1. KBank Capital Market Perspectives Market Updates
Macro / FX / Rates
Thai economy slowed down for the 5th straight quarter
21 November 2011
Overview:
Puttikul Ackarachalanonth
- Thailand’s economy in the third quarter grew by 0.5% (adjusted for seasonal puttikul.a@kasikornbank.com
factors) from the second quarter with the year-on-year growth of 3.5%. The
GDP in the third quarter rebounded from the second quarter when it contracted Nalin Chutchotitham
nalin.c@kasikornbank.com
by 0.2%qoq sa, as a result of the shortage of raw materials resulting from
Tsunamis in Japan. The actual numbers were rather disappointing as analysts
had expected a quarter-on-quarter expansion of 1.5% while the year-on-year
growth rate was expected to be 4.5%, according to a survey by Bloomberg,
- GDP growth in the third quarter resulted from the continuing growth in export,
private investment and manufacturing sector. Export in the third quarter
expanded by 27.3%, accelerated from 19.4% expansion in the second quarter.
The main export products are plastic products (+30.6%), electrical appliances
(+14.1%) and automobile (+10.8%). Private Investment expanded by 9.1%,
compared to 8.6% in the second quarter as a result of the increase in both
investment in machinery and equipment (+10.1%), as well as construction
investment (+6.1%). Manufacturing sector grew by 3.1% after the contraction of
0.1% in the second quarter because of the recovery in the major manufacturing
industries (automobile, hard disk drive and rubber and plastic products) in the
aftermath of Tsunamis in Japan.
- However, agricultural sector’s output reduced by 0.9%, compared to 6.7%
expansion in the second quarter as a result of severe floods in the North,
Northeast and Central regions of Thailand. Moreover, rubber production dropped
due to heavy rainfall in the Southern region. Prices of major agricultural products
(such as oil palm and rubber) also slowed down in the quarter.
- Household consumption expanded at 2.4%, compared to 2.7% growth in the
second quarter. This slowdown resulted from the flooding situation as consumers
became more cautious of their future consumption under the flooding situation.
- NESDB expects Thai economy to grow by 1.5% in 2011, revised down from
3.5-4.0% growth forecasted in August due to 2.3% contraction from the
floods. Consumption, investment and export are expected to grow by 2.5%,
4.7% and 17.2% respectively. Current account surplus is forecasted to be 2.2%
of GDP. Headline inflation is expected to be 3.8% while the unemployment rate is
expected to be at 0.7%. Kasikorn Research Center forecasted a 1.7% growth
for the year earlier this month.
GDP Growth %YoY and %QoQ Contribution to GDP growth
% % yoy/ contribution
15 15
10
10
5
5 2.7 3.5 2.8
2.3 1.8
1.1 0.5 0
0.2 -0.1 0
0
-5
Priv ate consumption Gov ernment C onsumption
-5 -2.5
-10 Gross fix ed capital formation Inv entory change
GDP yoy GDPsa qoq N et ex ports GDP y oy
-10 -15
1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11
Source: NESDB, KBank Source: NESDB, KBank
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2. - The Bank of Thailand’s senior officials, including the governor, had expressed
deep concerns about the impacts from the floods and are looking to revise down
their own projection of the GDP forecast this year. In mid-October, the BoT
forecasted this year’s growth to be 2.6% but officials said that the assumptions
has yet to take into consideration of all of the affected industrial parks. Note in
the figure below that the growth of domestic demand variables (private and public
consumption, fixed capital formation) had continued to slow down during the past
two quarters. With the deceleration of the global economy in mind, maintenance
of domestic demand growth could be less robust going forward if flooding
conditions are protracted.
- Last week, the BoT governor also said that confidence is also important and the
monetary policy committee would take into consideration that pace of output
rebound and the need to restore confidence for the next policy decision on Nov
th
30 . Consumer confidence index (surveyed by UTCC) dropped to its weakest
level since May 2009 at 72.4 in October, when the September reading had been
at 81.8.
- In any case, the bond market has already priced in at least 25bp of policy rate
cut. We expect the rate cut to be a one-off 50bp, noting that the next two MPC
meeting are almost two months apart (the first in 2012 is Jan 25th). While the
current policy rate of 3.50% is not high, compared to historical levels and inflation
rates this year and the next (BoT latest forecast shows 3.5% in 2012), we expect
a quicker and stronger response from the BoT, noting that monetary policy
transmission takes several quarters to impact the real sector, especially when
the level of interest rate is initially low.
