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K bank capital market perspectives aug 25   trade data
 

K bank capital market perspectives aug 25 trade data

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Kbank capital market perspectives (Monthly)

Kbank capital market perspectives (Monthly)

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    K bank capital market perspectives aug 25   trade data K bank capital market perspectives aug 25 trade data Document Transcript

    • KBank Capital Market Perspectives Market Updates Macro / FX / Rates Trade balance in July surprised at $2.8bn 25 August 2011 Overview: • Thailand’s custom-cleared exports surprised on the up side in July while trade balance Nalin Chutchotitham - Kasikornbank surplus recorded a substantial $2,797.7mn, the largest monthly surplus this year. Exports nalin.c@kasikornbank.com grew by 38.3%yoy (vs. 16.8% in June) and imports growth was at 13.5%yoy (vs. 26.1% in June). Nevertheless, the export number is partly distorted by the exports of unwrought gold which was relatively high at $995mn, compared to the H1/2011 monthly average of $568mn. Still, exports excluding gold were rather robust at 32.1% yoy growth while the trade balance surplus excluding gold was at $2,572mn. • Given the high surplus in July, trade balance surplus in 2011 ($6.24bn) had exceeded that of the same period in 2010 ($5.32bn). This may exert more pressure on the USD/THB to decline going forward as we continue to expect trade balance surpluses for the rest of the year, albeit a shrinking one. • Still, exports in several other categories were relatively high in July and total exports increased for the third consecutively month (without seasonal adjustments). In particular, the industrial sector saw an increase of 34.9%yoy and 7.9%mom. Exports in the electronics and electrical appliances industries expanded by 15.6%yoy and 12.3%yoy, respectively, indicating some resilience of Thailand’s key exports amid the global economic slowdown. Meanwhile, exports of vehicles and parts rose strongly by 15.6%yoy after contracting by 22.8%yoy in May and rising by a negligible pace of 2.2% yoy in June. This is in line with the rebound in domestic car sales in June and July, suggesting that imports of key parts from Japan had resumed. Agriculture sector’s exports declined slightly from a total of $4,315mn in June to $3,792mn in July (-12.1% mom) but that still accounted for a gain of 53.5% from the previous year. • Export to various destinations: Exports to Asia (includes 9 ASEAN economies, mainland China and Hong Kong SAR, 8 South Asian economies, South Korea, and Taiwan) continued to experience robust growth at 47.0%yoy in July (Jan-July period at 30.5%yoy). Asia’s market share had also risen to 49.4% of total exports this year compared to the 47.4% last year. Part of the increase of Asian markets’ share had been due to the slower pace of growth in exports to the U.S., Japan, and EU (15). Due to the fact that these countries are experiencing a slowdown this year, their total market share had declined from 30.6% last year to 29.9% this year. • Meanwhile, exports to the other potential markets (mainly Australia, Middle East, Africa, Latin American, Russia, and the rest of EU) rose by 28.4%yoy, also relatively robust compared to the whole year’s average growth of 14.1%yoy.Custom Department’s export and import growth Exports and imports value in USD mn % yoy USD mn 80 22,000 70 20,000 60 18,000 50 16,000 40 14,000 30 12,000 20 10,000 10 8,000 0 6,000 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Import (% YoY) Export (% YoY) Exports ImportsSource: Bloomberg, KBank Source: Bloomberg, KBank 11 1
    • • Imports in June declined from a high of $19,806.1mn in June to $18,723.4mn in July and recorded a 13.5% yoy growth due to a relatively high base last year. However, we suspect that there might be a reduction of inventory building by various businesses, as imports of raw materials and intermediate goods contracted by 3.7% yoy while the growth of capital goods’ imports also slowed down to 18.3%yoy pace compared to the January – July period growth of 25.2% yoy. Nevertheless, imports of consumer goods remained rather strong at 22.8% yoy, little changed from the average of the first half of the year. • Since the beginning of the year, Thai baht continued to be under an appreciation pressure, creating much concerns for the exports sector. However, such pressure did not show up much in actual appreciation. Thai baht appreciated by a mere 0.3% against the U.S. dollar since the beginning of year, trailing behind most of the other Asian currencies. Nevertheless, the baht did appreciate most strongly in the region (after Japan) back in the year 2010. We