Business sentiment worsened in July as a result of an escalating cost of production, according to a Bank of Thailand survey. The Business Sentiment Index (BSI) in July was only at 45, compared to 46.3 in the previous month. The confidence index in easing production costs declined from 41 to 38.4 in July.
"The increasing cost of production is an important issue, especially when we are looking for private investment. It is the risk that erodes business confidence," said Amara Sriphayak, a senior BOT director.
Amara believed that producers would not pass on rising costs to customers while the economy is still only picking up slowly. Although they have thin margins they cannot mark up prices as they would like.
Economic uncertainty remained in the first rank of all business obstacles. Political instability is of further concern for the real sector, rising to third place from fourth.
Although business confidence is below the confidence level of 50 in July, sentiment has gradually improved. This is indicated by forecasts for the index over the next three months, which has increased from 50.4 to 51.3, from all commercial elements except production costs.
Amara is optimistic that the improving economic conditions, the government's stimulus package as well as the global economic recovery would help bolster confidence here.
According to the BOT, the Manufacturing Production Index (MPI) continued to improve in July, regarding domestic and export markets.
Capacity utilisation picked up in accordance with higher production to 61.6 per cent in July. It rose slightly from 60.2 per cent in June, but remained lower than the normal level of 6870 per cent.
The Private Consumption Index showed an impressive outlook in July in terms of both level and growth.
It expanded 3.4 per cent from previous month, compared with 2.6 per cent in June. It contracted 1.8 per cent from the same period of last year compared to a 2.7percent drop in June.
The government's budget disbursement was 75.2 per cent in contrast to 76.4 per cent last year. However, the amount of money was bigger.
Monday, August 31, 2009
Thursday, August 27, 2009
WHY DID THE YEN BECOME A RESERVE CURRENCY?
Japan is the secondlargest economy in the world, with US$4.8 trillion (Bt 163.7 trillion) in GDP, after the United States ($14.3 trillion), as measured at the end of 2008. Because she has continuously run current account surpluses, she also has the largest net foreign exchange position, namely more foreign exchange assets than liabilities, with $5 trillion in gross foreign exchange assets and net $3.1 trillion in net foreign exchange assets at the end of September 2008.
By contrast, China had $4.4 trillion in GDP, gross foreign exchange assets of $2.3 trillion and net foreign exchange assets of $1 trillion at the end of 2007. In other words, Japan still has three time larger net foreign exchange assets than China even though China has more foreign exchange reserves.
In the 1960s, when the yen was still fixed at 360 to the $1, the Japanese economy grew at an average of 10 percent per annum. In the 1970s, when the yen began to appreciate and there was an oil shock, the growth slowed to an average of 5 percent. However, there was a massive stock market and real estate bubble after the Plaza Accord of 1985, when the yen appreciated sharply from 239 to the dollar to 128 in 1992. It continued to appreciate till April 1995 when the yen hit 80 and then went into reversal until it depreciated to 147 in June 1998, stopped only by joint intervention by the Bank of Japan and the US Treasury.
According to economic textbooks, a country with a continuous surplus should have an appreciating currency. It is interesting to note that Japan had a continuous current account surplus despite the volatile yen. Indeed, Japan had to export capital in large amounts in order to keep the yen at a competitive level. In the 1980s, Japan began to internationalise the yen in an effort to make it a reserve currency and Tokyo an international financial centre. However, after nearly 17 years of dismal economic growth, when growth was at best between 12 per cent a year, the role of the yen had declined, whilst the number for foreign companies listed on the Tokyo Stock Exchange had also declined.
Why did the yen not succeed as an international reserve currency? After all, Japan had actively promoted the yen by granting considerable amount of cheap official aid in yen loans. Japan banks branched overseas in the 1980s and granted substantial yen loans abroad. Because yen interest rates were cheap, initially many countries borrowed in yen, but very soon discovered that the high volatility in the US dollar-yen rate made the yen quite costly to hedge and to borrow.
The reason why the yen was pushed as an international reserve currency and Tokyo as an international financial centre was strategic. Given an ageing population, Japan wanted to diversify from a manufacturing exporter to a surplus country with longterm income from its savings. If the yen was an international reserve currency, the Bank of Japan could earn seigniorage, namely an interest-free loan from foreigners using the yen as reserve currency. Furthermore, Tokyo could earn services income as an international financial centre dealing with yen securities, currency trading and commercial services.
So the failure to achieve major reserve currency status despite the wealth and industrial power of Japan was strange. There are three conditions for becoming an international reserve currency - the value of the currency should be stable, transaction costs should be low and transparency should be high. Unfortunately, the Japanese yen has been very volatile and transaction costs in dealing in yen were also not cheap.
The volatility in yen was due to several reasons, mostly from wrong policies. Firstly, Japan's position as a major exporter of yen meant that there was a yen "overhang". A Japanese investor in US treasuries earning a spread of say 4 per cent between US Treasury rate and Japanese deposit rate would find that his income would be wiped out if the yen appreciated more than 4 per cent a year, which happened quite often.
The Thai borrower in yen, however, would find that an appreciation in yen would also wipe out the lower borrowing cost of yen compared to borrowing in Thai baht or US dollars. The borrower, however, would be naturally hedged if he earned an income in yen.
But because of the longterm tendency of the yen to appreciate, Japanese exporters preferred to export in yen and import in dollars, thus protecting their income in yen terms and saving on import costs if the yen appreciated.
This practice of passing the foreign exchange costs to the borrowers made the yen more volatile, because when the yen began to appreciate, both the borrower and the investor sold dollars to buy yen to protect themselves from the appreciation, causing the yen to go through large swings.
You can be a reserve currency only if you have a wide variety of financial and real assets to purchase at attractive yields with liquid markets. Because of the massive asset bubble in Japan in 1989, the basic trend of financial assets and real estate has been downward, and yields on Japanese bonds, stocks and bank deposits are low under the near zero interest rate policy. Hence, dollar/yen turnover has steadily declined to 13 per cent of global foreign currency turnover in 2007 compared with 20 per cent in 1998. The position of the yen as a reserve currency was further pushed aside with the rise of the euro in 1999.
Next, we shall look at the reserve currency status of the euro.
By contrast, China had $4.4 trillion in GDP, gross foreign exchange assets of $2.3 trillion and net foreign exchange assets of $1 trillion at the end of 2007. In other words, Japan still has three time larger net foreign exchange assets than China even though China has more foreign exchange reserves.
In the 1960s, when the yen was still fixed at 360 to the $1, the Japanese economy grew at an average of 10 percent per annum. In the 1970s, when the yen began to appreciate and there was an oil shock, the growth slowed to an average of 5 percent. However, there was a massive stock market and real estate bubble after the Plaza Accord of 1985, when the yen appreciated sharply from 239 to the dollar to 128 in 1992. It continued to appreciate till April 1995 when the yen hit 80 and then went into reversal until it depreciated to 147 in June 1998, stopped only by joint intervention by the Bank of Japan and the US Treasury.
According to economic textbooks, a country with a continuous surplus should have an appreciating currency. It is interesting to note that Japan had a continuous current account surplus despite the volatile yen. Indeed, Japan had to export capital in large amounts in order to keep the yen at a competitive level. In the 1980s, Japan began to internationalise the yen in an effort to make it a reserve currency and Tokyo an international financial centre. However, after nearly 17 years of dismal economic growth, when growth was at best between 12 per cent a year, the role of the yen had declined, whilst the number for foreign companies listed on the Tokyo Stock Exchange had also declined.
Why did the yen not succeed as an international reserve currency? After all, Japan had actively promoted the yen by granting considerable amount of cheap official aid in yen loans. Japan banks branched overseas in the 1980s and granted substantial yen loans abroad. Because yen interest rates were cheap, initially many countries borrowed in yen, but very soon discovered that the high volatility in the US dollar-yen rate made the yen quite costly to hedge and to borrow.
The reason why the yen was pushed as an international reserve currency and Tokyo as an international financial centre was strategic. Given an ageing population, Japan wanted to diversify from a manufacturing exporter to a surplus country with longterm income from its savings. If the yen was an international reserve currency, the Bank of Japan could earn seigniorage, namely an interest-free loan from foreigners using the yen as reserve currency. Furthermore, Tokyo could earn services income as an international financial centre dealing with yen securities, currency trading and commercial services.
So the failure to achieve major reserve currency status despite the wealth and industrial power of Japan was strange. There are three conditions for becoming an international reserve currency - the value of the currency should be stable, transaction costs should be low and transparency should be high. Unfortunately, the Japanese yen has been very volatile and transaction costs in dealing in yen were also not cheap.
The volatility in yen was due to several reasons, mostly from wrong policies. Firstly, Japan's position as a major exporter of yen meant that there was a yen "overhang". A Japanese investor in US treasuries earning a spread of say 4 per cent between US Treasury rate and Japanese deposit rate would find that his income would be wiped out if the yen appreciated more than 4 per cent a year, which happened quite often.
The Thai borrower in yen, however, would find that an appreciation in yen would also wipe out the lower borrowing cost of yen compared to borrowing in Thai baht or US dollars. The borrower, however, would be naturally hedged if he earned an income in yen.
But because of the longterm tendency of the yen to appreciate, Japanese exporters preferred to export in yen and import in dollars, thus protecting their income in yen terms and saving on import costs if the yen appreciated.
This practice of passing the foreign exchange costs to the borrowers made the yen more volatile, because when the yen began to appreciate, both the borrower and the investor sold dollars to buy yen to protect themselves from the appreciation, causing the yen to go through large swings.
You can be a reserve currency only if you have a wide variety of financial and real assets to purchase at attractive yields with liquid markets. Because of the massive asset bubble in Japan in 1989, the basic trend of financial assets and real estate has been downward, and yields on Japanese bonds, stocks and bank deposits are low under the near zero interest rate policy. Hence, dollar/yen turnover has steadily declined to 13 per cent of global foreign currency turnover in 2007 compared with 20 per cent in 1998. The position of the yen as a reserve currency was further pushed aside with the rise of the euro in 1999.
Next, we shall look at the reserve currency status of the euro.
LOAN DEMAND EXPECTED TO RISE
More borrowers are likely to seek housing and other conฌsumer loans this quarter due to the positive outlook for the property market, according to a Bank of Thailand survey.
Demand for corporate loans will possibly also rise, particularly from small and mediumsized enterprises, said the survey on financial institutions' lending.
The institutions will, however, continue to tighten lending standards as a result of concerns over asset quality. The debtrepayment ability of both the business and household sectors remains fragile until any economic recovery is sustainable.
"Financial institutions anticipate that the demand for housing loans and other consumer loans will slightly increase. This is a result of an expected improvement in the property sector in the second quarter of the year while lending interest rates have been low," said the central bank's report.
Demand for creditcard loans, however, is expected to decline in the current quarter because of the worsening creditworthiness of debtors.
The financial institutions will increasingly tighten their credit standards for all types of the consumer loans, due to the concerns over asset quality - particularly for housing loans.
"It indicates the financial institutions are more cautious about running businesses while the global and domestic economies have been fragile," the central bank said.
Deputy Governor Bandid Nijathaworn said earlier that the banking system's loans had dropped Bt220 billion over the first six months of the year or 3.4 per cent from the end of last year, due to lower demand and tighter credit approvals.
In the second quarter, the demand for housing and other consumer loans slightly increased from the previous quarter, thanks to attractive lending rates.
The government's measures to boost the property sector, particularly townhouses, also helped bolster the demand for mortgages.
Demand for other consumer loans rose in the second quarter after demand for essential goods picked up. But consumers continued to be cautious about their spending, indicating fragile confidence.
Demand for creditcard loans, however, dropped from the first quarter because consumers were not confident about income security and their job status.
The survey, financial institutions tightened their housingloan standards more than had been expected in the second quarter, despite higher demand. They were concerned about economic recovery and people's debtrepayment ability.
They continued to tighten the criteria for creditcard loans because cardholders' ability to repay debt declined.
An increasing number of debtors were unable pay their debt in time, while those who could not repay within 90 days and had their cards cancelled also rose.
The survey found that demand for corporate loans from large companies declined in the second quarter, in line with demand for inventory production.
Demand for loans for fixed investment and working capital was stable from the first quarter, indicating the economy had already bottomed out.
Demand for corporate loans will possibly also rise, particularly from small and mediumsized enterprises, said the survey on financial institutions' lending.
The institutions will, however, continue to tighten lending standards as a result of concerns over asset quality. The debtrepayment ability of both the business and household sectors remains fragile until any economic recovery is sustainable.
"Financial institutions anticipate that the demand for housing loans and other consumer loans will slightly increase. This is a result of an expected improvement in the property sector in the second quarter of the year while lending interest rates have been low," said the central bank's report.
Demand for creditcard loans, however, is expected to decline in the current quarter because of the worsening creditworthiness of debtors.