Government bond yields reflecting policy rate cut
Growth of domestic demand has slowed down
expectation
% yoy % Government bond yield curve
15 3.55
3.50
10
3.45
5 3.40
3.35
0
3.30
1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11
-5 3.25
3.20
-10
Private consumption 3.15
-15 Government Consumption 1y 2y 3y 4y 5y 6y 7y 8y 9y 10y
Gross fixed capital formation TTM
-20 18-Nov-11 14-Oct-11
Source: NESDB, KBank Source: Bloomberg, KBank
Consumer confidence index and business sentiment
Auto sales in October does not bode well for Q4 data
index
'000 '000 120 60
60 100 110 55
50 80 100
50
90
40 60
45
80
30 40 40
70
20 20 35
60
10 0 50 30
Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 04 05 06 07 08 09 10 11
Passenger car Commercial car Total car sales (right axis) consumer confidence index (LHS) Business sentiment index (RHS)
Source: NESDB, KBank Source: Bloomberg, KBank
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3. Table 1. NESDB latest estimates (unit : % YoY or otherwise indicated)
2011 Forecast
2010
H1 Q3 2011 2012
GDP 7.8 3.0 3.5 1.5 4.5-5.5
Total investment 9.4 6.6 3.3 4.7 10.3
private 13.8 10.5 9.1 8.8 11.0
Public -2.2 -5.9 -10.9 -7.9 8.0
Total consumption 5.1 2.8 2.1 2.3 4.0
private 4.8 3.0 2.4 2.5 4.4
Public 6.4 1.4 1.1 1.2 2.0
Exports of goods (USD) 28.5 23.1 27.3 17.2 19.0
Exports volume 17.3 13.7 16.6 10.7 12.0
Imports of goods (USD) 36.7 27.7 33.4 27.2 25.0
Imports volume 26.5 19.1 24.4 16.7 17.0
Current account as % of
4.4 4.2 3.5 2.2 1.2
GDP
Inflation rate 3.3 3.6 4.1 3.8 3.5-4.0
Unemployment rate 1.0 0.7 0.7 0.7 0.7
Source: NESDB
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4. Table 2. Monthly Key Economic Indicators Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11
Manufacturing index 198.2 165.3 178.1 201.6 188.9 196.1 200.4 -
% YoY -6.7 -8.1 -3.7 3.8 -0.7 6.8 -0.51 -
Industrial capacity utilization rate (%) 66.1 54.4 58.8 64.1 63.1 65.0 65.4 -
Retail sales (% YoY) 17.4 14.8 15.8 16.5 15.7 15.7 - -
Total vehicle sales (units) 93,008 67,283 55,851 70,259 72,902 79,043 87,012 42,873
Motorcycle sales (units) 191,437 174,244 163,411 205,392 169,320 194,691 170,954
Unemployed labor force ('000 persons) 276 285 204 163 206 270 - -
Unemployment rate 0.7 0.8 0.5 0.4 0.5 0.7 - -
Consumer prices (% YoY) 3.14 4.04 4.19 4.06 4.08 4.29 4.03 4.19
core 1.62 2.07 2.48 2.55 2.59 2.85 2.92 2.89
Producer prices (% YoY) 5.9 6.6 6.2 4.5 5.2 6.0 5.6 4.2
External Accounts (USD mn, unless specified otherwise)
Exports 21,072.0 17,243.0 19,284.0 20,816.0 21,098.0 20,940.0 21,259.0 -
% YoY 30.7 25.0 17.3 16.4 36.4 28.5 18.4 -
Imports 17,325.0 15,932.0 17,098.0 17,017.0 16,546.0 20,235.0 18,840.0 -
% YoY 27.6 26.2 34.5 23.6 13.2 45.9 42.6 -
Trade balance 3,747.0 1,311.0 2,186.0 3,799.0 4,552.0 705.0 2,419.0 -
Tourist arrivals ('000) 1,765 1,506 1,376 1,490 1,550 1,725 1,500 -
% YoY 22.7 35.9 68.8 56.3 23.2 36.0 23.0 -
Current account balance 1,692.0 -350.0 -656.0 2,402.0 3,438.0 -697.0 404.0 -
Balance of payments 1,365 3,570 -2,600 -972 541 -556 -1,674 -
FX reserves (USD bn) 181.5 189.9 186.2 184.3 187.6 189.4 180.1 181.7
Forward position (USD bn) 20.8 21.4 23.5 24.4 26.4 26.3 27.3 28.7
Monetary conditions (THB bn, unless specified otherwise)
M1 1,345.6 1,347.0 1,395.8 1,336.6 1,336.3 1,345.2 1,327.8 -
% YoY 13.8 13.9 10.6 13.3 13.9 13.9 13.0 -
M2 12,284.4 12,497.9 12,577.2 12,614.4 12,799.5 12,875.3 12,912.5 -
% YoY 13.2 15.4 14.3 16.3 17.6 17.4 16.2 -
Bank deposits 10,891.6 10,980.6 11,092.8 10,993.2 11,077.8 11,153.5 11,081.6 -
% YoY 9.0 10.1 8.4 10.1 11.1 11.4 9.8 -
Bank loans 10,308.2 10,376.2 10,517.7 10,679.1 10,718.9 10,899.7 11,067.0 -
% YoY 15.0 15.4 15.6 16.1 16.3 17.2 17.3 -
Interest rates (% month end)
BOT 1 day repo (target) 2.50 2.75 2.75 3.00 3.25 3.50 3.50 3.50
Average large banks' minimum lending rate 6.62 6.75 6.75 6.87 7.13 7.19 7.25 7.25
Average large banks' 1 year deposit rate 1.67 1.86 1.86 2.03 2.16 2.28 2.41 2.41
Govt bond yield 1yr 2.83 3.00 3.15 3.50 3.64 3.48 3.57 3.32
Govt bond yield 5yr 3.41 3.38 3.50 3.78 3.86 3.42 3.60 3.23
Govt bond yield 10yr 3.75 3.70 3.79 3.91 4.02 3.51 3.75 3.38
Key FX (month end)
DXY US dollar index 75.86 72.93 74.64 74.30 73.90 74.12 78.55 76.17
USD/THB 30.28 29.88 30.32 30.73 29.76 29.93 31.19 30.71
JPY/THB 36.42 36.80 37.17 38.13 38.76 39.06 40.50 39.29
EUR/THB 42.86 44.24 43.64 44.56 42.84 43.01 41.76 42.56
Source: Bloomberg
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5. 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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