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    K bank capital market perspectives jan 24   ir K bank capital market perspectives jan 24 ir Document Transcript

    • KBank Capital Market Perspectives Market Updates Macro / FX / Rates BoT’s January Inflation Report shows price concern remains 24 January 2011Our views and thoughts The key messages from the Bank of Thailand’s (BOT) January 2011 issue of the Inflation Nalin Chutchotitham – Report are: Kasikornbank nalinc@kasikornbank.com - Negative impacts on the Thai economy in the second half of the year 2010 (local floods and slowdown in trading partners’ economies) had mostly lifted, bringing the latest forecast of annual GDP growth in 2010 to 8.0%. - Continued economic growth in trading partners’ economies would help support Thai exports going forward while private consumption and investment would be key drivers of economic expansion this year. - Although growth forecast for the year is unchanged from the October issue (3.0-5.0%), assumptions involved had changed. - Rising prices from both expanding domestic demand and external forces (rising commodity prices and supply-side shocks to agriculture products due to natural disasters) would remain a key concern for monetary policy in the year 2011. Comparing the two most recent Inflation Reports, the central bank seems to remain rather comfortable with the pace of economic growth both locally and abroad, although it continued to cite weak growth in the U.S. and fiscal challenges in Europe. Trade balance and current account surpluses’ forecast are revised upwards, mainly attributable to stronger recovery in trading partners’ economies. However, the surpluses are likely to be lower than in the year 2010 anyhow because of imports growth. We expect that the BoT would front-load much of their policy rate hikes this year during the first half of the year. In particular, we still expect another two hikes to come durinng the MPC th th meetings on March 9 and April 20 . This would bring the repo rate to 2.75% from the current 2.25%. Should inflation rates start to decline or stabilize, the BoT may hold off rate hikes in the next few MPC meetings. However, it is likely that the BoT would stay on the cautious side and raise policy rate gradually until certain that they have inflation under control. In other words, the repo rate may stay at 2.75% during the first half but could continue to rise further to 3.00 – 3.25% before by year-end. Table 1. Bank of Thailand’s economic forecast as of January 2011 (unit : % YoY or otherwise indicated) 2009 2010 2011 2012 as of Jan Oct Jan GDP -2.7 8.0* 3.0 – 5.0 3.0 – 5.0 3.0 – 5.0 Core inflation 0.3 1.0 2.0 – 3.0 2.0 – 3.0 1.5 – 2.5 Headline inflation -0.9 3.3 2.5 – 4.5 3.0 – 5.0 2.0 – 4.0 Export of goods (f.o.b) -14.0 28.5 11.0 – 14.0 11.0 – 14.0 11.0 – 14.0 Imports of goods (c.i.f) -25.2 36.8 15.0 – 18.0 13.5 – 16.5 13.0 – 16.0 Trade balance ($ bn) 19.4 14.0 8.0 – 11.0 4.0 – 7.0 4.5 – 7.5 Current account ($ bn) 21.9 14.8 10.0 – 13.0 5.0 – 8.0 6.5 – 9.5 Source: Bank of Thailand, * indicates forecast111
    • Key Assumptions Changes compared to October forecasts Revised up slightly in 2011 mainly attributable to the improved prospects of the US economy, with a Demand for Thai exports strong momentum sustaining well into 2012. Fed funds rate Anticipated to rise in 2011 Q3, unchanged from the previous assumption Likely to appreciate more against the US dollar throughout the projection period in line with latest data Regional currencies and strong growth prospects in Asia Revised upwards, mostly because of the reclassification of some transfer payments into consumption spending. Both consumption and investment expenditures in fiscal year 2012 will then rise from the Direct government spending FY2011 preceding fiscal year following the budget expansion. Raised throughout the forecast period, in tandem