The financial institutions will increasingly tighten their credit standards for all types of the consumer loans, due to the concerns over asset quality - particularly for housing loans.
"It indicates the financial institutions are more cautious about running businesses while the global and domestic economies have been fragile," the central bank said.
Deputy Governor Bandid Nijathaworn said earlier that the banking system's loans had dropped Bt220 billion over the first six months of the year or 3.4 per cent from the end of last year, due to lower demand and tighter credit approvals.
In the second quarter, the demand for housing and other consumer loans slightly increased from the previous quarter, thanks to attractive lending rates.
The government's measures to boost the property sector, particularly townhouses, also helped bolster the demand for mortgages.
Demand for other consumer loans rose in the second quarter after demand for essential goods picked up. But consumers continued to be cautious about their spending, indicating fragile confidence.
Demand for creditcard loans, however, dropped from the first quarter because consumers were not confident about income security and their job status.
The survey, financial institutions tightened their housingloan standards more than had been expected in the second quarter, despite higher demand. They were concerned about economic recovery and people's debtrepayment ability.
They continued to tighten the criteria for creditcard loans because cardholders' ability to repay debt declined.
An increasing number of debtors were unable pay their debt in time, while those who could not repay within 90 days and had their cards cancelled also rose.
The survey found that demand for corporate loans from large companies declined in the second quarter, in line with demand for inventory production.
Demand for loans for fixed investment and working capital was stable from the first quarter, indicating the economy had already bottomed out.
Yen hits 5-week high vs dollar on risk aversion
The yen rose broadly yesterday, hitting its highest level in more than a month against the dollar and sterling as a slide in Asian stocks raised concerns a risk rally in past months may have been overdone.
The Japanese currency climbed to a five-week high against the dollar and made inroads against high-yielders including the Australian and New Zealand dollars.
European shares were slightly lower on the day, giving up early gains. Shanghai stocks, which have been a driver of risk trades in past weeks, dropped 0.7%.
The yen is strengthening today on doubts about the view that China will pull the global economy out of recession,said Lutz Karpowitz, currency strategist at Commerzbank in Frankfurt.
Some in the market said a report that Chinas sovereign wealth fund would increase new foreign investment this year by around 10 times from last year, and was exploring investment in Japan, was also a support factor for the yen.
By 0925 GMT, the dollar traded 0.6%lower at 93.65 yen, having fallen as low as 93.37 yen on electronic trading platform EBS, its lowest since July 22.
The yen rallied across the board, pushing sterling down roughly 1% on the day to around 151.40 yen, its lowest since mid-July. The euro and Australian and New Zealand currencies fell more than half a percent on the day against the Japanese currency.
Despite its losses against the yen, the dollar gained against the euro, which slipped 0.3% to $1.4250. Risk aversion pushed the Australian and New Zealand dollars each down 0.5% against the US currency.
The Japanese currency climbed to a five-week high against the dollar and made inroads against high-yielders including the Australian and New Zealand dollars.
European shares were slightly lower on the day, giving up early gains. Shanghai stocks, which have been a driver of risk trades in past weeks, dropped 0.7%.
The yen is strengthening today on doubts about the view that China will pull the global economy out of recession,said Lutz Karpowitz, currency strategist at Commerzbank in Frankfurt.
Some in the market said a report that Chinas sovereign wealth fund would increase new foreign investment this year by around 10 times from last year, and was exploring investment in Japan, was also a support factor for the yen.
By 0925 GMT, the dollar traded 0.6%lower at 93.65 yen, having fallen as low as 93.37 yen on electronic trading platform EBS, its lowest since July 22.
The yen rallied across the board, pushing sterling down roughly 1% on the day to around 151.40 yen, its lowest since mid-July. The euro and Australian and New Zealand currencies fell more than half a percent on the day against the Japanese currency.
Despite its losses against the yen, the dollar gained against the euro, which slipped 0.3% to $1.4250. Risk aversion pushed the Australian and New Zealand dollars each down 0.5% against the US currency.
Nokia makes own Money
The world's top mobile phone maker Nokia said on Wednesday it would launch a mobile financial service next year targeting consumers, mainly in emerging markets, with a phone but no banking account.
Nokia said its Nokia Money service was based on the mobile payment platform of Obopay, a privately-owned firm that Nokia invested in earlier this year,and it is now building up a network of agents.
Obopay, which uses text messaging and mobile internet access, charges users a fee to send money or to top up their accounts.
"Mobile-enabled financial services has tremendous growth opportunities," Nokia chief development officer Mary McDowell said, noting there are four billion mobile phone users globally but only 1.6 billion bank accounts and one billion credit cards.
"There is pretty significant gap between people, especially in emerging markets, who have a mobile device yet don't have a bank account," McDowell said.
The announcement is the latest push by Nokia to diversify its business as global handset sales have gone from slowing down over the past few years to contracting due to the recession. The firm also said this week that it would start to make laptops.
Mobile money is one of the hottest topics in the wireless world, but so far take-up of services hasbeen limited mostly to a few emerging markets, as in developed countries, the popularity of online banking has been a brake on mobile money.
The Consultative Group to Assist the Poor (CGAP), a US-based microfinance policy and research centre, has said the market for mobile financial services to poor people in emerging markets will surge from nothing to $5 billion in 2012.
The service began in early 2007 with a launch of Safaricom's M-PESA in Kenya,which has attracted 6.5 million customers, or one in six Kenyans. By the end of 2009, CGAP expects more than 120 mobile money implementations in developing markets.
Nokia did not announce any partnerships with operators or financial institutions, only saying that Nokia Money would be rolled out gradually to selected markets starting in early 2010.
Nokia said its Nokia Money service was based on the mobile payment platform of Obopay, a privately-owned firm that Nokia invested in earlier this year,and it is now building up a network of agents.
Obopay, which uses text messaging and mobile internet access, charges users a fee to send money or to top up their accounts.
"Mobile-enabled financial services has tremendous growth opportunities," Nokia chief development officer Mary McDowell said, noting there are four billion mobile phone users globally but only 1.6 billion bank accounts and one billion credit cards.
"There is pretty significant gap between people, especially in emerging markets, who have a mobile device yet don't have a bank account," McDowell said.
The announcement is the latest push by Nokia to diversify its business as global handset sales have gone from slowing down over the past few years to contracting due to the recession. The firm also said this week that it would start to make laptops.
Mobile money is one of the hottest topics in the wireless world, but so far take-up of services hasbeen limited mostly to a few emerging markets, as in developed countries, the popularity of online banking has been a brake on mobile money.
The Consultative Group to Assist the Poor (CGAP), a US-based microfinance policy and research centre, has said the market for mobile financial services to poor people in emerging markets will surge from nothing to $5 billion in 2012.
The service began in early 2007 with a launch of Safaricom's M-PESA in Kenya,which has attracted 6.5 million customers, or one in six Kenyans. By the end of 2009, CGAP expects more than 120 mobile money implementations in developing markets.
Nokia did not announce any partnerships with operators or financial institutions, only saying that Nokia Money would be rolled out gradually to selected markets starting in early 2010.
GH BANK WANTS RULES APPLIED NATONWIDE
The government Housing Bank will ask the Board of Investment to extend the new rules for affordable housing to the provinces in order to provide home-ownership opportunities to low-income earners across the country.
The bank also will offer a special mortagage package for the BoI's low-priced housing project, including a low interest rate long repayment term and maybe easider approval criteria, GH Bank president Khan Parachuabmoh said yesterday.
The new rules for residential projects located in BoI's Zone 1, covering greater Bangkok, went in to effect on June 10.
The new rules are revised from the old rules used since 1993. They include relaxing project size form a minimum of 150 units to 50 units to 50 units and distinguishing between condominium and low-rise projects.
For condos, units must be at least 28 square metres and priced not more than Bt1 million. For low rises, units must have at least 70 square metres of usable space and be priced not more than Bt1.2 million.
Khan siad that if the new rules were applied nationwide, that would help lowe-income earners have the ability to buy a new home.
Buyers who want to finance a Bt1-million residence with BoI privileges must show net income of at least Bt25,000 per month. This will be enough to pay instalments of Bt8,000 per month.
The Thai Real Estate Association, Thai Condominium Association and Business Housing Association agreed with this idea, Tehy also want the BoI to ease its rules further to allow mixed condo projects, with some units priced up to Bt1 million but others priced over Bt1 million, so that they would be more commercially viable.
Follwing this suggestion, the associations offer the condition that mixed condo projects would have at least 50 units priced not more that Bt1 million each.
Industry Minister Charnchai Chairungrueng said the government was ready to consider the ideas as soon as possible after GH Bank and the associations propose them in writing to the BoI.
"We will do anything that helps lower-income people to have a home more esilythan before. This also is one of the government's stimulus measures to drive the economy throuhg the property sector, he said.
As of August 14.25 residential projects with 8,690 units had applied for BoI tax incentives under the new rules. With an estimated comstruction cost of Bt1.89 billion, their total project value would be about Bt8 billion.
Issara Boonyong, president of the Business Housing Association, said the association believed that the new rules would boost BoI-promoted residences to at least 20,000 units worth more than Bt20 billion a year.
Atip Bichanond, president of the Thai Concominium Assocition, said that if the government also stretched the rules for condo projects to include mixed projects, there may be more than 20,000 units a year.
Kittipol Pramoj na Ayudhya, president of the Thai Real Estate Association, said that if the governemtn applied the new rules upcountry, it would support the government's policy to implement a property tax.
That is because it will force provincial landlords to develop their vacant land rather than hold their property, as is the case now.
The bank also will offer a special mortagage package for the BoI's low-priced housing project, including a low interest rate long repayment term and maybe easider approval criteria, GH Bank president Khan Parachuabmoh said yesterday.
The new rules for residential projects located in BoI's Zone 1, covering greater Bangkok, went in to effect on June 10.
The new rules are revised from the old rules used since 1993. They include relaxing project size form a minimum of 150 units to 50 units to 50 units and distinguishing between condominium and low-rise projects.
For condos, units must be at least 28 square metres and priced not more than Bt1 million. For low rises, units must have at least 70 square metres of usable space and be priced not more than Bt1.2 million.
Khan siad that if the new rules were applied nationwide, that would help lowe-income earners have the ability to buy a new home.
Buyers who want to finance a Bt1-million residence with BoI privileges must show net income of at least Bt25,000 per month. This will be enough to pay instalments of Bt8,000 per month.
The Thai Real Estate Association, Thai Condominium Association and Business Housing Association agreed with this idea, Tehy also want the BoI to ease its rules further to allow mixed condo projects, with some units priced up to Bt1 million but others priced over Bt1 million, so that they would be more commercially viable.
Follwing this suggestion, the associations offer the condition that mixed condo projects would have at least 50 units priced not more that Bt1 million each.
Industry Minister Charnchai Chairungrueng said the government was ready to consider the ideas as soon as possible after GH Bank and the associations propose them in writing to the BoI.
"We will do anything that helps lower-income people to have a home more esilythan before. This also is one of the government's stimulus measures to drive the economy throuhg the property sector, he said.
As of August 14.25 residential projects with 8,690 units had applied for BoI tax incentives under the new rules. With an estimated comstruction cost of Bt1.89 billion, their total project value would be about Bt8 billion.
Issara Boonyong, president of the Business Housing Association, said the association believed that the new rules would boost BoI-promoted residences to at least 20,000 units worth more than Bt20 billion a year.
Atip Bichanond, president of the Thai Concominium Assocition, said that if the government also stretched the rules for condo projects to include mixed projects, there may be more than 20,000 units a year.
Kittipol Pramoj na Ayudhya, president of the Thai Real Estate Association, said that if the governemtn applied the new rules upcountry, it would support the government's policy to implement a property tax.
That is because it will force provincial landlords to develop their vacant land rather than hold their property, as is the case now.
Nokia plans to launch mobile banking
Nokia, the world's leading mobile-phone maker, will launch a service enabling people to make financial transactions with their cellphones, the Finnish telecoms giant said yesterday.
The Nokia Money service will make it possible "to send money to another person by using the person's mobile phone number, as well as to pay merchants for goods and services, pay their utility bills, or recharge their pre-paid SIM cards," the company of Nikia Money agents where consumers can deposit money or withdraw cash from their mobile accounts.
"We believe mobile financial services offer a market opportunity with long term growh potential," Nokia's chief development officer, Mary long term growth potential," Nokia's chief development officer, Mary McDowell, said in the statement. "In many countries, mobilephone ownership significantly exceeds bank account usage," she said noting that there are more than four billion mobile-phone users worldwide compared to 1.6 billion bank accounts.
Nokia is racing to diversify its operations as its rivals Apple and Research in Motion experience raging successes with their respective "smartphones", the iPhone and the Blackberry.
The Nokia Money service will make it possible "to send money to another person by using the person's mobile phone number, as well as to pay merchants for goods and services, pay their utility bills, or recharge their pre-paid SIM cards," the company of Nikia Money agents where consumers can deposit money or withdraw cash from their mobile accounts.
