KBank Capital Market Perspective   Feb 20 - gdp q4
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  • 1. KBank Capital Markets Perspectives 20 February 2012 Thai GDP dropped due to flood impact§ Thai economy in the fourth quarter dropped by 9.0% yoy % or 10.7%qoq seasonal adjusted due to the decline in both 15 domestic and external demand as well as industrial 10 production as a result of severe flooding situations in 3.9 Thailand. 5 2.3 2.5 2.7 1.8 1.5 0.8 0§ This resulted in the full year GDP growth of only 0.1% in 0 -0.3 -0.5 2011, much less than NESDB’s forecast of 1.5% and -5 -2.4 BOT’s forecast of 1%. -10§ NESDB expected Thai economy to grow by 5.5%-6.5% in GDP yoy GDPsa qoq-10.7 2012 (compared with BOT’s number of 4.9%), up from -15 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 prior forecast of 4.5%-5.5%, as investment from both private and public sectors is likely to increase. However, NESDB revised down export growth in 2012 exports from Source: NESDB 19% to 17.2%, while inflation is projected to be in the range of 3.5%-4.0% in 2012. Amonthep Chawla, Ph.D. Puttikul Ackarachalnaonth amonthep.c@kasikornbank.com puttikul.a@kasikornbank.com 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. 1
  • 2. GDP 4Q 2011 dropped as floods hit manufacturing sector Contribution to GDP growth§ Thai economy in the fourth quarter dropped by 9.0% yoy or % yoy/ contribution 10.7%qoq seasonal adjusted due to the decline in both domestic 15 and external demand as well as industrial production as a result 10 of severe flooding situations in Thailand. 5§ The floods resulted in the decrease in both private and government consumption as well as the total investment. 0 Household consumption dropped by 3%, compared to a rise of 2.4%yoy in Q3. Government consumption expenditure dropped -5 Private consumption Government Consumption by 3.1%yoy, compared to a rise of 4.9%yoy in 3Q and total -10 Gross fixed capital formation Inventory change investment dropped by 3.6%yoy, compared to the rise of Net exports GDP yoy 3.3%yoy in 3Q. -15§ Exports value of goods and services were also affected from the 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 % yoy flooding situation and thus dropped from THB2.22trn in Q3 to 15 Growth of domestic demand dropped in Q4 THB1.82trn in Q4. The same to import. Import dropped from THB2.07trn in Q3 to THB1.87trn in Q4. 10§ Net export of goods and services (i.e. export minus import) 5 dropped by 36.9% yoy. Exports of goods fall 6.9% yoy while 0 exports of services fall 4.8% yoy. 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 -5§ This resulted in the full year GDP growth of only 0.1% in 2011, much less than NESDB’s forecast of 1.5% and BOT’s forecast -10 of 1%. Private consumption -15 Government Consumption Gross fixed capital formation -20 2
  • 3. NESDB expects Thai economy will go back to normal level in Q2 % yoy % Manufacturing production and capacity utilization 40 70§ NESDB expected Thai economy to grow by 5.5%-6.5% in 2012 30 (compared with BOT’s number of 4.9%), up from prior forecast 20 65 of 4.5%-5.5%, as investment from both private and public 10 60 sectors is likely to increase. However, NESDB revised down 0 -10 55 export growth in 2012 exports from 19% to 17.2%, while inflation -20 is projected to be in the range of 3.5%-4.0% in 2012. -30 50 -40 45§ NESDB Secretary-General Akom Termpittayapaisit said GDP -50 Q1 2012 would turn positive but the growth would not be so high -60 40 while the factories in the industrial estates starting to recover. Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 However, Q2 would be better. According to NESDB, Thai economy will be back to normal in the second quarter of this Manufacturing production index ISIC (% yoy, left) Capacity Utilization (% , right) year. Noted that BOT expected the manufacturing sector to fully Relationship between Thai GDP and industrial production Thai GDP, real, SA recover in the third quarter of this year. 1,300,000§ Industrial production is very important to the contribution to Thai y = 4288.9x + 332903 1,200,000 2 GDP. As shown, there is a high correlation between industrial R = 0.9689 production index and Thai GDP, real, SA. How fast Thai 1,100,000 economy will recover depends on how fast the manufacturing 1,000,000 resumes its normal operation. 900,000 800,000 700,000 600,000 80 100 120 140 160 180 200 220 industrial production index 3
  • 4. During economic recovery, what’s the trend of USD/THB? Currency performance§ Economic slump owing to the severe floods is likely to be INR 7.7% stimulated by various measures of the government. Imports are MYR 4.7% expected to rise as industries are likely to replace machines that SGD 3.3% were damaged. Production will soon resume its normal process PHP 3.0% while increase in exports will follow. During this economic THB 2.6% recovery, trade deficits are likely to cause an upward bias for the KRW 2.6% USD/THB. TWD 2.5%§ However, the USD/THB is likely to be supported on the IDR 0.3% downward bias following large fund flows to the capital markets. Change against USD, year-to-date CNY -0.1% The effects of capital flows are believed to outweigh trade JPY-3.2% deficits. Thus, we projected the USD/THB to approach 29.50 YE2012. The USD/THB is seen to be volatile amid different -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% timing of the demand for US dollar for imports and capital inflows. 600 Net capital inflows to Thailand’s capital markets§ Regarding the price level, since the government is planning to 500 stimulate consumption by various policies, particularly a policy to 400 increase the minimum wage, higher consumption is likely to 300 cause inflationary pressure. Despite risk of financial crisis in the 200 eurozone that could affect external demand, the BoT is likely to 100 hold the policy rate at 3.00% though out the year for fear that 0 inflationary pressure from economic stimulus plan would cause -100 macroeconomic instability. Jan-2010 May-2010 Sep-2010 Jan-2011 May-2011 Sep-2011 Jan-2012 sum of foreign equity / fixed income flows 4
  • 5. NESDB latest estimates 5
  • 6. 6