- The US economy grew 1% in Q2 2011, down from the previous estimate of 1.3%, and consumer confidence plunged to its lowest level since the recession. - The Fed hinted that it is prepared to take further action but gave no clear signals on a third round of quantitative easing. There was also no consensus at the FOMC on what form future stimulus might take. - Thailand's economy slowed in July due to weak global growth and high inventory levels, while inflation rose to 4.3% in August.

1. Economy Update
Economy Update
September 1, 2011
September 1 2011

2. Economic Update
• Last Friday, Bernanke speech could be summarized;
L t F id B k h ld b i d
– no hints on QE 3 from Fed and instead, pledged that Fed is "prepared to employ its tools as appropriate to
promote a stronger recovery".
– the September FOMC meeting will be extended to 2 days.
• Revised US GDP growth in Q2/2011 declined to 1% from 1.3%
d h / d l d f
• Consumer confidence plunged in August to 44.5 that is lowest since the 2007‐2009 recession.
(consensus 52.0, previous 59.2).
• FOMC, Mom of Aug, showed there was no clear consensus on what the stimulus would be.
FOMC, Mom of Aug, showed there was no clear consensus on what the stimulus would be.
– another round of asset purchases (QE3)
– Fed could shift the maturity of the assets it's buying to help drive mortgage rates lower.
– Fed could also cut the rate it pays banks on excess reserves deposited at the Fed, possibly incentivizing
banks to lend more.
banks to lend more.
– Fed could also buy long term asset indicating it would maintain the size of its balance sheet for a more
concrete time period.
Consumer Sentiment Survey GDP Growth and ISM index

3. Economic Update
• Economic Confidence in Aug was lower at 98.3
• Germany
– Unemployment rate was not changed at 7%
Unemployment rate was not changed at 7%
– German Chancellor approved measures which would allow EFSF to buy
government bonds and would increase its lending capacity.
Economic Sentiment and Industrial Production Unemployment Rate

4. Economic Update
2010 2011
• Thai Gov announced suspend the state Oil Q1 Q2 Jul Aug
Fund's levies on diesel and gasoline from Headline 3.30 3.01 4.10 4.08 4.29
Core 1.00 1.46 2.37 2.59 2.85
last Saturday would cut inflation by 0.5 PPI 9.40 6.40 5.80 5.20
percentage point.
percentage point. Policy Rate and Inflation
l d fl
– Finance Ministry's Fiscal Policy Office, said
that the policy interest rate should be lower
than the current 3.50%
• Headline and Core Inflation in Aug rose to
4.3% and 2.8% respectively.
• Thai Economy was slowdown in Jul due to
world economy and high inventory.
Manufacturing Production Index and CAPU USD/THB Movement

5. Interest Rate Update
THB Interest Movement
THB I M
USD Interest Movement

6. Expecting GDP
Global GDP 2009, USD 62 trn
Global GDP 2009 USD 62 trn Global GDP 2030, USD 129 trn
Global GDP 2030 USD 129 trn
Population change by region, 2010‐2030 Number of Patents

7. Global Trade Openness
Export Volume Index World Export to GDP
Thailand Export Structure

8. Economic update
• The S&P/Case‐Shiller index of home prices in 20 cities continued to see substantial fall of
4.5% yoy i J
4 5% in June, after a 4.6% drop in the 12 months ended in May.
ft 4 6% d i th 12 th d di M
• Personal Spending increased 0.8% in Jul from ‐0.1% in Jun.
• Pending Home Sales remain weak at ‐1.3%

9. Asia Market Update
• China
– PBOC may increase Reserve requirement ratio (existing 21.5%) due to
fighting inflation and calm down economy.
fi hti i fl ti d l d
– Increased Reserve requirement ratio 100‐150 bps equi remove liquidity RMB
900‐950 Bil.
• Japan
– Japan Finance Minister Yoshihiko Noda has been selected to be new PM.

10. Thai Economic Update
• Q2 GDP was weaker than expect, lower at
k h l GDP Growth and GDP Contribution
GDP Growth and GDP Contribution
2.6%
– Supply Disruption ‐> Export
– Pre‐election Caution ‐> Investment
Pre election Caution > Investment
• GDP Forecast 2011 declined to 3.5‐4%
• Trade Surplus in Jul = 2.8 Bil. USD
– Export = 21.5 Bil. USD
Export = 21 5 Bil USD
– Import = 18.7 Bil.USD
Trade Balance is continuing surplus in Jul Consumer Confidence

11. Fluctuating THB
Due to Political Uncertainties and Global Risk Aversion
2011 Foreign Flows (Million Baht) and USDTHB
350,000 31
Somewhat clearer
Inflation domestic political
300,000 fears picture in July
30.5
30 5
250,000 Strong external
Political uncertainties
Balance, 4.271
prior to the July
Billion USD in Feb
general election
200,000 Solid growth
BOT’s tight MP 30
t
stance
150,000 Risk off
sentiment
100,000 in August 29.5
50,000
29
0
Jan
Feb
Apr
Mar
Jun
May
010
August
July
M
A
M
F
50 000
-50,000
J
20
J
28.5
-100,000
-150,000
-150 000 Stocks Bonds USDTHB (RHS) 28
11
Source: The Stock Exchange of Thailand, the Thai Bond Market Association, Bloomberg and SCB FM analysis

12. USD/THB Movement
Avg = 30.31
1 Mth
1 Mth 3 Mth
3 Mth 6 Mth
6 Mth
Spot 29.97 29.97 29.97
Swap point
pp 0.08 0.23 0.43
All in Rate 30.05 30.20 30.40

13. Quantitative easing (QE3)?
Possible but not very soon and might not be that helpful
y g p
“…that the recent economic weakness may prove more persistent than expected and that
deflationary risks might reemerge … another approach would be to initiate more securities
purchases … “
Source: July‐2011, Semi‐annual testimony to the congress
US real GDP growth: Weakness? US core inflation: Deflationary risk?
Unit: %QOQ SAAR Unit: %YOY
Start of QE2
Start f
St t of QE2
Source: SCB EIC analysis based on data from Bloomberg
13

14. Federal Reserve District
• Board of Governors & Reserve Bank Districts
• Board of Governors
• 1‐Boston
• 2‐New York
2 New York
• 3‐Philadelphia
• 4‐Cleveland
• 5‐Richmond
• 6‐Atlanta
• 7‐Chicago
• 8‐St. Louis
• 9‐Minneapolis
9 Minneapolis
• 10‐Kansas City
• 11‐Dallas
• 12‐San Francisco