Kittiratt acknowledges effect of political tensions on SET

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Kittiratt acknowledges effect of political tensions on SET
Suphannee Pootpisut
The Nation


Kittirat

Expresses concern about continued depreciation of baht

BANGKOK: -- The country's caretaker finance minister concedes that the current political unrest has dragged down the Stock Exchange of Thailand's benchmark index.

He is also worried about the baht's continued depreciation.

The Kingdom's political problems have negatively affected the overall economy and the stock market, caretaker Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong said yesterday, while also expressing concern over the rapidly weakening currency.

He said the SET Index' plunge of more than 5 per cent so far this year was not normal, and was due mainly to local political developments.

However, he pointed out that other Asian stock markets had also seen drops in their indices, such as in South Korea, where the Kospi had fallen 2.2 per cent partly because of the weakening of Japan's currency, which had also affected Thai exports.

The SET Index dropped another 0.58 per cent to close at 1,223.62 points yesterday.

It has tumbled 12.65 per cent in the past three months, and 5.25 per cent since the beginning of the new year.

Investors, particularly institutional ones, are concerned about this, said Kittiratt, although he said he believed they would return when the political problems were resolved.

"Short sales have taken place, as investors are not confident about the political situation. If the situation eases, the stock market will resume its stability," he said.

He also expressed concern over the overall state of the Thai economy and the rapidly weakening baht, which has been affected by the unclear political situation, with confidence in investment and consumption having been eroded.

He noted that while the nation is in the hands of a caretaker government, investment in new public projects could not be made.

"Mega-projects may have to wait for the Constitutional Court's consideration [of a borrowing bill] and a new Cabinet. Therefore, large investment may be delayed from the full period of this fiscal year" through September 30, Kittiratt said.

The prolonged political protests, which started in early November and forced Prime Minister Yingluck Shinawatra to dissolve Parliament last month, could damage the economy this year and deter investors, he warned.

The Fiscal Policy Office last week cut its estimate for 2014 economic growth from 5.1 per cent to 4 per cent, citing the export slowdown and political instability.

The situation is not helped by the fact that it remains unclear whether the general election scheduled for February 2 will take place, and when a new government will be formed.

"People are still held in suspense trying to figure out how this will resolve itself," Bloomberg quoted Leong Sook Mei, Southeast Asian head of global markets research at Bank of Tokyo-Mitsubishi UFJ in Singapore, as saying.

The baht could weaken to 34 per US dollar by June, she said.

Although the baht's depreciation may benefit the export sector, imports - particularly of energy - will be adversely affected, Kittiratt said.

The baht weakened 0.5 per cent to 33 per dollar during the course of the past week, according to Bloomberg.

Analysts at Asia Plus Securities predict that Asian currencies will continue to fall as the global economy recovers, especially in the United States, while the baht will be further affected by the current unclear political situation in this country.

The US has begun showing signs of recovery. Last month, its Purchasing Managers' Index (PMI) registered at 57 per cent, the second-highest reading in 2013 and only 0.3 percentage point below November's reading of 57.3 per cent.

As of now, the baht is trading at around 33 per dollar, an almost four-year low, and the current political situation is another main factor, besides the global economic recovery, that will continue to deter investors from putting money back into this country.

Economists at Kasikorn Research Centre say two factors affecting sentiment on the baht are domestic political unrest and the expectation of continued QE tapering this month, as the latter has intensified outflows concerns.

Banks say the baht's depreciation will have a positive impact on business operators, mostly exporters, while most large-scale importers have already hedged on foreign exchange to protect themselves from currency volatility.

Sayam Prasitsirigul, head of SME banking at Bank of Ayudhya (BAY), noted that most larger enterprises had hedged on forex, while small importers rarely do so because their volumes too small to cover the administrative cost of hedging.

He noted that business clients were more worried about the baht strengthening than depreciating.

CIMB Thai Bank executive vice president Jiratchayuth Amyongka said most importers had already hedged on forex as they are aware that the baht's depreciation can hurt them if they do not take precautions. He added that the bank's customers were more worried about the political unrest than the baht's movements because government policy had a big influence on their investments.

The bank has reviewed its SME business plan by focusing more on small and medium-sized enterprises in main provinces such as Chiang Mai and Khon Kaen. Meanwhile, the bank will be more cautious on dealing with large enterprises in the construction sector, which is expected to be affected by delayed government investment.

Meanwhile, Manatase Annawat, deputy managing director of The Emporium Shopping Complex on Bangkok's Sukhumvit Road, said the weakness of baht would have positive impact on the upscale mall as it would attract more foreign tourists into the Kingdom to benefit from cheaper travel and accommodation. Meanwhile, it will reduce the number of Thais travelling abroad.

"As a shopping mall, we expect to enjoy some benefit from an increasing number of foreign shoppers, who currently account for about 40 per cent of our clients," he said.

However, the number of inbound tourists would depend on the local political situation, he added.

Manatase said the current depreciation of the baht had not yet affected the prices of The Emporium's principal luxury products. Some top brands have lengthy order lead-times of six months to a year.

Many importers of those luxury goods have hedged against some fluctuation of the currency.


-- The Nation 2014-01-04

[ramrod711]

He also expressed concern over the overall state of the Thai economy and the rapidly weakening baht, which has been affected by the unclear political situation, with confidence in investment and consumption having been eroded.

The unclear political situation was in evidence before Suthep took to the streets. Investors everywhere wondered what fly by night goofy idea PTP would come up with next. Rice scheme, tablet scheme, first car scheme, credit cards for insolvent farmers, etcetera. Investors must be wondering if there is some crazy person in charge, someone who has no personal stake, except for revenge.