"We believe mobile financial services offer a market opportunity with long term growh potential," Nokia's chief development officer, Mary long term growth potential," Nokia's chief development officer, Mary McDowell, said in the statement. "In many countries, mobilephone ownership significantly exceeds bank account usage," she said noting that there are more than four billion mobile-phone users worldwide compared to 1.6 billion bank accounts.
Nokia is racing to diversify its operations as its rivals Apple and Research in Motion experience raging successes with their respective "smartphones", the iPhone and the Blackberry.
UK FINANCIAL WATCHDOG CHIEF BACKS BANK TAX
The head of Britain's financial watchdog said in comments published on Wednesday that if needed he would back a multi-billion-pound tax onbanks as a measure to curb large bonuses for banking executives.
Adair Turner, chairman of the Financial Services Authority, said he would support taxes on the financial sector in a bid to prevent such bonuses for executives if they continued with excessive risk-taking.
Excessive risk-taking has been blamed for helping spark the global financial crisis and prompted a multi-billion pound taxpayer bailout of the British banking sector.
Lord Turner also criticised some activities of London's financial sector as "socially useless" and questioned whether it has grown too large.
"If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneartion profit," Turner said in an interview with current affairs magazine Prospect.
"Higher capital requirements against trading activities will be our most powerful tool to eliminate excessive activity and profits. And if increased capital requirements are insufficient I am happy to consier taxes on financial transactions...Tobin taxes."
A Tobin tax is a small tax on foreign exchange transactions, originally proposed by American economist James Tobin in the 1970s to discourage speculative trading.
Turner said a tax on the millions of transactions in the sector would cut banks' profits and reduce the pool of money available for bonuses.
He said the level of pay in the sector may be caused by "over-simplistic financial deregulation", describing this as the "really fundamental question".
"This is not a question that any of the politicians have focused on but I think it's an important and legitimate issue of public concern," he said.
Turner's comments were published yesterday on the front pages of several British newspapers.
Aides to Britain's finance minister Alistair Darling told the Financial Times that such taxes were not under consideration.
The comments come after the FSA earlier this month outlined new rules on bonuses for banking executives, unveiling a new code of practice that will come into effect from 2010.
Analysts argue that large bonuses, particularly in Europe and the United States, damaged the ability of leading bank executives to take well-judged business risks in the run-up to the meldown.
Adair Turner, chairman of the Financial Services Authority, said he would support taxes on the financial sector in a bid to prevent such bonuses for executives if they continued with excessive risk-taking.
Excessive risk-taking has been blamed for helping spark the global financial crisis and prompted a multi-billion pound taxpayer bailout of the British banking sector.
Lord Turner also criticised some activities of London's financial sector as "socially useless" and questioned whether it has grown too large.
"If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneartion profit," Turner said in an interview with current affairs magazine Prospect.
"Higher capital requirements against trading activities will be our most powerful tool to eliminate excessive activity and profits. And if increased capital requirements are insufficient I am happy to consier taxes on financial transactions...Tobin taxes."
A Tobin tax is a small tax on foreign exchange transactions, originally proposed by American economist James Tobin in the 1970s to discourage speculative trading.
Turner said a tax on the millions of transactions in the sector would cut banks' profits and reduce the pool of money available for bonuses.
He said the level of pay in the sector may be caused by "over-simplistic financial deregulation", describing this as the "really fundamental question".
"This is not a question that any of the politicians have focused on but I think it's an important and legitimate issue of public concern," he said.
Turner's comments were published yesterday on the front pages of several British newspapers.
Aides to Britain's finance minister Alistair Darling told the Financial Times that such taxes were not under consideration.
The comments come after the FSA earlier this month outlined new rules on bonuses for banking executives, unveiling a new code of practice that will come into effect from 2010.
Analysts argue that large bonuses, particularly in Europe and the United States, damaged the ability of leading bank executives to take well-judged business risks in the run-up to the meldown.
IMF foresees 3% GDP dip
Thailand's economic contraction this year will be limited to 3% as the government increases spending to counter falling exports, the International Monetary Fund said yesterday.
The government's budget deficit is expected to widen to 4.5% of gross domestic product in the current fiscal year ending Sept 30 from 0.5% in the previous year, the Washington-based lender said in a statement. The economy may expand 1% in 2010.
With domestic demand weak and external demand faltering, public spending is the key to limiting growth cuts, the IMF said."An early start on the three-year public investment programme is recommended. This would support demand beyond 2009."
Thailand's recession eased last quarter, helped by public spending and improving export orders. The government plans to spend 1.06 trillion baht through 2012 to buoy growth and consumption, in addition to a 116.7-billionbaht stimulus package implemented in the first half of 2009.
The Bank of Thailand on Wednesday kept its benchmark interest rate unchanged at a third straight meeting after lowering borrowing costs by a total of 2.5 percentage points in four meetings from December to April.
The central bank has scope for further cuts in the policy rate, the fund said. The impact of monetary policy may be limited because of a weak economy and excess liquidity in the financial system, the IMF said.
The economy, which contracted 4.9% in the second quarter from a year earlier, may shrink as much as 3.5% in 2009, the National Economic and Social Development Board said on Monday.Thailand is experiencing a V-shaped recovery, Chakramon Phasukvanich,a member of the central bank's Monetary Policy Committee, said yesterday.
The baht is broadly trading at the appropriate level, the IMF added. The Bank of Thailand is committed to a flexible exchange rate and will intervene only to smooth excessive volatility in the currency, the fund added.
"The Bank of Thailand's continued commitment to a flexible exchangerate system is welcome," the IMF said.
The baht has traded in a range of 33.88 to 34.41 per dollar since the start of June as the central bank intervened to stall gains and relaxed rules on overseas investments. It was little changed at 34.02 yesterday.
The government's budget deficit is expected to widen to 4.5% of gross domestic product in the current fiscal year ending Sept 30 from 0.5% in the previous year, the Washington-based lender said in a statement. The economy may expand 1% in 2010.
With domestic demand weak and external demand faltering, public spending is the key to limiting growth cuts, the IMF said."An early start on the three-year public investment programme is recommended. This would support demand beyond 2009."
Thailand's recession eased last quarter, helped by public spending and improving export orders. The government plans to spend 1.06 trillion baht through 2012 to buoy growth and consumption, in addition to a 116.7-billionbaht stimulus package implemented in the first half of 2009.
The Bank of Thailand on Wednesday kept its benchmark interest rate unchanged at a third straight meeting after lowering borrowing costs by a total of 2.5 percentage points in four meetings from December to April.
The central bank has scope for further cuts in the policy rate, the fund said. The impact of monetary policy may be limited because of a weak economy and excess liquidity in the financial system, the IMF said.
The economy, which contracted 4.9% in the second quarter from a year earlier, may shrink as much as 3.5% in 2009, the National Economic and Social Development Board said on Monday.Thailand is experiencing a V-shaped recovery, Chakramon Phasukvanich,a member of the central bank's Monetary Policy Committee, said yesterday.
The baht is broadly trading at the appropriate level, the IMF added. The Bank of Thailand is committed to a flexible exchange rate and will intervene only to smooth excessive volatility in the currency, the fund added.
"The Bank of Thailand's continued commitment to a flexible exchangerate system is welcome," the IMF said.
The baht has traded in a range of 33.88 to 34.41 per dollar since the start of June as the central bank intervened to stall gains and relaxed rules on overseas investments. It was little changed at 34.02 yesterday.
Wednesday, August 26, 2009
FUND MANAGERS UNFAZED BY RED'S RALLY
Fund managers believe the red-shirt protest this weekend will be peaceful and not have a negative impact on the stock market, and that Asian stock markets are promising for investors. Vana Bulboon, CEO of UOB Asset Management, said the current global economic recovery would positively impact the Asian market. Financial institutions in Asia have been least affected by the global financial crisis, and so the Asian economy will turn around the soonest.
He believes the political situation in Thailand as well as the redshirt protest due on Sunday will not lead to further violence, and that foreign investors can be expected to understand the situation very well.
"There has been a problem for a long time in Thai politics, and foreigners already know about this. But once the situation settles well, I believe foreign investors will invest more in the Thai market," Vana said.
Jotika Savanananda, president of SCB Asset Management, also believes the red shirts' demonstration will not lead to any violence or affect economic activity. The country's political problems have built up over a long time and are well understood by foreign investors, she said.
"I believe the redshirt protest won't affect investment in the capital market right now," Jotika said.
She added that the local stock market was currently strong enough, with Thai economic indicators showing signs of recovery in line with a global recovery.
She said the economy next year is expected to record positive growth. The Bank of Thailand yesterday forecast grossdomesticproduct growth for 2010 at 4.55 per cent.
Meanwhile, UOB Asset Management recently launched the UOB Smart Asia Recovery fund, with the main focus in bigcap stocks in Asia. It invests 37.5 per cent in China, 25 per cent in Singapore, 18.75 per cent in Hong Kong, 12.5 per cent in Taiwan and 6.25 per cent in Thailand.
The SCB Asian Emerging Market Fund has invested in Asian stock markets, with emerging markets so far generating satisfactory results - and a high investment proportion in Thailand.
The returns in the three and sixmonth periods to August 25 were 16.36 per cent and 69.28 per cent, respectively. The net asset value was at Bt6.8052 per unit as of August 25.
He believes the political situation in Thailand as well as the redshirt protest due on Sunday will not lead to further violence, and that foreign investors can be expected to understand the situation very well.
"There has been a problem for a long time in Thai politics, and foreigners already know about this. But once the situation settles well, I believe foreign investors will invest more in the Thai market," Vana said.
Jotika Savanananda, president of SCB Asset Management, also believes the red shirts' demonstration will not lead to any violence or affect economic activity. The country's political problems have built up over a long time and are well understood by foreign investors, she said.
"I believe the redshirt protest won't affect investment in the capital market right now," Jotika said.
She added that the local stock market was currently strong enough, with Thai economic indicators showing signs of recovery in line with a global recovery.
She said the economy next year is expected to record positive growth. The Bank of Thailand yesterday forecast grossdomesticproduct growth for 2010 at 4.55 per cent.
Meanwhile, UOB Asset Management recently launched the UOB Smart Asia Recovery fund, with the main focus in bigcap stocks in Asia. It invests 37.5 per cent in China, 25 per cent in Singapore, 18.75 per cent in Hong Kong, 12.5 per cent in Taiwan and 6.25 per cent in Thailand.
The SCB Asian Emerging Market Fund has invested in Asian stock markets, with emerging markets so far generating satisfactory results - and a high investment proportion in Thailand.
The returns in the three and sixmonth periods to August 25 were 16.36 per cent and 69.28 per cent, respectively. The net asset value was at Bt6.8052 per unit as of August 25.
MASSIVE LENDING PROGRAMME BY SPECIALISED BANKS TO BOOST RECOVERY
State-owned banks have begun a campaign of aggressive lending aimed at pulling the country out of recession.
Measures involve fast-track loans on three-day approval, waiving loanguarantee fees and offering credit to foreign importers.
Finance Minister Korn Chatikavanij and executives of seven specialised financial institutions yesterday launched fast-track lending, in which borrowers could obtain loans within three days, or no more than 21 days.
The Finance Ministry wants these banks to increase their combined target lending this year from Bt625.5 billion to Bt927 billion.
Fast-track lending is major feature of the scheme. Korn said banks would not only reduce days of waiting, but also make loan documents simpler, with fewer pages.
To achieve the new lending target, Korn said the Samll Business Credit Guarantee Corporation (SBCG) would waive its 1.75-per-cent-per-year guarantee fee for the first year of the loan term. It will also double its per-bank-per-borrower loan guarantee to Bt40 million.
SBCG chairman Pichit Akrathit pledged to meet the target of providing loan guarantees worth Bt30 billion even though the scheme had not yet made much progress. So far, the corporation has provided guarantees worth only Bt3 billion.
Pichit said if the SBCG could fully implement its pledge, it would lead to bank lending worth up to Bt100 billion.
The Finance Ministry next week will ask the Cabinet to provide a financial subsidy to the SBCG to compensate it for the cost of implementing the project. For the whole project, the corporation needs Bt2.5 billion in compensation from the government.
Export-Import Bank of Thailand (Exim Bank) president Apichai Boontherawara said his bank would offer credit to foreign importers, in order to promote the country's goods and services. To mitigate its risk, Exim Bank will advance loans via foreign banks. Apichai said he believed foreign importers could repay their debts even though they faced a lack of liquidity in their countries.
The bank will also offer credit to suppliers of Thai exporters.
For fast-track Exim credit, the bank will offer a revolving credit line of up to Bt10 million and notify eligible exporters within five business days of the completion of loan documents. Teh bank will also offer working-capital loans of more than Bt10 million and notify exporters of whether their application has passed preliminary screening within seven days.
