US rate cut not until December: Kasikorn Asset Management

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US rate cut not until December: bank

ERICH PARPART,

SUCHEERA PINIJPARAKARN

THE NATION

BANGKOK: -- KASIKORN Asset Management (Kasset) expects the US Federal Reserve to delay its interest-rate normalisation to December after the high and increased fluctuation in the world's financial markets, an economic slowdown in China and further drops in global oil prices.

The Federal Open Market Committee meets this week.

"KAsset expects minimal impact on markets if the Fed decides not to raise its interest rate this round since the market has already accommodated the expectation," managing director Pongpichet Nananukool said.

"The world's equity markets might increase slightly in the short term, but if the Fed hikes the rate this round, then we can expect more fluctuation in the market. An unexpected increase will contribute to the declines of stocks and bonds, especially in emerging markets," he said.

"Capital will flow out to safe haven assets such as bonds or funds of developed countries including the US, Germany and Japan."

The point to monitor after the Fed's rate decision is its signalling of how fast and continuous the next increases are going to be. If they are not consecutive and come slowly, then their impact on the world's money markets should be less, he said.

Boontuck Wungcharoen, chief executive officer of TMB Bank and chairman of the Thai Bankers' Association, said the market needed to measure the Fed's pulse.

"The market has already expected the Federal Reserve to increase its interest rate, but what we should closely watch is whether it will continue to raise the rate after the first increase," he said.

The Fed's action is not expected to move the Thai market much because the country has strong fundamentals including firm foreign-currency reserves.

Even if outflows are seen after the Fed rate increase, they will be more subdued in Thailand than other countries, he said.

Fitch Ratings said part of the rationale for the ultra-loose monetary policies of global central banks had been to depress risk and term premiums via a portfolio-rebalancing effect.

This is consistent with the emergence of pressures on emerging markets as the Fed's normalisation approaches.

Emerging-market borrowers may have become more exposed since 2008 to an impact on their funding conditions from an increase in US interest rates, while a rise in the federal funds rate has been well signalled.

However, there remains a substantial gap between the Fed's indication of the future path of rates and what the market is pricing in. An outcome closer to the Fed's guidance could be a significant shock, the ratings firm warned.

CLSA Securities (Thailand) expects the Bank of Thailand's Monetary Policy Committee (MPC) to keep its benchmark lending rate at 1.50 per cent, as the baht is already weakening while fiscal policy is playing the main role in the stimulation of the economy.

The baht was trading at 36.061 to the US dollar as of 4pm yesterday. It has depreciated by 8-9 per cent since it was trading at 32.950 on January 1.

The military-led government unleashed a Bt137-billion stimulus package last month with the aim to stop the decline in gross domestic product, but the central bank will likely downgrade its forecast for 2015 GDP growth from 3 per cent on September 25.

The MPC has lowered the policy interest rate two straight times this year at its March and April meetings.

"The MPC will definitely maintain [the current rate]," said Prinn Panitchpakdi, CLSA's country head.

"I will be shocked if it dares to lower the rate again, since there is no need to cut it and there is no chance for an increase because there is no rush, while the new governor [of the BOT] is also coming into office next month," he said.

Source: http://www.nationmultimedia.com/business/US-rate-cut-not-until-December-bank-30268805.html

-- The Nation 2015-09-15

[spermwhale]

What's he smoking? "The Fed's action is not expected to move the Thai market much because the country has strong fundamentals including firm foreign-currency reserves.

Even if outflows are seen after the Fed rate increase, they will be more subdued in Thailand than other countries, he said."

[NoBrainer]

Why does the headline read "U.S. Rate Cut" when we are expecting an increase?

Does the author not know the difference?

[Srikcir]

End of year gives the US the benefit of any economic bump from several major shopping holidays and year-end corporate results.

It looks like US Treasury is anticipating higher GDP growth with slower inflation - a good combination for a rate INCREASE.

[Gonsalviz]

No wonder financials are so screwed up in this country. If he is expecting a rate cut from the FED, he will sorely disappointed.

[lostoday]

No wonder financials are so screwed up in this country. If he is expecting a rate cut from the FED, he will sorely disappointed.

One might assume that if you didn't read the article. The Nation's headlines often do not have anything to do with the content of the article. I assume it's because they have saved money on a human editor and use google translate.