Cmb perspective

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Cmb perspective

  1. 1. KBank Capital Market Perspectives Market Updates Macro / FX / Rates Thai growth engines still running fine but risks increased 28 February 2011 January economic conditions Nalin Chutchotitham – - Overall economic development compared to December showed the four engines Kasikornbank nalinc@kasikornbank.com of the economy continuing to work hand-in-hand. Risk factors going forward include increased price pressure and higher interest rates. At the same time, risks from global financial markets’ volatilities and global economic slowdown continue to play an important role in local economic expectations. - Private consumption index (PCI) rose 1.0% mom sa while it was flat in December. Compared to a year earlier, the PCI increased 4.7%, a faster pace compared to the fourth quarter’s 3.5% growth. In particular, imports of consumer goods and vehicle sales rose strongly in January, led by economic expansion and continuous growth in farm income and demand of environmental-friendly vehicles. - Private investment index (PII) reverted to an increase by registering a growth rate of 3.7% mom in January after falling by 1.0% in December. From the year-on-year growth basis, PII continued to see consistent climb since the beginning of the year 2010. The 17.8% yoy expansion in 2010 had more than offset the contraction of 11.2% yoy in 2009. In January, the PII rose 13.0% yoy, primarily led by capital goods imports and sales of commercial vehicles. Indicators in the construction sector also showed positive trend due to the repair works needed after severe flooding last year. - Manufacturing production index (MPI) rose 0.8% on the month, mainly attributable to production in the electronics, vehicles, and electrical appliances sectors. Compared to the same period last year, the MPI reverted to an increase of 3.7% yoy after a contraction of 3.4% in December due to unusually high production in December 2009. In January, the export-oriented industries saw production growth returning to 0.0%yoy growth after a brief contraction in December. At the same time, domestic market- oriented industries showed strong growth of 16.8% yoy. Capacity utilization rate saw a slight increase on the seasonally-adjusted basis (63.5% to 63.9%). - Confidence levels continued to climb. The business sentiment index (BSI) rose from 51.6 to 52.8 while consumer confidence index rose from 80.8 to 81.5. Yet, business sector’s expectation was poorer than December, mainly due to rising costs. - External sector – exports continued to expand positively (21.4% yoy vs Dec 18.6%) while imports picked up significantly (31.2% yoy vs. Q4 18.8%). Imports quickened on the back of gold imports which rose to record high in January ($1.79bn) due to the correction in gold prices while local exporters and investors maintained a positive view on gold price this year. The trade balance was in deficit by $588mn but would register a surplus of $1,143mn if imports of gold had been excluded.Balance of payments Manufacturing production and Capacity Utilization US$, mn % yoy % Current account (Trade balance + S ervices) and BOP 40 75 6000 5000 30 70 4000 20 3000 10 65 2000 0 60 1000 -10 0 55 -1000 -20 -2000 -30 50 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Trade balance Services and transfers Balance of Payments Manufacturing production index ISIC % yoy Capacity Utilization % (right axis)Source: Bloomberg, KBank Source: Bloomberg, KBank 11 1
  2. 2. - Tourism sector continue to remain in positive trend with the number of tourist arrivals expanding by 12.7% yoy or 1.8 million persons. Hotel occupancy rate was also in line with the arrivals, increasing from 58.5% in December to 62.6% in January. The current account balance registered a surplus of $1.09bn as the surplus in services, income and transfers account helped to offset the deficit in the trade accounts. The overall balance of payments recorded a smaller surplus at $1.69bn vs. December’s $2.26bn. - Private deposit and credit expansion continued to see positive trends. Private loan growth accelerated for the 9th consecutive months and registered strong growth of 14.4% yoy in January. Deposit growth continued but had been seeing a more stable pace at above 8.0% during the past four months. - Policy rate outlook - A BoT’s assistant governor, Paiboon Kittisrikangwan, commented in the early afternoon today on inflation outlook and policy rate trend. He said that if inflationary pressure becomes more evident, the