Government Savings Bank (GSB) president and CEO Lersuk Chuladesa has promised to reduce loan documents from eight pages to two, group guarantees will require only two people rather than three, and loan approvals will be notified within three days.
This applies to microcredit loans for low-income applicants from the People's Bank and credit to small entrepreneurs who run businesses from their townhouses.
Ennoo Suesuwan, acting president of the Bank for Agriculture and Agricutltural Cooperatives (BAAC), said the bank's fast-track lending would be offered to 680,000 farmers and ordinary borrowers, with a total loan target of Bt22 billion. The bank's existing customers will get loans within five days, while new clients will be notified with 15 days.
Government Housing Bank (GHB) president Khan Prachuabmoh said h is bank would offer mortgages totalling Bt15 billion to people buying homes from land developers or building their own homes. The interest rate would be 1.5 per cent for the first three months, 2.99 per cent for the rest of the first year and the bank's minimum retail rate minus 2 per cent for the second and third years.
The finance minister said the GSB and the Small and Medium Enterprise Development Bank of Thailand (SME Bank) would take care of the tourism industry. He said new loans would contribute 0.5-0.9 per cent to expansio of gross domestic product and that he expected 730,000 people to access them.
The specialised financial institutions have lent 99.54 per cent of their earlier combined target of Bt625.5 billion. The BAAC has lent 105 per cent, the GSB 116 per cent, the GHB 73.55 per cent, the SME Bank 64.76 per cent, Exim 50.26 per cent and the Ialamic Bank 75.78 per cent.
Lending by the specialised financial institutions rose 6.5 per cent in the first half of the year, while commercial bank's lending contracted 0.4 per cent in the first five months.
Measures involve fast-track loans on three-day approval, waiving loanguarantee fees and offering credit to foreign importers.
Finance Minister Korn Chatikavanij and executives of seven specialised financial institutions yesterday launched fast-track lending, in which borrowers could obtain loans within three days, or no more than 21 days.
The Finance Ministry wants these banks to increase their combined target lending this year from Bt625.5 billion to Bt927 billion.
Fast-track lending is major feature of the scheme. Korn said banks would not only reduce days of waiting, but also make loan documents simpler, with fewer pages.
To achieve the new lending target, Korn said the Samll Business Credit Guarantee Corporation (SBCG) would waive its 1.75-per-cent-per-year guarantee fee for the first year of the loan term. It will also double its per-bank-per-borrower loan guarantee to Bt40 million.
SBCG chairman Pichit Akrathit pledged to meet the target of providing loan guarantees worth Bt30 billion even though the scheme had not yet made much progress. So far, the corporation has provided guarantees worth only Bt3 billion.
Pichit said if the SBCG could fully implement its pledge, it would lead to bank lending worth up to Bt100 billion.
The Finance Ministry next week will ask the Cabinet to provide a financial subsidy to the SBCG to compensate it for the cost of implementing the project. For the whole project, the corporation needs Bt2.5 billion in compensation from the government.
Export-Import Bank of Thailand (Exim Bank) president Apichai Boontherawara said his bank would offer credit to foreign importers, in order to promote the country's goods and services. To mitigate its risk, Exim Bank will advance loans via foreign banks. Apichai said he believed foreign importers could repay their debts even though they faced a lack of liquidity in their countries.
The bank will also offer credit to suppliers of Thai exporters.
For fast-track Exim credit, the bank will offer a revolving credit line of up to Bt10 million and notify eligible exporters within five business days of the completion of loan documents. Teh bank will also offer working-capital loans of more than Bt10 million and notify exporters of whether their application has passed preliminary screening within seven days.
Government Savings Bank (GSB) president and CEO Lersuk Chuladesa has promised to reduce loan documents from eight pages to two, group guarantees will require only two people rather than three, and loan approvals will be notified within three days.
This applies to microcredit loans for low-income applicants from the People's Bank and credit to small entrepreneurs who run businesses from their townhouses.
Ennoo Suesuwan, acting president of the Bank for Agriculture and Agricutltural Cooperatives (BAAC), said the bank's fast-track lending would be offered to 680,000 farmers and ordinary borrowers, with a total loan target of Bt22 billion. The bank's existing customers will get loans within five days, while new clients will be notified with 15 days.
Government Housing Bank (GHB) president Khan Prachuabmoh said h is bank would offer mortgages totalling Bt15 billion to people buying homes from land developers or building their own homes. The interest rate would be 1.5 per cent for the first three months, 2.99 per cent for the rest of the first year and the bank's minimum retail rate minus 2 per cent for the second and third years.
The finance minister said the GSB and the Small and Medium Enterprise Development Bank of Thailand (SME Bank) would take care of the tourism industry. He said new loans would contribute 0.5-0.9 per cent to expansio of gross domestic product and that he expected 730,000 people to access them.
The specialised financial institutions have lent 99.54 per cent of their earlier combined target of Bt625.5 billion. The BAAC has lent 105 per cent, the GSB 116 per cent, the GHB 73.55 per cent, the SME Bank 64.76 per cent, Exim 50.26 per cent and the Ialamic Bank 75.78 per cent.
Lending by the specialised financial institutions rose 6.5 per cent in the first half of the year, while commercial bank's lending contracted 0.4 per cent in the first five months.
DON'T COUNT YOUR CHICKENS JUST YET
Economic indicators of recovery look positive, but we must not be carried away by false hope
Like the National Economic and Social Development Board, the Bank of Thailand has been particularly upbeat about the prospects of economic recovery in the fourth quarter and next year. Although weakness will continue into the third quarter, by the time we reach the fourth quarter, and barring any more political crises, the Thai economy will stage a rebound.
Overall, the Thai economy is still registering negative growth of 3.5 per cent this year. But next year the growth will turn positive at 4.5-5 per cent. Gross domestic product will return to the pre-crisis level of the first quarter of 2008, by the fourth quarter of 2010.
We believe that the Bank of Thailand and the NSEDB are being too optimistic. It is too early to say whether we are out of the woods yet. The month of October will be decisive. By that time, companies, banks and the government will have issued balance sheets, so that we really know the health of the global economy.
The financial markets will react accordingly, once the October results come out.
Since the Thai economy still relies heavily on the health of global economic conditions, its growth will continue to be dictated by external factors.
According to Macquarie Equities Research (August 20), the research house remains cautious on the outlook for Asian equities as a whole, because of concern about the state of global consumer demand.
"Developed world consumer spending (ie: external demand) remains very weak, credit availability for US and European households continues to tighten, exporter margins are coming under pressure again, and valuations for the externally exposed sectors are not compelling," it warns.
"Recent data have reinforced that concern. So while some investors have been turning their attention to exporters recently, we caution against this and recommend maintaining a firm focus on companies with domestic growth plays.
Still, the Bank of Thailand has decided to play it safe by keeping its interest rate at 1.25 per cent for the third consecutive month, saying the recovery of the Thai economy is still fragile. The bank's monetary policy committee said global economic and financial conditions have improved in the second quarter, particularly in Asia and Thailand itself.
"Nevertheless the committee views that there is still a high degree of uncertainty about the sustainability of the global economic recovery," Paiboon Kittisrikangwan, assistant governor of the Bank of Thailand, said in statement.
Last year the world started to feel the pinch of the crisis. The financial turmoil heightened in the final quarter of 2008. In the first quarter of this year, the situation remained bleak. This forced governments all over the world to announce huge stimulus packages. The Thai government has also introduced a series of stimulus measures designed to counter the economic downturn. So it comes as no surprise that the figures for the second quarter began to improve. On Monday, the NESDB reported that the Thai economy grew by 2.2 per cent between the first and second quarter, although it still shrank 4.9 per cent year-on-year. This prompted many to jump to the conclusion that the worst is over and that Thailand is now on a recovery path.
In the US, the sentiment is similar. Ben Bernanke has received a vote of confidence to continue his job as chairman of the Federal Reserve for a second term. Apparently the US does not want to change horses in midstream. Bernanke has been responsible for injecting massive liquidity to save the US financial system from collapsing. He has stopped the bleeding of the US financial system, which has yet to go through any drastic restructuring to see off years of financial bubbles. Unemployment in the US is likely to climb to 10 per cent and the US deficit will reach US$1.5 trillion, somewhat less than the $1.8 trillion projected earlier.
The US government now projects economic growth this year to record minus 2.8 per cent, compared to a positive growth of 2 per cent for 2010 and 3.8 per cent for 2011. Again, this US projection is rather rosy, considering the fact that drastic corporate and financial restructuring has not yet taken place.
In the meantime, Thailand's export-driven economy has been hit hard over the past year by domestic political turmoil that has exacerbated the impact of the global downturn. Protesters loyal to fugitive former premier Thaksin Shinawatra are set to rally in Bangkok at the weekend, just four months after derailing a key Asean summit in April and rioting in the capital. If the political situation deteriorates, chance of improvement in the fourth quarter will evaporate.
Like the National Economic and Social Development Board, the Bank of Thailand has been particularly upbeat about the prospects of economic recovery in the fourth quarter and next year. Although weakness will continue into the third quarter, by the time we reach the fourth quarter, and barring any more political crises, the Thai economy will stage a rebound.
Overall, the Thai economy is still registering negative growth of 3.5 per cent this year. But next year the growth will turn positive at 4.5-5 per cent. Gross domestic product will return to the pre-crisis level of the first quarter of 2008, by the fourth quarter of 2010.
We believe that the Bank of Thailand and the NSEDB are being too optimistic. It is too early to say whether we are out of the woods yet. The month of October will be decisive. By that time, companies, banks and the government will have issued balance sheets, so that we really know the health of the global economy.
The financial markets will react accordingly, once the October results come out.
Since the Thai economy still relies heavily on the health of global economic conditions, its growth will continue to be dictated by external factors.
According to Macquarie Equities Research (August 20), the research house remains cautious on the outlook for Asian equities as a whole, because of concern about the state of global consumer demand.
"Developed world consumer spending (ie: external demand) remains very weak, credit availability for US and European households continues to tighten, exporter margins are coming under pressure again, and valuations for the externally exposed sectors are not compelling," it warns.
"Recent data have reinforced that concern. So while some investors have been turning their attention to exporters recently, we caution against this and recommend maintaining a firm focus on companies with domestic growth plays.
Still, the Bank of Thailand has decided to play it safe by keeping its interest rate at 1.25 per cent for the third consecutive month, saying the recovery of the Thai economy is still fragile. The bank's monetary policy committee said global economic and financial conditions have improved in the second quarter, particularly in Asia and Thailand itself.
"Nevertheless the committee views that there is still a high degree of uncertainty about the sustainability of the global economic recovery," Paiboon Kittisrikangwan, assistant governor of the Bank of Thailand, said in statement.
Last year the world started to feel the pinch of the crisis. The financial turmoil heightened in the final quarter of 2008. In the first quarter of this year, the situation remained bleak. This forced governments all over the world to announce huge stimulus packages. The Thai government has also introduced a series of stimulus measures designed to counter the economic downturn. So it comes as no surprise that the figures for the second quarter began to improve. On Monday, the NESDB reported that the Thai economy grew by 2.2 per cent between the first and second quarter, although it still shrank 4.9 per cent year-on-year. This prompted many to jump to the conclusion that the worst is over and that Thailand is now on a recovery path.
In the US, the sentiment is similar. Ben Bernanke has received a vote of confidence to continue his job as chairman of the Federal Reserve for a second term. Apparently the US does not want to change horses in midstream. Bernanke has been responsible for injecting massive liquidity to save the US financial system from collapsing. He has stopped the bleeding of the US financial system, which has yet to go through any drastic restructuring to see off years of financial bubbles. Unemployment in the US is likely to climb to 10 per cent and the US deficit will reach US$1.5 trillion, somewhat less than the $1.8 trillion projected earlier.
The US government now projects economic growth this year to record minus 2.8 per cent, compared to a positive growth of 2 per cent for 2010 and 3.8 per cent for 2011. Again, this US projection is rather rosy, considering the fact that drastic corporate and financial restructuring has not yet taken place.
In the meantime, Thailand's export-driven economy has been hit hard over the past year by domestic political turmoil that has exacerbated the impact of the global downturn. Protesters loyal to fugitive former premier Thaksin Shinawatra are set to rally in Bangkok at the weekend, just four months after derailing a key Asean summit in April and rioting in the capital. If the political situation deteriorates, chance of improvement in the fourth quarter will evaporate.
Euro hits 2 1/2-month high vs sterling after Ifo
The euro hit 2-1/2 month highs against sterling yesterday after an improvement in German business morale re inforced signs that Europes largest economy was recover ing from recession.
The Munich-based Ifo think tanks business climate index rose to 90.5 from an upwardly revised 87.4 in July, beating an 88.9 median forecast in a Reuters poll.