[trainman34014]

So; when will someone write something we don't already know ? An intelligent 14 year old Western kid could have written such a report.

Meanwhile, the MD of the 'upmarket' shopping mall expects more foreign visitors to buy his 'upmarket' goods at heavily inflated prices adjusted to suit current conditions. Er; wrong...the weak Baht will attract the lower end seeking more sex and beer for their Baht !

Edited January 4, 2014 by trainman34014

[Pib]

Meanwhile, Manatase Annawat, deputy managing director of The Emporium Shopping Complex on Bangkok's Sukhumvit Road, said the weakness of baht would have positive impact on the upscale mall as it would attract more foreign tourists into the Kingdom to benefit from cheaper travel and accommodation.

One little problem with this prediction Khun Manatase, it disregards the fact the number of foreign tourists will be (has been) reduced due to the turmoil and getting to your complex with be harder due to the street protests. Just thought you might want to be made aware of those little details.

[JoePai]

Long may the Baht devalue - very happy to see it down to 60 to the GBP

[canopus1969]

First thing he should do is stop picking his nose in public

[noitom]

These articles in the THai press point out how often Thais being quoted use although, because, and, if, but, however, and all the other evasive techniques. it's poor Thai journalism that exposes their use in Thailand more than other Asian major English press.

[aTomsLife]

He also expressed concern over the overall state of the Thai economy and the rapidly weakening baht, which has been affected by the unclear political situation, with confidence in investment and consumption having been eroded.

The unclear political situation was in evidence before Suthep took to the streets. Investors everywhere wondered what fly by night goofy idea PTP would come up with next. Rice scheme, tablet scheme, first car scheme, credit cards for insolvent farmers, etcetera. Investors must be wondering if there is some crazy person in charge, someone who has no personal stake, except for revenge.

I agree. The SET/Baht were both poised to depreciate prior to the political unrest. Anyone following the Thai economy knew the PTP's populist policies would adversely affect the economy, and would also cause bubbles in the credit markets.

However, that both depreciated this much this fast is directly attributable to the protests, as well as to a strengthening dollar. There's pretty much a perfect storm brewing:

1) PTP mismanagement

2) Prolonged political unrest at best / civil war at worst

3) Strengthening western economies / currencies

Most everything in life is cyclical, and I think it's apparent that Thailand has entered a downward trend. How long it lasts is anyone's guess at this point, though.

Edited January 4, 2014 by aTomsLife

[HiSoLowSoNoSo]

So the white lies didn't work out as planned? what a farce.

[robblok]

So the white lies didn't work out as planned? what a farce.

The predictions he uses for growth are still far to high even the Kasikorn has given lower figures. They love the high figures because then they can loan more claim more taxes are going to come in ect. So in fact he is overstating the growth again as it will be 3% or less at best not 4%.

As for blaming it all on the protesters.. he would do that would he not.. instead of on the rice scam (destroying the rice exporting) and all the other stupid policies this incompetent government has started. I am not saying the protesters have no influence but its minor compared to the damage that is self inflicted. Add to that that the USA is pulling back money and we got the perfect storm others are talking about.

[FangFerang]

What a mess!

What bothers me most is that so many articles, like this one, talk about "when the political problems were resolved". That is sophistry. The political problems will be stabilized, but that is not and never will be "resolved" without concrete reforms that neither side will elucidate. This is sadly interesting.

This conflict is a symptom, not the illness, and everyone knows it who can do addition (Thais and farang alike). Both sides keep raising the bar while simultaneously refusing to appoint an impartial referee. Now the issue is beginning to hurt everyone's wallets, the vital organ of the taxi drivers, the street vendors, the noodle shopkeepers, the shadow dancers, the unmentionables, the untouchables, and the puppet masters alike. I think we will see some wonderful breakthrough now that lets both sides claim victory...in a few weeks, so both can claim the other had no say in their decisions, and they can then meet without losing face.

But it is not the end, there will always be tensions because neither side wants any reform that lets the other acquire power.

The only reason I have faith that Thais will find a Thai solution to Thai problems at the national level is... greed. Neither side is going to empty their bank accounts, and neither side is going to give away all their money. In this one aspect of human nature, I have an almost religious faith.

Amen.

[Ulic]

This guy is a master of stating the obvious.

[soi41]

First thing he should do is stop picking his nose in public

He was picking his brain!!

Also known as micro-surgery!!

[Moruya]

More crap from this odious little man.

Have a look at the graph of the Malaysian Ringget for example and you will see the exact same drop

[Thai at Heart]

Wasn't he begging for a reduction in the value of the baht about 6 months ago?

Who is the idiot. Does he want a strong or weak baht?

[noitom]

Wasn't he begging for a reduction in the value of the baht about 6 months ago?

Who is the idiot. Does he want a strong or weak baht?

He is not sure and of course, the Thai reporter hasn't got the sense to check what he said before/

[Thai at Heart]

Wasn't he begging for a reduction in the value of the baht about 6 months ago?

Who is the idiot. Does he want a strong or weak baht?

He is not sure and of course, the Thai reporter hasn't got the sense to check what he said before/

Exactly. When it was 29, it was to strong, now it's 33 it's too weak. He really is clueless because it would be better if he admitted that the USA fed sets the value of the baht with how strong or weak the USD is.

So ok. Now you got a weak baht, at least exports should get a push. Somehow I don't think it will work quite as easily as that.