central bank would continue to “normalize” interest rates further. The monetary policy decision would be made again on March 9th and we expect that the BoT would raise the overnight repo by another 25bp. At the same time, there are speculations that the BoT would raise interest rate by 50bp this time round (6-month reference rate for floating interest rate payment rose to 2.37% this morning after making a new high last Friday at 2.20%). Minutes of the previous MPC meeting showed that some members of the committee contemplated a more hawkish policy action. While this expectation is in line with the current trend of higher inflationary pressure observed globally, such a move is unlikely to be necessary for Thailand. The BoT had not been behind the curve and it might be more appropriate to raise policy rate gradually as the BoT try to balance risks of growth and inflation.Business sentiment index (current vs expectations) Private deposit and credit growth Thai Business Sentiment Indices % yoy 50 = neutral 60 16 14.4% 14 55 12 50 10 8 8.9% 45 6 40 4 2 35 0 30 -2 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 BSI BSI 3m forward expectations Private credit Private DepositsSource: Bloomberg, KBank Source: Bloomberg, KBankPolicy rate and 6m THBFIX Contribution to GDP growth % % contribution 15.0 4.5 4.0 10.0 3.5 5.0 3.0 2.5 0.0 2.0 1.5 -5.0 1.0 -10.0 0.5 Consumption Public consumption -15.0 Inv estment Change in inv entories 0.0 Net Ex ports GDP Grow th Jan-08 Jan-09 Jan-10 Jan-11 -20.0 Policy rate 6M THBFIX 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10Source: Bloomberg, KBank Source: NESDB, KBank 22 2
  3. 3. Table 1. Monthly Key Economic Indicators Jun 10 Jul 10 Aug 10 Sep 10 Oct 10 Nov 10 Dec 10 Jan 10Manufacturing index 194.2 190.1 183.7 201.5 191.2 190.4 190.2 190.2 % YoY 14.2 13.1 8.4 8.1 6.0 5.7 -2.5 5.9Industrial capacity utilization rate (%) 65.4 64.8 63.6 64.4 63.9 63.6 62.4 62.1Retail sales (% YoY) 11.9 12.3 8.6 9.1 5.4 8.1 7.4 n.a.Total vehicle sales (units) 70,557 65,672 65,724 68,261 72,012 78,874 93,122 93,122Motorcycle sales (units) 168,389 175,926 153,256 147,932 145,916 154,971 165,658 165,658Unemployed labor force (000 persons) 459 346 353 343 355 389 268 n.a.Commercial car sales (units) 1.2 0.9 0.9 0.9 0.9 1.0 0.7 n.a.Consumer prices (% YoY) 3.3 3.4 3.3 3.0 2.8 2.8 3.0 3.0 core 1.1 1.2 1.2 1.1 1.1 1.1 1.4 1.3Producer prices (% YoY) 11.5 11.1 10.7 9.1 6.3 5.9 6.7 6.0External Accounts (USD mn, unless specified otherwise)Exports 17,877.0 15,475.0 16,292.0 17,955.0 17,046.0 17,584.0 17,220.0 16,523.0 % YoY 47.1 21.2 23.6 21.8 16.6 28.7 18.6 21.4Imports 15,334.0 16,266.0 15,440.0 14,712.0 14,773.0 17,094.0 15,911.0 17,111.0 % YoY 38.3 36.5 41.8 15.7 14.4 35.0 8.8 31.2Trade balance 2,543.0 -791.0 852.0 3,243.0 2,273.0 490.0 1,309.0 -588.0Tourist arrivals (000) 953 1,258 1,268 1,220 1,360 1,500 1,840 1,840 % YoY -0.2 14.7 12.5 1.9 6.3 10.3 9.5 14.7Current account balance 821.0 -1,001.0 280.0 2,767.0 2,740.0 1,019.0 1,750.0 1,090.0Balance of payments 2,166 1,412 3,589 4,270 5,822 820 2,263 1,689FX reserves (USD bn) 147.1 151.5 154.7 163.1 171.1 168.2 172.1 174.0Forward position (USD bn) 17,877.0 15,475.0 16,292.0 17,955.0 17,046.0 17,584.0 17,220.0 16,523.0Monetary conditions (THB bn, unless specified otherwise)M1 1,180.2 1,173.0 1,181.4 1,175.5 1,202.3 1,235.4 1,302.4 1,326.7 % YoY 15.1 15.8 11.4 11.7 11.4 10.8 10.9 15.6M2 10,846.4 10,887.1 10,968.1 11,116.1 11,323.3 11,497.6 11,776.4 11,818.5 % YoY 7.0 8.8 8.5 9.9 11.2 11.1 10.9 11.5Bank deposits 9,983.3 9,974.5 10,016.0 10,091.6 10,206.0 10,392.3 10,583.4 10,607.0 % YoY 6.2 7.6 6.6 7.8 8.5 8.1 8.7 8.9Bank loans 9,196.7 9,219.7 9,299.8 9,432.7 9,580.3 9,751.1 9,934.4 10,058.9 % YoY 8.5 9.1 9.8 10.8 12.1 12.2 12.5 14.4Interest rates (% month end)BOT 1 day repo (target) 1.25 1.50 1.75 1.75 1.75 1.75 2.00 2.25Average large banks minimum lending rate 5.86 6.00 6.00 6.00 6.00 6.00 6.12 6.37Average large banks 1 year deposit rate 0.68 0.98 0.98 1.11 1.11 1.11 1.32 1.51Govt bond yield 1yr 1.56 1.91 1.99 2.01 1.98 2.11 2.38 2.54Govt bond yield 5yr 2.99 3.08 2.69 2.56 2.83 2.98 3.26 3.40Govt bond yield 10yr 3.33 3.44 3.01 3.12 3.18 3.59 3.77 3.85Key FX (month end)DXY US dollar index 86.02 81.54 83.20 78.72 77.27 81.20 79.03 77.74USD/THB 32.45 32.24 31.27 30.35 29.94 30.21 30.06 30.93JPY/THB 36.62 37.29 37.14 36.34 37.18 36.11 37.01 37.60EUR/THB 39.71 42.08 39.65 41.38 41.76 39.22 40.23 42.35Source: Bloomberg333
  4. 4. 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

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