The euro initially hit the days high against the dollar after the data, but trimmed some gains as some analysts said the data was lower than the more bullish expectations in the market.
The euro rose to 87.85 pence against the British currency, its highest level since early June. It was last seen at 87.74 pence.
We tend to favour positioning for a stronger euro against the pound at the moment rather than the dollar, said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ in London. Thats where the clearest positioning is going for ward if you want to position for an earlier euro zone recovery compared to the UK.
By 0902 GMT, the euro was 0.2% up on the day at $1.4318 against the dollar.
Everyone was expecting a good (Ifo)number and they all got a bit long of euro and euro crosses ahead of the release, a London-based trader said,explaining the pullback on euro.
Ranges were narrow with activity still low due to the holiday season in parts of the northern hemisphere.
Market participants said that a 1.78%rise in the Shanghai stock market was suppor ting demand for riskier assets even as European shares posted slight losses.
The Munich-based Ifo think tanks business climate index rose to 90.5 from an upwardly revised 87.4 in July, beating an 88.9 median forecast in a Reuters poll.
The euro initially hit the days high against the dollar after the data, but trimmed some gains as some analysts said the data was lower than the more bullish expectations in the market.
The euro rose to 87.85 pence against the British currency, its highest level since early June. It was last seen at 87.74 pence.
We tend to favour positioning for a stronger euro against the pound at the moment rather than the dollar, said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ in London. Thats where the clearest positioning is going for ward if you want to position for an earlier euro zone recovery compared to the UK.
By 0902 GMT, the euro was 0.2% up on the day at $1.4318 against the dollar.
Everyone was expecting a good (Ifo)number and they all got a bit long of euro and euro crosses ahead of the release, a London-based trader said,explaining the pullback on euro.
Ranges were narrow with activity still low due to the holiday season in parts of the northern hemisphere.
Market participants said that a 1.78%rise in the Shanghai stock market was suppor ting demand for riskier assets even as European shares posted slight losses.
BERNANKE REAPPOINTMENT DRAWS FIRE FROM SENATE
President Obama's decision seen as a mistake by some
Some US senators expressed worries or outright disgust on Tuesday at President Barack Obama's announcement that he was nominating Federal Reserve Chairman Ben Bernanke to a second term.
Democratic Senator Christopher Dodd, the chairman of the Senate Banking Committee, cited "serious differences" with the Fed over the past few years, but added "reappointing Chairman Bernanke is probably the right choice".
"Bernanke was too show to act during the early stages of the fore-closure crisis, but he ultimatelly demonstrated effective leadership and his reappointment sends the right signal to the markets," said Dodd.
Dodd, who will chair Bernanke's Senate confirmation hearings, said he had "serious concerns" about the Fed's "failure to protect consumers" and vowed vigorous questioning on what authorities the central bank should have done.
The top Republican on the panel, Senator Richard Shelby, said the hearings should include questions about the Fed's role in the US response to the global financial meltdown sparked by a collapse in the US housing market.
The committee "should carefully examine the impact of the Fed's failures as a back regulator, how such failures contributed to the financial crisis, and whether Chairman Bernanke's performance as the chief regulator merits his reconfirmation", said Shelby.
"We must be mindful that this crisis is not over. We must determine whether Chairman Bernanke has the strategic vision to chart the necessary course going forward and the resolve to stick to it," said Shelby.
In his announcement, Obama said Bernanke's bold "out-of-the-box" thinking would help steer the US economy out of the worst slump since the 1930s.
But independent Senator Bernie Sanders charged that Bernanke had been "asleep at the wheel" while the global economic meltdown developed and "did nothing to move our financial system onto safer grounds."
Sanders, who sits on the Senate Budget Committee, accused the Fed chief of abetting "the greed, irresponsibility and illegal behaviour of Wall Street. We need a chairman of the Federal Reserve who is more concerned about expanding the productive economy, increasing decent-paying jobs for all Americans, than continuing to fan the flames of Wall Street greed and outrageous compensation "packages", the lawmaker said in a statement.
And Republican Senator Jim Bunning accused Bernanke of helping Obama rather than being an independent central banker and bluntly declared: "I don't think he deserves another therm as chairman of the Federal Reserve."
He accused Bernanke of "acting as an arm" of Obama's Treasury Department and supporting Obama's "out-of-control spending policies that have led to America's mounting debt and will put the taxpayers trillions of dollars more in the red".
Bernanke "lacks the independent voice we need in a Federal Reserve chairman and has refused to provide any sort of transparency or account-ability to the American people when it comes to who exactly the Fed is lending to and how much they are lending", said Bunning.
Bunning is a member of the Senate's committees on Finance as well as Banking, Housing and Uran Affairs.
Bernanke's renomination allows him to redefine the Federal Reserve's mission as he expands its power over financial markets and pulls back on a credit surge the central bank used to keep the economy from collapse, economists say.
His agenda during the next four years will include elevating the Fed's role in reducing excessive risk in major financial institutions, figuring out how to curtail asset bubbles, and scaling back US$1.2 trillion (Bt41 trillion) of monetary stimulus.
"He will have the opportunity to permanently change the structure of the Federal Reserve system," said Vincent Reinhart, a former director of the Fed's Monetary Affairs Division who is now a resident scholar at the American Enterprise Institute, a Washington-based research group.
The stakes are high, said Henry Kaufman, president of Henry Kaufman&Co in New York. "Success in overhauling supervision of the financial system would mean improved economic conditions for an extended period of time," Kaufman said. "Failure would mean a return to continued volatility."
Some US senators expressed worries or outright disgust on Tuesday at President Barack Obama's announcement that he was nominating Federal Reserve Chairman Ben Bernanke to a second term.
Democratic Senator Christopher Dodd, the chairman of the Senate Banking Committee, cited "serious differences" with the Fed over the past few years, but added "reappointing Chairman Bernanke is probably the right choice".
"Bernanke was too show to act during the early stages of the fore-closure crisis, but he ultimatelly demonstrated effective leadership and his reappointment sends the right signal to the markets," said Dodd.
Dodd, who will chair Bernanke's Senate confirmation hearings, said he had "serious concerns" about the Fed's "failure to protect consumers" and vowed vigorous questioning on what authorities the central bank should have done.
The top Republican on the panel, Senator Richard Shelby, said the hearings should include questions about the Fed's role in the US response to the global financial meltdown sparked by a collapse in the US housing market.
The committee "should carefully examine the impact of the Fed's failures as a back regulator, how such failures contributed to the financial crisis, and whether Chairman Bernanke's performance as the chief regulator merits his reconfirmation", said Shelby.
"We must be mindful that this crisis is not over. We must determine whether Chairman Bernanke has the strategic vision to chart the necessary course going forward and the resolve to stick to it," said Shelby.
In his announcement, Obama said Bernanke's bold "out-of-the-box" thinking would help steer the US economy out of the worst slump since the 1930s.
But independent Senator Bernie Sanders charged that Bernanke had been "asleep at the wheel" while the global economic meltdown developed and "did nothing to move our financial system onto safer grounds."
Sanders, who sits on the Senate Budget Committee, accused the Fed chief of abetting "the greed, irresponsibility and illegal behaviour of Wall Street. We need a chairman of the Federal Reserve who is more concerned about expanding the productive economy, increasing decent-paying jobs for all Americans, than continuing to fan the flames of Wall Street greed and outrageous compensation "packages", the lawmaker said in a statement.
And Republican Senator Jim Bunning accused Bernanke of helping Obama rather than being an independent central banker and bluntly declared: "I don't think he deserves another therm as chairman of the Federal Reserve."
He accused Bernanke of "acting as an arm" of Obama's Treasury Department and supporting Obama's "out-of-control spending policies that have led to America's mounting debt and will put the taxpayers trillions of dollars more in the red".
Bernanke "lacks the independent voice we need in a Federal Reserve chairman and has refused to provide any sort of transparency or account-ability to the American people when it comes to who exactly the Fed is lending to and how much they are lending", said Bunning.
Bunning is a member of the Senate's committees on Finance as well as Banking, Housing and Uran Affairs.
Bernanke's renomination allows him to redefine the Federal Reserve's mission as he expands its power over financial markets and pulls back on a credit surge the central bank used to keep the economy from collapse, economists say.
His agenda during the next four years will include elevating the Fed's role in reducing excessive risk in major financial institutions, figuring out how to curtail asset bubbles, and scaling back US$1.2 trillion (Bt41 trillion) of monetary stimulus.
"He will have the opportunity to permanently change the structure of the Federal Reserve system," said Vincent Reinhart, a former director of the Fed's Monetary Affairs Division who is now a resident scholar at the American Enterprise Institute, a Washington-based research group.
The stakes are high, said Henry Kaufman, president of Henry Kaufman&Co in New York. "Success in overhauling supervision of the financial system would mean improved economic conditions for an extended period of time," Kaufman said. "Failure would mean a return to continued volatility."
Modernform plans expansion via M&A activity
Furniture manufacturer and distributor Modernform Group is planning mergers and acquisitions next year, both domestically and abroad but especially in other Asean countries.
The move will be part of a long-term growth strategy, CEO Thaksa Busayapoka told a press conference yesterday.
The M&As will involve firms that are at least related to the furniture business, but the company cannot say now how much it will spend, because that will depend largely on the opportunity presented, he |said.
Funding can come from the company's cash flow, bank borrowing or debenture issues, depending on how much is needed. However, the company's debt-to-equity ratio is now only 0.2, giving it much leeway to assume more debt if funding must come from banks or the bond market, Thaksa said.
Modernform Group is Thailand's furniture leader. Ninety-six per cent of its revenue comes from domestic sales and the rest from exports.
Its main market is contract projects, accounting for 70 per cent of revenue. These include both residential and office developments, both private and government. The rest comes from retail sales.
The group wants to maintain annual growth of 15-20 per cent over the next three to five years, and the company must expand to meet this target, Thaksa said.
However, it achieved first-half revenue of only Bt1.13 billion for a net profit of Bt114.11 million, down 21.5 per cent and 41.7 per cent |year on year, respectively.
Thaksa said the drop in revenue and net profit was in line with the country's economic slowdown and that most of its customers - property developers - had delayed their construction projects.
This meant Modernform had to delay delivery of its products, forcing it to hold on to Bt670 million worth of inventory. Seventy per cent of that will be delivered in the current half of this year and the rest next year.
Its high inventory combined with stiff competition caused Modernform's gross margin to drop from an average of 37 per cent last year to 36 per cent in this year's first half, Thaksa said.
However, the company believes demand in the furniture market will recover in the second half, raising the gross margin to 36.5 per cent by year-end.
The company has targeted full-year revenue of Bt2.46 billion for net profit of Bt283 million, down 14.28 per cent and 26 per cent, respectively, from last year.
The company expects full-year revenue of Bt3.2 billion for a net profit Bt420 million in 2011 following its aggressive expansion next year, Thaksa said.
The move will be part of a long-term growth strategy, CEO Thaksa Busayapoka told a press conference yesterday.
The M&As will involve firms that are at least related to the furniture business, but the company cannot say now how much it will spend, because that will depend largely on the opportunity presented, he |said.
Funding can come from the company's cash flow, bank borrowing or debenture issues, depending on how much is needed. However, the company's debt-to-equity ratio is now only 0.2, giving it much leeway to assume more debt if funding must come from banks or the bond market, Thaksa said.
Modernform Group is Thailand's furniture leader. Ninety-six per cent of its revenue comes from domestic sales and the rest from exports.
Its main market is contract projects, accounting for 70 per cent of revenue. These include both residential and office developments, both private and government. The rest comes from retail sales.
The group wants to maintain annual growth of 15-20 per cent over the next three to five years, and the company must expand to meet this target, Thaksa said.
However, it achieved first-half revenue of only Bt1.13 billion for a net profit of Bt114.11 million, down 21.5 per cent and 41.7 per cent |year on year, respectively.
Thaksa said the drop in revenue and net profit was in line with the country's economic slowdown and that most of its customers - property developers - had delayed their construction projects.
This meant Modernform had to delay delivery of its products, forcing it to hold on to Bt670 million worth of inventory. Seventy per cent of that will be delivered in the current half of this year and the rest next year.
Its high inventory combined with stiff competition caused Modernform's gross margin to drop from an average of 37 per cent last year to 36 per cent in this year's first half, Thaksa said.
However, the company believes demand in the furniture market will recover in the second half, raising the gross margin to 36.5 per cent by year-end.
The company has targeted full-year revenue of Bt2.46 billion for net profit of Bt283 million, down 14.28 per cent and 26 per cent, respectively, from last year.
The company expects full-year revenue of Bt3.2 billion for a net profit Bt420 million in 2011 following its aggressive expansion next year, Thaksa said.
GROWTH MAY REACH 5% IN 2010
The Monetary Policy Committee (MPC) is optimistic the economy will post an impressive recovery to record growth of 4.5-5 per cent next year, bringing nominal gross domestic product back to the pre-2008 crisis level.