suspect that much of the adjustment had been done by exporters last year, given the more volatile USD/THB movements then. This would bode well for exports for the rest of the year, although the risks of slower growth in the major economies had increased. • Given the affirmation by the Federal Reserve that the fed fund rates would remain at near- zero for another 2 years and the gradual pace of recovery in the U.S. economy, we continue to expect the broad-based weakness of the greenback to push USD/THB lower. However, the continued expansion of domestic economy is likely to help boost imports growth going forward, inducing a lower trade balance surplus in the coming months. In sum, we continue to target the USD/THB at 29.00 at the end of this year.Appreciation of Asian currencies against USD year-to- Appreciation of Asian currencies against USD, 3 monthsdate months INR -3.0% Change against USD, year-to-date INR -1.6% Change against USD, 3-month THB 0.3% TWD -0.3% TWD 0.9% IDR 0.1% MYR 2.6% KRW 1.3% PHP 3.1% THB 1.5% CNY 3.4% CNY 1.6% KRW 3.5% PHP 2.6% IDR 4.7% MYR 2.6% JPY 5.0% SGD 3.3% SGD 6.2% JPY 6.1% -5.0% -3.0% -1.0% 1.0% 3.0% 5.0% 7.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%Source: Bloomberg, KBank Source: Bloomberg, KBankSpot gold price in 2011 Monthly trade balance inclusive and exclusive of gold $/oz USD mn 2000 3500 3000 1900 2500 1800 2000 1700 1500 1000 1600 500 1500 0 1400 -500 -1000 1300 -1500 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Gold prices (LHS) Trade balance (USD mn) Trade balance ex. Gold (USD mn)Source: Bloomberg, KBank Source: CEIC, KBank 22 2
    • Table 1. Monthly Key Economic Indicators Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11Manufacturing index (ISIC) 189.6 189.5 188.3 187.0 180.3 182.0 195.7 % YoY -3.4 4.1 -3.0 -6.7 -8.1 -3.7 3.3Industrial capacity utilization rate (%) (ISIC) 62.4 62.3 59.5 66.1 54.4 58.8 63.6Retail sales (% YoY) 8.4 9.6 9.0 4.1 7.9 8.4 n.a.Total vehicle sales (units) 93,122 68,398 77,213 93,008 67,283 55,851 70,259 72,902Motorcycle sales (units) 167,707 165,152 188,248 191,437 174,244 163,411 205,392Unemployed labor force (000 persons) 389 268 268 374 268 276 163Unemployment rate (%) 1.0 0.7 0.7 1.0 0.7 0.7 0.4Consumer prices (% YoY) 3.00 3.03 2.87 3.14 4.04 4.19 4.06 4.08 core 1.40 1.32 1.45 1.62 2.07 2.48 2.55 2.59Producer prices (% YoY) 4.7 6.0 7.4 5.9 6.6 6.2 4.5 5.2External Accounts (USD mn, unless specified otherwise)Exports 17,219.0 16,523.0 18,406.0 21,072.0 17,243.0 19,284.0 20,816.0 % YoY 18.6 21.4 29.1 31.0 24.7 17.3 16.4Imports 15,892.0 17,111.0 16,375.0 19,180.0 17,720.0 19,010.0 18,931.0 % YoY 8.6 31.2 18.6 27.2 26.3 34.4 23.5Trade balance 1,327.0 -588.0 2,031.0 1,892.0 -477.0 274.0 1,885.0Tourist arrivals (000) 1,840 1,810 1,822 1,765 1,506 1,376 1,490 % YoY 9.5 12.8 12.8 22.7 35.9 68.8 56.3Current account balance 1,750.0 1,090.0 3,823.0 1,881.0 -165.0 -511.0 2,499.0Balance of payments 2,263 1,689 4,271 1,365 3,570 -2,600 -972FX reserves (USD bn) 172.1 174.0 179.2 181.5 189.9 186.2 184.3Forward position (USD bn) 19.6 19.0 17.7 20.8 21.4 23.5 24.4Monetary conditions (THB bn, unless specified otherwise)M1 1,302.4 1,326.2 1,346.4 1,345.6 1,347.6 1,396.4 1,337.4 % YoY 10.9 15.5 13.4 13.8 14.0 10.7 13.3M2 11,776.4 11,817.2 12,152.9 12,280.3 12,481.0 12,575.1 12,610.6 % YoY 10.9 11.5 13.7 13.1 15.2 14.3 16.3Bank deposits 10,584.9 10,606.3 10,834.2 10,893.1 10,982.1 11,094.3 10,993.3 % YoY 8.7 8.8 10.3 9.1 10.1 8.5 10.1Bank loans 9,947.0 10,064.5 10,209.7 10,308.2 10,376.2 10,517.7 10,677.6 % YoY 12.6 14.5 15.1 14.9 15.3 15.6 16.1Interest rates (% month end)BOT 1 day repo (target) 2.00 2.25 2.25 2.50 2.75 2.75 3.00 3.25Average large banks minimum lending rate 6.12 6.37 6.37 6.62 6.75 6.75 6.87 7.13Average large banks 1 year deposit rate 1.32 1.51 1.51 1.67 1.86 1.86 2.03 2.16Govt bond yield 1yr 2.38 2.54 2.68 2.83 3.00 3.15 3.50 3.64Govt bond yield 5yr 3.26 3.40 3.48 3.41 3.38 3.50 3.78 3.86Govt bond yield 10yr 3.77 3.85 3.89 3.75 3.70 3.79 3.91 4.02Key FX (month end)DXY US dollar index 79.03 77.74 76.89 75.86 72.93 74.64 74.30 73.90USD/THB 30.06 30.93 30.60 30.28 29.88 30.32 30.73 29.76JPY/THB 37.01 37.60 37.47 36.42 36.80 37.17 38.13 38.76EUR/THB 40.23 42.35 42.25 42.86 44.24 43.64 44.56 42.84Source: Bloomberg333
    • Disclaimer For private circulation only. The foregoing is for informational purposes only and not to be considered as an offer to buy or sell, or a solicitation of an offer to buy or sell any security. Although the information herein was obtained from sources we believe to be reliable, we do not guarantee its accuracy nor do we assume responsibility for any error or mistake contained herein. Further information on the securities referred to herein may be obtained upon request.444