with upward demand pressure coming from the unusually cold weather and the rising global demand. Dubai oil price will average at 91.3 and 98.1 US Dubai oil price dollars per barrel in 2011 and 2012, respectively. Prices will rise gradually over the period ahead, with pressure from both a negative supply shock due to last year’s flood and firming domestic demand. Climate factors and natural disasters also lead to a substantial upward revision in non-fuel commodity prices. Agricultural prices In addition, the continued capital inflows into commodity markets also contribute to the upward pressure. Revised up to 215 baht in 2011, before rising to 226 baht in 2012, in line with the economic growth and Daily minimum wage higher inflation going forward. Source: Bank of Thailand BOT’s press release on January’s Inflation Report http://www.bot.or.th/Thai/PressAndSpeeches/Press/News2554/n0254e.pdf Download January’s Inflation Report http://www.bot.or.th/English/MonetaryPolicy/Inflation/Pages/index.aspxBoT’s core inflation forecast Real interest rates (deposit and lending rates) % 10 8 6 4 2 0 -2 -4 -6 02 03 04 05 06 07 08 09 10 11 Real policy rate real 12m deposit rate real MLRSource: Bank of Thailand Source: Bloomberg, KBank 22 2
    • Table 2. Monthly Key Economic Indicators May 10 Jun 10 Jul 10 Aug 10 Sep 10 Oct 10 Nov 10 Dec 10Manufacturing index 185.0 194.2 190.1 183.7 201.5 191.2 190.4 % YoY 15.9 14.2 13.1 8.4 8.1 6.0 5.6Industrial capacity utilization rate (%) 64.3 65.4 64.8 63.6 64.4 63.9 63.6Retail sales (% YoY) 8.1 11.9 12.3 8.5 8.9 4.7 4.7Passenger car sales (units) 62,205 70,557 65,672 65,724 68,261 72,012 78,874Motorcycle sales (units) 138,558 168,389 175,926 153,256 147,932 145,916 154,971Unemployed labor force (000 persons) 586 459 346 353 343 355 -Commercial car sales (units) 1.5 1.2 0.9 0.9 0.9 0.9 -Consumer prices (% YoY) 3.5 3.3 3.4 3.3 3.0 2.8 2.8 3.0 core 1.2 1.1 1.2 1.2 1.1 1.1 1.1 1.4Producer prices (% YoY) 8.0 11.5 11.1 10.7 9.1 6.3 5.9 6.7External Accounts (USD mn, unless specified otherwise)Exports 16,435.0 17,877.0 15,475.0 16,292.0 17,955.0 17,046.0 17,584.0 % YoY 42.5 47.1 21.2 23.6 21.8 16.6 28.7Imports 14,144.0 15,334.0 16,266.0 15,440.0 14,712.0 14,773.0 17,094.0 % YoY 53.6 38.3 36.5 41.8 15.7 14.4 35.0Trade balance 2,291.0 2,543.0 -791.0 852.0 3,243.0 2,273.0 490.0Tourist arrivals (000) 815 953 1,258 1,268 1,220 1,360 1,500 % YoY -11.8 -0.2 14.7 12.5 1.9 6.3 10.3Current account balance 1,172.0 821.0 -1,001.0 280.0 2,767.0 2,740.0 1,019.0Balance of payments -989 2,166 1,412 3,589 4,270 5,822 820FX reserves (USD bn) 143.4 147.1 151.5 154.7 163.1 171.1 168.2 170.4Forward position (USD bn) 13.0 12.2 11.0 12.1 11.1 12.6 15.3 16.7Monetary conditions (THB bn, unless specified otherwise)M1 1,261.9 1,180.2 1,173.0 1,181.4 1,175.5 1,202.3 1,235.4 % YoY 14.4 15.1 15.8 11.4 11.7 11.4 10.8M2 11,001.5 10,846.4 10,887.1 10,968.1 11,116.1 11,322.4 11,497.3 % YoY 6.7 6.9 8.7 8.4 9.8 11.1 11.0Bank deposits 10,229.1 9,983.3 9,974.5 10,015.9 10,091.6 10,204.1 10,389.3 % YoY 7.0 6.2 7.6 6.6 7.8 8.5 8.1Bank loans 9,101.2 9,196.7 9,219.7 9,299.8 9,432.7 9,580.5 9,743.9 % YoY 7.3 8.5 9.1 9.8 10.8 12.1 12.2Interest rates (% month end)BOT 1 day repo (target) 1.25 1.25 1.50 1.75 1.75 1.75 1.75 2.00Average large banks minimum lending rate 5.86 5.86 6.00 6.00 6.00 6.00 6.00 6.12Average large banks 1 year deposit rate 0.68 0.68 0.98 0.98 1.11 1.11 1.11 1.32Govt bond yield 1yr 1.52 1.56 1.91 1.99 2.01 1.98 2.11 2.38Govt bond yield 5yr 3.06 2.99 3.08 2.69 2.56 2.83 2.98 3.26Govt bond yield 10yr 3.49 3.33 3.44 3.01 3.12 3.18 3.59 3.77Key FX (month end)DXY US dollar index 86.59 86.02 81.54 83.20 78.72 77.27 81.20 79.03USD/THB 32.51 32.42 32.26 31.27 30.33 29.91 30.20 30.06JPY/THB 35.67 36.61 37.31 37.18 36.35 37.16 36.11 37.02EUR/THB 39.96 39.79 42.12 39.73 41.31 41.62 39.37 40.18Source: 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