The committee yesterday kept the policy interest rate unchanged at 1.25 per cent, heaving a big sigh of relief that risks to the global and domestic economies have declined.
The global recovery, however, is uncertain, while the domestic political conflict remains a risk.
Inflationary pressure has been low even though oil prices have continued to rise recently. However, high oil prices could become a threat to economic recovery.
"I think we'll be able to step out of the crisis, which will return GDP in next year's fourth quarter to the same level as in last year's first quarter. It means the country's income will have lost opportunities for three years," said Chakramon Phasukvanich, a member of the MPC.
He said the economy would possibly pick up at the end of this year, with a contraction of 3.5 per cent for the entire year, and then expand by 4.5-5 per cent next year.
The Bank of Thailand had previously projected the economy would post positive growth of 3-5 per cent next year, driven by government spending and exports.
Chakramon said Map Ta Put investment projects worth more than Bt200 billion and the government's stimulus package would significantly drive the economy.
The recovery in many export sectors, rising employment, improved business and consumer confidence and retail sales have also pointed to a V-shaped recovery, he said.
Paiboon Kittisrikangwan, Bank of Thailand assistant governor, said the central bank would not formally revise the economic-growth projection until October.
Despite higher-than-expected growth in the second quarter, the bank's latest projection for an economic contraction of 3-4.5 per cent this year therefore remains in place.
The sustainability of the global economic recovery, which relies on the G-3 (the US, Japan and the euro zone) economies, has been in doubt. The financial problems of the US housing sector have continued, which means there has not been a recovery in consumer spending.
In addition, the problems faced by US and Europe financial institutions have not yet been resolved. They could even worsen, said Paiboon, eroding the sustainability of a global recovery.
"There is concern that US consumption, which has driven the global economy, will not be able to pick up on a continuous basis," said the assistant governor.
Chakramon said if the US financial institutions were to function by giving loans to the real sector, the US economy would be back on track.
He said the global recovery currently was at least L-shaped but would not necessarily end up as U- or V-shaped.
The MPC hopes the government's budget disbursement will be on target in a bid to boost the economy, with private investment possibly returning from the middle of next year.
If not, the economy could be in trouble, Chakramon said, adding that political uncertainty continued to be a risk.
Paiboon said the central bank was not yet prepared to say the policy interest rate had reached its lowest level. He said the bank remained ready to tackle any internal and external risk factors.
The committee yesterday kept the policy interest rate unchanged at 1.25 per cent, heaving a big sigh of relief that risks to the global and domestic economies have declined.
The global recovery, however, is uncertain, while the domestic political conflict remains a risk.
Inflationary pressure has been low even though oil prices have continued to rise recently. However, high oil prices could become a threat to economic recovery.
"I think we'll be able to step out of the crisis, which will return GDP in next year's fourth quarter to the same level as in last year's first quarter. It means the country's income will have lost opportunities for three years," said Chakramon Phasukvanich, a member of the MPC.
He said the economy would possibly pick up at the end of this year, with a contraction of 3.5 per cent for the entire year, and then expand by 4.5-5 per cent next year.
The Bank of Thailand had previously projected the economy would post positive growth of 3-5 per cent next year, driven by government spending and exports.
Chakramon said Map Ta Put investment projects worth more than Bt200 billion and the government's stimulus package would significantly drive the economy.
The recovery in many export sectors, rising employment, improved business and consumer confidence and retail sales have also pointed to a V-shaped recovery, he said.
Paiboon Kittisrikangwan, Bank of Thailand assistant governor, said the central bank would not formally revise the economic-growth projection until October.
Despite higher-than-expected growth in the second quarter, the bank's latest projection for an economic contraction of 3-4.5 per cent this year therefore remains in place.
The sustainability of the global economic recovery, which relies on the G-3 (the US, Japan and the euro zone) economies, has been in doubt. The financial problems of the US housing sector have continued, which means there has not been a recovery in consumer spending.
In addition, the problems faced by US and Europe financial institutions have not yet been resolved. They could even worsen, said Paiboon, eroding the sustainability of a global recovery.
"There is concern that US consumption, which has driven the global economy, will not be able to pick up on a continuous basis," said the assistant governor.
Chakramon said if the US financial institutions were to function by giving loans to the real sector, the US economy would be back on track.
He said the global recovery currently was at least L-shaped but would not necessarily end up as U- or V-shaped.
The MPC hopes the government's budget disbursement will be on target in a bid to boost the economy, with private investment possibly returning from the middle of next year.
If not, the economy could be in trouble, Chakramon said, adding that political uncertainty continued to be a risk.
Paiboon said the central bank was not yet prepared to say the policy interest rate had reached its lowest level. He said the bank remained ready to tackle any internal and external risk factors.
EX-BANKER DEDICATES HIS LIFE TO HELPING AIDS ORPHANS
If not for the sake of compassion and humanity, then look at it as a way of helping society. That was the message from a former banker who now devotes his life to young HIV/Aids victims in China.
Speaking at a recent function in Bangkok, Chung To, the winner of the Ramon Magsaysay Award in 2007, talked about the need for communities to take action and care for these victims.
"We really have to change and transform society," said Chung To, who is the director of the Chi Heng Foundation.
"If we do not help them now, they will grow up uneducated and vulnerable, becoming a large force for social instability for decades to come," Chung said.
Chung To urged the Thai government to work towards reducing the stigma surrounding children orphaned by HIV/Aids. One way to do this is by empowering local communities to take care of them, saving them from isolation. But his work is not limited to just HIV-positive children in China.
Chung To was born in Hong Kong but migrated with his family to the United States when he was fifteen. He attended Columbia University, earned a master's degree at Harvard, and went into a career in banking.
In 1995, success led him back to Hong Kong as a senior bank executive. By this time, he was already aware of the Aids crisis following the death of a favourite teacher and many friends.
In Hong Kong he was alarmed to find the male homosexual community largely ignorant of the threat. Gay men accounted for a third of the city's HIV/Aids cases, yet unprotected sex was commonplace.
In 1998, Chung To decided to set up the Chi Heng Foundation to give gay men the means of protecting themselves.
Beginning in Hong Kong but later expanding into mainland China, he enlisted the help of pimps and brothel-owners and hundreds of volunteers to distribute condoms and safe-sex kits in gay bars and clubs.
He set up a help line with frank, factual information about HIV/Aids and offered workshops and personal counselling, legal advice and links to doctors. He exploited the rising popularity of the Internet to reach millions of gay Chinese.
By 2006, Chung To had established Foundation branches in 10 Chinese cities. The United Nations named his direct, management-savvy approach one of its "best practice" models for China.
In 2001, an encounter with Aids victims in Henan province led him in a different direction. There, the Aids epidemic resulted not from sexual contact but the egregiously careless practices of blood buyers. Many peasants contracted HIV/Aids while selling blood to earn extra income.
In some villages today, more than 40 per cent of adults have either died of Aids or are HIV-positive. Tens of thousands of orphans have been left behind. Most of these orphans do not have the HIV virus themselves.
Citing the United Nations Children's Fund's (Unicef) records, he says there are half a million children in China today who have been orphaned by the disease, are HIV-positive, or are living in households with at least one HIV-positive parent. Their grim lives and futures stirred him to launch the Aids Orphans Project in 2002. He left his job at the bank to devote himself full-time to China's Aids crisis.
He started a programme to help Aids-affected children by sponsoring their education and providing psycho-social support and vocational training.
"I figured the world could do with one less banker, but these children, they cannot wait," he said.
The Aids Orphans Project provides every child who has an Aids-infected parent with school fees and expenses through university or vocational school.
To avoid reinforcing the Aids stigma and its social isolation, Chung To spurns orphanages and foster homes and insists that Aids-affected children attend normal village schools and live with relatives.
The idea is to make every life as normal as possible, just like for other children. There have been incidents in Thailand where certain Aids hospices have exploited HIV-infected children and adults for personal gain.
Chung To's foundation provides the children with self-affirming counselling through art and writing therapy, summer camps and home visits by the Foundation's volunteers.
Starting with only 127 students in a single village, today over 4,000 children in five of China's provinces are benefiting from this work.
"We help them to go back to school with children not affected by Aids," he added.
Chung To was speaking at the Magsaysay Forum's Peer Learning Programme, the first event organised in Bangkok to praise the awardees' efforts and dedication, and to share publicly their achievements and success stories.
Speaking at a recent function in Bangkok, Chung To, the winner of the Ramon Magsaysay Award in 2007, talked about the need for communities to take action and care for these victims.
"We really have to change and transform society," said Chung To, who is the director of the Chi Heng Foundation.
"If we do not help them now, they will grow up uneducated and vulnerable, becoming a large force for social instability for decades to come," Chung said.
Chung To urged the Thai government to work towards reducing the stigma surrounding children orphaned by HIV/Aids. One way to do this is by empowering local communities to take care of them, saving them from isolation. But his work is not limited to just HIV-positive children in China.
Chung To was born in Hong Kong but migrated with his family to the United States when he was fifteen. He attended Columbia University, earned a master's degree at Harvard, and went into a career in banking.
In 1995, success led him back to Hong Kong as a senior bank executive. By this time, he was already aware of the Aids crisis following the death of a favourite teacher and many friends.
In Hong Kong he was alarmed to find the male homosexual community largely ignorant of the threat. Gay men accounted for a third of the city's HIV/Aids cases, yet unprotected sex was commonplace.
In 1998, Chung To decided to set up the Chi Heng Foundation to give gay men the means of protecting themselves.
Beginning in Hong Kong but later expanding into mainland China, he enlisted the help of pimps and brothel-owners and hundreds of volunteers to distribute condoms and safe-sex kits in gay bars and clubs.
He set up a help line with frank, factual information about HIV/Aids and offered workshops and personal counselling, legal advice and links to doctors. He exploited the rising popularity of the Internet to reach millions of gay Chinese.
By 2006, Chung To had established Foundation branches in 10 Chinese cities. The United Nations named his direct, management-savvy approach one of its "best practice" models for China.
In 2001, an encounter with Aids victims in Henan province led him in a different direction. There, the Aids epidemic resulted not from sexual contact but the egregiously careless practices of blood buyers. Many peasants contracted HIV/Aids while selling blood to earn extra income.
In some villages today, more than 40 per cent of adults have either died of Aids or are HIV-positive. Tens of thousands of orphans have been left behind. Most of these orphans do not have the HIV virus themselves.
Citing the United Nations Children's Fund's (Unicef) records, he says there are half a million children in China today who have been orphaned by the disease, are HIV-positive, or are living in households with at least one HIV-positive parent. Their grim lives and futures stirred him to launch the Aids Orphans Project in 2002. He left his job at the bank to devote himself full-time to China's Aids crisis.
He started a programme to help Aids-affected children by sponsoring their education and providing psycho-social support and vocational training.
"I figured the world could do with one less banker, but these children, they cannot wait," he said.
The Aids Orphans Project provides every child who has an Aids-infected parent with school fees and expenses through university or vocational school.
To avoid reinforcing the Aids stigma and its social isolation, Chung To spurns orphanages and foster homes and insists that Aids-affected children attend normal village schools and live with relatives.
The idea is to make every life as normal as possible, just like for other children. There have been incidents in Thailand where certain Aids hospices have exploited HIV-infected children and adults for personal gain.
Chung To's foundation provides the children with self-affirming counselling through art and writing therapy, summer camps and home visits by the Foundation's volunteers.
Starting with only 127 students in a single village, today over 4,000 children in five of China's provinces are benefiting from this work.
"We help them to go back to school with children not affected by Aids," he added.
Chung To was speaking at the Magsaysay Forum's Peer Learning Programme, the first event organised in Bangkok to praise the awardees' efforts and dedication, and to share publicly their achievements and success stories.
Thanachart moves into auto refinancing segment
Thanachart Bank plans aggressive growth in auto-refinancing loans to lead the market by next year, says executive vicepresident Nophadon Ruengchinda.
The bank entered the car-refinancing loan market in April and now has 2 billion baht worth of accounts. It is aiming for 5 billion by year-end and hopes to double the sum next year to top the segment.
Ayudhya Capital Auto Lease Ltd (Aycal), a subsidiary of Bank of Ayudhya,now leads the market with its 10-billionbaht portfolio.
"Being ranked number one in the car-loan business with long experience and expertise, we are ready to join the refinancing market, said Mr Nophadon.
"As a result, we have entered into the market with an ambitious goal."
The bank currently offers refinancing products in Greater Bangkok but it intends to expand the service from the fourth quarter of this year through its nationwide network of 246 branches.
Thanachart - a mid-sized bank with a market-leading auto-leasing loan book worth about 200 billion baht - aims to maintain its share of 20-25% this year.The bank booked 45 billion baht in new car loans in the first seven months of 2009 and has set a target of 80 billion for the year.
