KBank Capital Market perspectives Dec 30 flooding and economic slowdown in november
1. KBank Capital Market Perspectives Market Updates
Macro / FX / Rates
Thai economy contracted sharply in November 2011 from the
30 December 2011
historic severe flooding effect
November economic indicators Puttikul Ackarachalanonth –
Kasikornbank
Economy slowdown due to flooding impact across all economic sectors as well as the slowdown in Puttikul.a@kasikornbank.com
global economy
- Economic indicators for November were adversely affected by the historic severe
flooding effect in all sectors amid slowdown in global economy. BOT said the
flooding situation may affect 2011 GDP growth which was expected to grow 1.8%
in the prior forecast. However, BOT did not expect 2011 GDP to turn negative.
Last month, BOT revised the economic growth for this year downward to 1.8%
from the prior forecast of 2.6% in October due to the slowdown in economy in
Q4/2011 from the severe flooding situation.
- Production side: Production continued to drop in most of the sectors as the
manufacturing plants temporarily shutdown due to direct and indirect effects from
the flooding situation. Manufacturing Production Index (MPI) dropped by 48.6%
YoY. The most affected industries were vehicles (-84% YoY), hard disk drive
(-81.6% YoY) and integrated circuit (-75.5% YoY). For the agricultural side,
agricultural production decreased by 7.2% YoY due to decrease in rice
production that was damaged by the flooding. Meanwhile, rubber and oil palm
production continued to increase from the expansion of the planting areas. In
November, farm income dropped by 8.6% YoY with 1.5% decline in agricultural
price. Agricultural price mainly declined as rubber price decline from the concern
in global economy slowdown, production of several automobile manufacturers’
disruption from the floods and increase in global supply.
- Consumption side: Private Consumption Index (PCI) decreased from 135.8 in
October to 135.1 in November, especially from the contraction in the indicator for
domestic automobile sales (-55.8% YoY). The investment side showed the same
picture. Private Investment Index (PII) decreased from 198.9 in October to 186.4
in November from the shrinkage in the production sector. Imports of capital
goods declined in almost all product categories and commercial car sales
dropped from temporary shutdown of the automobile industry.
- Confidence: Business Sentiment Index (BSI) in November increased from 36.7
in October (the lowest level since early 2009) to 39.0 in November. However, BSI
in November was still lower than September’s level of 48.5. The indicator for next
3 months’ outlook surveyed in November was 54.4, higher than 42.9 in October
survey.
Business sentiment index, current assessment and 3m
Manufacturing Production Index (MPI)
outlook
% yoy % 50 = neutral
40 70 60
30
20 65 55
10 60 50
0
-10 55 45
-20
50 40
-30
-40 45 35
-50
-60 40 30
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11
Manufacturing production index ISIC (% yoy, left) Capacity Utilization (% , right) BSI BSI 3m forward expectations
Source: Bloomberg, KBank Source: CEIC, KBank
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2. - Export value dropped by 13.1% YoY in November, amounting to USD15.3bn.
This was the lowest export value since July 2010 due to manufacturing
contraction from the flooding situation. Moreover, export of computer and
integrated circuit dropped from slowdown in global economy, especially in the
U.S. and the euro area.
- Import value dropped by 1.9% YoY in November, amounting to USD15bn. This
resulted from the decline in the electronic component, raw material used in the
chemical and plastic industries as well as the decrease in electrical machinery
due to the shrinkage in the production sector.
- This resulted in the reduction in the trade balance. Trade balance in November
was only USD218m, compared to the trade surplus of USD1.01bn in October.
Baht is weakening the most against the USD compared
External sector balances
to regional counterparts
US$, mn
CNY 1.3%
6000 TWD Change against USD, 1 month 0.2%
5000
JPY 0.1%
4000
MYR 0.1%
3000
2000 PHP -0.5%
1000 KRW -0.9%
0 IDR -1.0%
-1000
SGD -1.4%
-2000
INR -2.0%
-3000
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 THB -2.5%
Trade balance Services and transfers Balance of Payments -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5%
Source: Bloomberg, KBank Source: Bloomberg, KBank
Outlook for USD/THB
- Thai baht is seen weakening the most against the US dollar compared to
regional counterparts in December and weakening the most during the last week
of December due to month-end demand for the U.S. dollar.
- USD/THB opened at 30.85 this month and closed at 31.73 yesterday, traded at
the highest level of this year during these two days amid the thin volume as the
end of the year is approaching.
- In 2012, we expected USD/THB to trade in the range of 30.50-33.00 in the first
half of 2012 from the volatility of the euro-zone crisis which yet seem to be
resolved.
- However, when the euro-zone comes out with attractive solutions to keep every
member in the EMU while its debt problem is gradually resolved, capital flows are
seen to come to Asia again. In addition, the U.S. is likely to re-introduce its
quantitative easing (QE3) as an effective mechanism to monetize its debt
following a continual depreciation of the U.S. dollar. Consequently, we are likely
to see a downward bias of the USD/THB, which is projected to reach 29.5 at the
end of 2012.
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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.
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