limited.

The conference was attended by over 350 senior executives and officials across the investor, regulatory, financial and corporate sectors.


-- The Nation 2013-09-27

[hammered]

So just like most other reports, Fitch is not going into meltdown over Thailand's infrastructure plans and sees risk as lower than in the US or Europe. No surprise there.

[Baerboxer]

So just like most other reports, Fitch is not going into meltdown over Thailand's infrastructure plans and sees risk as lower than in the US or Europe. No surprise there.

Yep - looks like a good old bit of all round back slapping. No surprises there.

[thhMan]

In one ear, out the other

[indyuk]

The recent return of thousands of automobiles ordered under the Tax Rebate Plan is a clear warning of impending difficulties in Thailand's credit market. Thailand's level of domestic credit should be reined in before before it reaches an unsustainable level.

[i claudius]

The recent return of thousands of automobiles ordered under the Tax Rebate Plan is a clear warning of impending difficulties in Thailand's credit market. Thailand's level of domestic credit should be reined in before before it reaches an unsustainable level.

My wife ,who does not work constantly gets phone calls from the banks offering her a credit card .how she would pay it back goodness knows ,but they seem not to care ,luckily she is sensible and only has a card to pay for stuff online ,that gets paid off as soon as the bill comes in ,but others?