Mr Nophadon said the bank was maintaining the target even though it forecasts local new-car sales will total just 480,000 units this year - a 30% decline from last year's sales.
The vehicle sector has been picking up since June with new car sales totalling 43,000 units per month compared with around 37,000 to 38,000 in the beginning of the year.
The situation is expected to improve better in the fourth quarter, supported by an improving economic climate and seasonal factors, including the year-end motor show, he said.
The bank entered the car-refinancing loan market in April and now has 2 billion baht worth of accounts. It is aiming for 5 billion by year-end and hopes to double the sum next year to top the segment.
Ayudhya Capital Auto Lease Ltd (Aycal), a subsidiary of Bank of Ayudhya,now leads the market with its 10-billionbaht portfolio.
"Being ranked number one in the car-loan business with long experience and expertise, we are ready to join the refinancing market, said Mr Nophadon.
"As a result, we have entered into the market with an ambitious goal."
The bank currently offers refinancing products in Greater Bangkok but it intends to expand the service from the fourth quarter of this year through its nationwide network of 246 branches.
Thanachart - a mid-sized bank with a market-leading auto-leasing loan book worth about 200 billion baht - aims to maintain its share of 20-25% this year.The bank booked 45 billion baht in new car loans in the first seven months of 2009 and has set a target of 80 billion for the year.
Mr Nophadon said the bank was maintaining the target even though it forecasts local new-car sales will total just 480,000 units this year - a 30% decline from last year's sales.
The vehicle sector has been picking up since June with new car sales totalling 43,000 units per month compared with around 37,000 to 38,000 in the beginning of the year.
The situation is expected to improve better in the fourth quarter, supported by an improving economic climate and seasonal factors, including the year-end motor show, he said.
State-bank loan applications on fast track
LOANS APPROVED BY SIX STATE BANKS JAN-JULY 99.5% of targets 622 billion baht
State banks will be able to approve new loans as quickly as three days under the government's new "Fast Track" system,according to Finance Minister Korn Chatikavanij.
No loan application with any specialised state-owned financial institution should take longer than 21 days to approve, he added.
The Finance Ministry has told state banks to speed up lending to support the recovery, particularly for the tourism,export and small business sectors.
Commercial bank lending in the first half contracted from the same period last year, due in part to falling demand for working capital and project loans under the recession. As well, banks were taking a more risk-averse approach to new lending.
The Finance Ministry recently increased its loan target for the state banks to a total of 927 billion baht for the full year, up from 625 billion.
"Accelerating state bank lending will help add 0.5 to 0.9 percentage points to GDP growth, depending on the disbursal rate of new loans," Mr Korn said.
The National Economic and Social Development Board on Monday cut its economic forecast for 2009 to a contraction of between 3% and 3.5% from last year, down from earlier estimates of a decline of 2.5% to 3.5%.
The six state banks participating in the Fast Track programme are the Government Savings Bank, the Bank for Agriculture and Agricultural Co-operatives,the Government Housing Bank, the SME Bank, the Islamic Bank and the Small Industry Credit Guarantee Corp.
All six banks will revamp their loan application procedures to approve new credit requests within 3,5,7,15 or 21 days after documentation is complete,depending on the complexity, size and type of loan and borrower.
A loan to a shophouse business may take just seven working days for approval,while revolving credit lines of up to 10 million baht may be approved within five days.
The ministry also announced special programmes run by each of the six banks to help accelerate credit lending and support economic recovery.
The SICG will take a more aggressive role in offering credit guarantees for borrowers without collateral, and will waive guarantee fees of 1.75% for the first year and double credit lines to 40 million baht from 20 million earlier.
The ministry also said the GSB and SME Bank would take the lead in lending to tourism operators affected by the global economic crisis and domestic political turmoil.
The GSB also will aim to increase lending through its People's Bank microfinance programme to another 500,000 borrowers by the end of the year, with each borrower eligible for up to 100,000 baht. The People's Bank also aims to lend up to 500,000 baht each to another 500,000 shophouses and small retailers nationwide.
The Exim Bank, meanwhile, will ease terms and permit purchase orders or letters of credit to serve as documentation against credit requests.
For the BAAC, officials said lending to small farmers would be accelerated while the bank also prepares to introduce a new price support programme for key crops to replace the crop mortgage programme now used by the government.
The GHB, meanwhile, announced that it would offer special interest rates for 15 billion baht in new home mortgage loans.
From January to July, the six state banks approved loans of 622 billion baht,or 99.5% of their targets. The GSB posted the strongest performance, with loans exceeding targets by 115%, followed by the BAAC at 105%. The Exim Bank was the worst performer, at 50%.
Mr Korn said the Finance Ministry estimated that 730,000 borrowers nationwide would receive state loans, with an approval target of 80% of the 927 billion baht target and a disbursal target of 70%.
State banks will be able to approve new loans as quickly as three days under the government's new "Fast Track" system,according to Finance Minister Korn Chatikavanij.
No loan application with any specialised state-owned financial institution should take longer than 21 days to approve, he added.
The Finance Ministry has told state banks to speed up lending to support the recovery, particularly for the tourism,export and small business sectors.
Commercial bank lending in the first half contracted from the same period last year, due in part to falling demand for working capital and project loans under the recession. As well, banks were taking a more risk-averse approach to new lending.
The Finance Ministry recently increased its loan target for the state banks to a total of 927 billion baht for the full year, up from 625 billion.
"Accelerating state bank lending will help add 0.5 to 0.9 percentage points to GDP growth, depending on the disbursal rate of new loans," Mr Korn said.
The National Economic and Social Development Board on Monday cut its economic forecast for 2009 to a contraction of between 3% and 3.5% from last year, down from earlier estimates of a decline of 2.5% to 3.5%.
The six state banks participating in the Fast Track programme are the Government Savings Bank, the Bank for Agriculture and Agricultural Co-operatives,the Government Housing Bank, the SME Bank, the Islamic Bank and the Small Industry Credit Guarantee Corp.
All six banks will revamp their loan application procedures to approve new credit requests within 3,5,7,15 or 21 days after documentation is complete,depending on the complexity, size and type of loan and borrower.
A loan to a shophouse business may take just seven working days for approval,while revolving credit lines of up to 10 million baht may be approved within five days.
The ministry also announced special programmes run by each of the six banks to help accelerate credit lending and support economic recovery.
The SICG will take a more aggressive role in offering credit guarantees for borrowers without collateral, and will waive guarantee fees of 1.75% for the first year and double credit lines to 40 million baht from 20 million earlier.
The ministry also said the GSB and SME Bank would take the lead in lending to tourism operators affected by the global economic crisis and domestic political turmoil.
The GSB also will aim to increase lending through its People's Bank microfinance programme to another 500,000 borrowers by the end of the year, with each borrower eligible for up to 100,000 baht. The People's Bank also aims to lend up to 500,000 baht each to another 500,000 shophouses and small retailers nationwide.
The Exim Bank, meanwhile, will ease terms and permit purchase orders or letters of credit to serve as documentation against credit requests.
For the BAAC, officials said lending to small farmers would be accelerated while the bank also prepares to introduce a new price support programme for key crops to replace the crop mortgage programme now used by the government.
The GHB, meanwhile, announced that it would offer special interest rates for 15 billion baht in new home mortgage loans.
From January to July, the six state banks approved loans of 622 billion baht,or 99.5% of their targets. The GSB posted the strongest performance, with loans exceeding targets by 115%, followed by the BAAC at 105%. The Exim Bank was the worst performer, at 50%.
Mr Korn said the Finance Ministry estimated that 730,000 borrowers nationwide would receive state loans, with an approval target of 80% of the 927 billion baht target and a disbursal target of 70%.
MPC leaves key rate unchanged
The Bank of Thailand is optimistic about a global recovery but warns that weak local consumer purchasing power and unfinished reform of the US financial sector make the outlook highly risky.
The central bank's Monetary Policy Committee yesterday maintained the one-day repurchase interest rate, which has been at 1.25% since April. It said the Thai economy had a more positive trend thanks to manufacturing, exports,employment and private consumption.
Paiboon Kittisrikangwan, a central bank assistant governor for the monetary policy group, said that the G-3 and Asian economies improved between April to June from the first three months and they exceeded the MPC's expectations in mid-July.
But overhanging bad loans and capital problems following the sub-prime mortgage crisis remain an obstacle in the US and European financial sectors constraining the global economy. The price of crude is another risk as it has risen quickly over the past month.
"The MPC saw no need to adjust the interest rate for the moment. The first lot of government bonds worth 80 billion baht has marginally pushed bond yields up. The MPC will ensure liquidity is accommodative to borrowing, should there be a need," said Mr Paiboon.
He said the MPC was concerned that inflation would accelerate in the world economy if Dubai oil prices pass $75 per barrel. But it would monitor whether a price rise was driven by an increase in global demand or by speculation.
Mr Paiboon said the Chinese economy would minimally benefit the global economy as a considerable portion of its exports are aimed at the US market.Home sales and manufacturing production were positive signs for the US economy, but unemployment is expected to lag manufacturing and consumption in the US, he said.
Thanomsri Fongarunrung, an economist at Phatra Securities, said that the recent upswing in the US economy came from aggressive fiscal and monetary expansion, but the real economy has not built on the momentum.
"We can be comfortable that the global economy has reached the bottom because of government and Federal Reserve actions. But recovery signs related to economic momentum have been unclear," she said.
Ms Thanomsri said a factor supporting the Thai economy was the government's subsidies for utility bills and its spending on consumers.
"The government should increase spending in the future to help build momentum for the economic recovery.But I am worried about whether the projects will generate enough return in the future to serve repayment of public debt," she said.
The central bank's Monetary Policy Committee yesterday maintained the one-day repurchase interest rate, which has been at 1.25% since April. It said the Thai economy had a more positive trend thanks to manufacturing, exports,employment and private consumption.
Paiboon Kittisrikangwan, a central bank assistant governor for the monetary policy group, said that the G-3 and Asian economies improved between April to June from the first three months and they exceeded the MPC's expectations in mid-July.
But overhanging bad loans and capital problems following the sub-prime mortgage crisis remain an obstacle in the US and European financial sectors constraining the global economy. The price of crude is another risk as it has risen quickly over the past month.
"The MPC saw no need to adjust the interest rate for the moment. The first lot of government bonds worth 80 billion baht has marginally pushed bond yields up. The MPC will ensure liquidity is accommodative to borrowing, should there be a need," said Mr Paiboon.
He said the MPC was concerned that inflation would accelerate in the world economy if Dubai oil prices pass $75 per barrel. But it would monitor whether a price rise was driven by an increase in global demand or by speculation.
Mr Paiboon said the Chinese economy would minimally benefit the global economy as a considerable portion of its exports are aimed at the US market.Home sales and manufacturing production were positive signs for the US economy, but unemployment is expected to lag manufacturing and consumption in the US, he said.
Thanomsri Fongarunrung, an economist at Phatra Securities, said that the recent upswing in the US economy came from aggressive fiscal and monetary expansion, but the real economy has not built on the momentum.
"We can be comfortable that the global economy has reached the bottom because of government and Federal Reserve actions. But recovery signs related to economic momentum have been unclear," she said.
Ms Thanomsri said a factor supporting the Thai economy was the government's subsidies for utility bills and its spending on consumers.
"The government should increase spending in the future to help build momentum for the economic recovery.But I am worried about whether the projects will generate enough return in the future to serve repayment of public debt," she said.
Yen gains as stocks struggle, euro on back foot
The yen rose broadly yesterday, gaining in particular against the euro and sterling as a retreat in European shares from a 10-month high the previous day curbed demand for currencies considered to be high-risk.
Still, the euro trimmed losses as European shares pulled back from a roughly 0.5% fall in early trade, when it took a cue from a 2.6% fall in Chinese shares.
Trading was thin as many market participants were away on summer holidays,and analysts said currency movements were largely being dictated by other asset markets, making them vulnerable to a pullback in stocks and commodities.
Some capital markets still look a bit overpriced relative to the hard economic data, so some of the correction weve seen in the pro-cyclicals is to be expected,said Phyllis Papadavid, currency strategist at Societe Generale in London.
The euro traded flat on the day at $1.4302, clawing back some losses after slipping to the days low of $1.4254 according to Reuters data, in early European trade.
The dollar index was little changed but the US currency fell as low as 93.80 yen in early trade, as the yen was the main beneficiary of the pullback in risk demand. By 0958 GMT, the pair traded at 94.28 yen, down 0.2% on the day.
The Swiss franc was little changed against the euro and the dollar as investors awaited a speech by Swiss National Bank board member Thomas Jordan to see if he reiterates the central banks position on combating excessive strength in the national currency.
Swiss authorities have been inter vening in the currency market since March.
Still, the euro trimmed losses as European shares pulled back from a roughly 0.5% fall in early trade, when it took a cue from a 2.6% fall in Chinese shares.
Trading was thin as many market participants were away on summer holidays,and analysts said currency movements were largely being dictated by other asset markets, making them vulnerable to a pullback in stocks and commodities.
Some capital markets still look a bit overpriced relative to the hard economic data, so some of the correction weve seen in the pro-cyclicals is to be expected,said Phyllis Papadavid, currency strategist at Societe Generale in London.
The euro traded flat on the day at $1.4302, clawing back some losses after slipping to the days low of $1.4254 according to Reuters data, in early European trade.
The dollar index was little changed but the US currency fell as low as 93.80 yen in early trade, as the yen was the main beneficiary of the pullback in risk demand. By 0958 GMT, the pair traded at 94.28 yen, down 0.2% on the day.
The Swiss franc was little changed against the euro and the dollar as investors awaited a speech by Swiss National Bank board member Thomas Jordan to see if he reiterates the central banks position on combating excessive strength in the national currency.
Swiss authorities have been inter vening in the currency market since March.
"LET RESERVES RISE TO WEAKEN BAHT"
Bank of Thailand board chairman MR Chatu Mongol Sonakul said yesterday that the country's international reserves should go higher to help weaken the baht.
"If the country's policies are pursued to help the trade sector, the economy will expand rapidly," he said.
A depreciating baht would facilitate exports, which would drive economic growth, he said.
The trade industry can expand limitlessly while the non-trade sector has high diseconomies of scale, he added.
A vibrant export sector would help boost the non-trade sector eventually, which would help lift the entire economy, said Chatu Mongol, who has served as central bank governor and Finance Ministry permanent secretary.
For example, China and Singapore have abundant foreign reserves, which have helped support their exports.
The Kingdom could use its reserves to seek returns.
For instance, it could lend to other countries, when it becomes a net lender. This could be done through a sovereign wealth fund.
Thai assets abroad have built up gradually due to the policies to promote overseas investment. The central bank has kept relaxing its rules to allow local investors to pursue opportunities abroad, resulting in many investors going offshore to buy assets such as plants.
The country is currently a net borrower and would become a net lender when its assets abroad are higher than the assets that foreigners hold here.
"If the country's policies are pursued to help the trade sector, the economy will expand rapidly," he said.
A depreciating baht would facilitate exports, which would drive economic growth, he said.
The trade industry can expand limitlessly while the non-trade sector has high diseconomies of scale, he added.
A vibrant export sector would help boost the non-trade sector eventually, which would help lift the entire economy, said Chatu Mongol, who has served as central bank governor and Finance Ministry permanent secretary.
For example, China and Singapore have abundant foreign reserves, which have helped support their exports.
The Kingdom could use its reserves to seek returns.
For instance, it could lend to other countries, when it becomes a net lender. This could be done through a sovereign wealth fund.
Thai assets abroad have built up gradually due to the policies to promote overseas investment. The central bank has kept relaxing its rules to allow local investors to pursue opportunities abroad, resulting in many investors going offshore to buy assets such as plants.
The country is currently a net borrower and would become a net lender when its assets abroad are higher than the assets that foreigners hold here.
POST-CRISIS ENVIRONMENT IN 5-YEAR TIME FRAME
The following article entitled "Challenges in the New Global Macroeconomic and Financial Environment" is presented by Don Nakornthab, Jittapa Prachuabmoh, Tientip Subhanij, and Kessarin Tansuwanarat from the Bank of Thailand.
The current global financial crisis has dramatically changed the future economic landscape as well as the agenda of central banks and fiscal fiscal authorities around the world.
Thinking that the good times will return once the crisis dust settles would be a fatal mistake for businesses and policy-makers alike. A good understanding of what lies ahead will be critical to the development of future strategies at both corporate and country levels.
In this paper, we attempt to provide an educated estimation of how the postcrisis macroeconomic and financial environment will look in a fiveyear timeframe along with the risks and challenges for emerging market economies.
Among the still unfolding developments that we attempt to portray are the remaining global imbalances and advanced economies' central bank balance sheets and public debt.
In so doing, we briefly review the fallout of the current crisis and the responses by both the public and the private sectors as a backdrop for what will come next. The former includes the global recession, fragile banking systems, dysfunctional credit markets, occasional financial market jitters, and asset-price deflation.
The latter includes aggressive monetary easing, unconventional monetary policies, financial system stabilisation and reform, and massive fiscal stimulus by the public sector, risk repricing, deleveraging, and balance sheet repairs by the private sector, as well as the role of the IMF.
To keep our analysis focused, we picked four aspects of the postcrisis environment we deem to have the greatest implications for emerging market economies' macroeconomic and financialsector policies.
These are global economic growth, global inflation, the future for the US dollar, and capital costs. The paper concludes with policy challenges for emerging market economies from exportled growth, fiscal dominance, monetary policy communications, foreignexchange reserve accumulation policy and the development of financial markets.
This article is a portion of the research paper to be presented at the forthcoming annual economic symposium organised by the Bank of Thailand on the 15th and 16th of September at the Centara Grand Hotel. The views expressed in this paper are the authors' own and are not necessarily endorsed by the Bank of Thailand.
The current global financial crisis has dramatically changed the future economic landscape as well as the agenda of central banks and fiscal fiscal authorities around the world.
Thinking that the good times will return once the crisis dust settles would be a fatal mistake for businesses and policy-makers alike. A good understanding of what lies ahead will be critical to the development of future strategies at both corporate and country levels.
In this paper, we attempt to provide an educated estimation of how the postcrisis macroeconomic and financial environment will look in a fiveyear timeframe along with the risks and challenges for emerging market economies.
Among the still unfolding developments that we attempt to portray are the remaining global imbalances and advanced economies' central bank balance sheets and public debt.
In so doing, we briefly review the fallout of the current crisis and the responses by both the public and the private sectors as a backdrop for what will come next. The former includes the global recession, fragile banking systems, dysfunctional credit markets, occasional financial market jitters, and asset-price deflation.
The latter includes aggressive monetary easing, unconventional monetary policies, financial system stabilisation and reform, and massive fiscal stimulus by the public sector, risk repricing, deleveraging, and balance sheet repairs by the private sector, as well as the role of the IMF.
To keep our analysis focused, we picked four aspects of the postcrisis environment we deem to have the greatest implications for emerging market economies' macroeconomic and financialsector policies.
These are global economic growth, global inflation, the future for the US dollar, and capital costs. The paper concludes with policy challenges for emerging market economies from exportled growth, fiscal dominance, monetary policy communications, foreignexchange reserve accumulation policy and the development of financial markets.
This article is a portion of the research paper to be presented at the forthcoming annual economic symposium organised by the Bank of Thailand on the 15th and 16th of September at the Centara Grand Hotel. The views expressed in this paper are the authors' own and are not necessarily endorsed by the Bank of Thailand.
Banks offer new deposit options
Banks nowadays are working hard to maintain their liquidity by launching several long-term deposit options at special interest rates now that retail savers are finding the recently launched government and corporate bonds more attractive.
Kasikorn Research Centre (KResearch) reported that commercial banks' deposit stood at Bt6.3 trillion as of July, down by Bt116 billion from Bt6.41 trillion as of June, which showed a Bt189 billion drop when compared to Bt6.49 trillion in deposits at the end of last year.
Kannikar Chalitaporn, president of Siam Commercial Bank (SCB), said bonds had affected her bank's deposits by several billion, though loan expansion did not affect the bank's liquidity by that much.
However, she said, the bank still had liquidity because its loan to deposit ratio stood at about 90 per cent. Therefore, SCB does not need to raise its deposit rate by increasing interest rates for the rest of the year. Currently SCB offers a special deposit step rate for a period of 15 months.
Meanwhile, TMB Bank has just launched a new two-year deposit campaign, under which customers will not be penalised for making withdrawals before the end of the term. Under this deposit deal, the bank offers six-monthly step rates at 0.75 per cent, 1.25 per cent, 1.75 per cent and 4.25 per cent. Minimum deposit is Bt25,000 and at the end of the term the entire amount needs to be withdrawn.
Michal Szczurek, TMB Bank's chief retail banking officer, said the bank's deposits were affected by recently launched investment products, but the bank did not have a liquidity problem as its loan to deposit ratio stood at 84 per cent as of June.
"The two-year deposit scheme provides consumers with high interest rates, flexibility and liquidity, because they will continue earning the interest even if they withdraw money before it is due. The bank expects to have at least 40,000 accounts for this product in the end of this year. Currently the bank has 4.5 million deposit accounts, of which one million are active," Szczurek said.
Kasikorn Research Centre (KResearch) reported that commercial banks' deposit stood at Bt6.3 trillion as of July, down by Bt116 billion from Bt6.41 trillion as of June, which showed a Bt189 billion drop when compared to Bt6.49 trillion in deposits at the end of last year.
Kannikar Chalitaporn, president of Siam Commercial Bank (SCB), said bonds had affected her bank's deposits by several billion, though loan expansion did not affect the bank's liquidity by that much.
However, she said, the bank still had liquidity because its loan to deposit ratio stood at about 90 per cent. Therefore, SCB does not need to raise its deposit rate by increasing interest rates for the rest of the year. Currently SCB offers a special deposit step rate for a period of 15 months.
Meanwhile, TMB Bank has just launched a new two-year deposit campaign, under which customers will not be penalised for making withdrawals before the end of the term. Under this deposit deal, the bank offers six-monthly step rates at 0.75 per cent, 1.25 per cent, 1.75 per cent and 4.25 per cent. Minimum deposit is Bt25,000 and at the end of the term the entire amount needs to be withdrawn.
Michal Szczurek, TMB Bank's chief retail banking officer, said the bank's deposits were affected by recently launched investment products, but the bank did not have a liquidity problem as its loan to deposit ratio stood at 84 per cent as of June.
"The two-year deposit scheme provides consumers with high interest rates, flexibility and liquidity, because they will continue earning the interest even if they withdraw money before it is due. The bank expects to have at least 40,000 accounts for this product in the end of this year. Currently the bank has 4.5 million deposit accounts, of which one million are active," Szczurek said.
Wall St ends flat, investors pause after 4-day rally
Investors slowed their hectic buying of stocks Monday, leaving the major indexes little changed after a four-day advance.
Stocks pulled back from their early highs as financial stocks, which had been surging, retreated.Meanwhile, Treasury prices rallied ahead of the latest round of debt auctions.
Analysts had expected a pause after stocks soared last week, lifting the Dow Jones industrials 370 points.The advance picked up momentum Friday after Federal Reserve Chairman Ben Bernanke declared that the economy is on the verge of recovery.
I think people still believe there are signs of recovery here, but it doesnt hurt to take a little bit of profits, said Alan Villalon, senior research analyst at First American Funds.
Market experts have been warning, though, that the markets upbeat mood could be tested with reports this week on consumer confidence and housing. Some signs of recovery have emerged already in the housing market, but consumers are still struggling. Improved consumer confidence and spending is widely seen as one of the keys that could help end the recession.
Were lining up here in advance of the data this week, said James Cox, managing partner at Harris Financial Group. This is a good time to get out.
Bank shares gave up some of their early gains and traded mixed, weighed down by losses among regional banks. Investors have been worried that smaller banks could face significant hardships in the coming months as losses among commercial real estate loans pile up.
In a research note late Sunday, Rochedale Securities banking analyst Richard Bove predicted that 150 to 200 more U.S. banks could fail in the current banking crisis on top of the 81 banks that have already failed this year, putting greater stress on the Federal Deposit Insurance Corps deposit insurance fund.
The Dow rose 3.32, or less than 0.1%, to 9,509.28,after earlier rising as much as 82 points. The Standard & Poors 500 index fell 0.56, or 0.1%, to 1,025.57, while the Nasdaq composite index fell 2.92, or 0.1%, to 2,017.98.
Advancing issues were slightly ahead of losers on the New York Stock Exchange, where volume came to 1.23 billion shares.
In other trading, the Russell 2000 index of smaller companies slipped 1.27, or 0.2%, to 580.24.
Bond prices rose as investors prepared for $197 billion in auctions this week. The yield on the benchmark 10-year Treasury note fell to 3.48% from 3.57%late Friday, while the yield on the three-month T-bill fell to 0.15% from 0.16%.
The markets have been choppy lately as investors react to mixed economic data, but so far there hasnt been a big pullback as many have expected. The Standard & Poors 500 index is up 52% since early March.
We still think there is a lot of fear out there, said Ryan Detrick, chief technical strategist at Schaeffers Investment Research. The economy has to validate what the stock market has done.
Justin Golden, strategist at Macro Risk Advisors in New York, said some of the markets recent gains have been magnified by short-covering, in which investors have to buy stock after having earlier sold borrowed shares in a bet they would fall.
A lot of bear investors have thrown in the towel, he said. That shouldnt be confused with people being ultra bullish about the market.
There were no major economic reports Monday, but investors are anxious ahead of the Conference Boards monthly consumer confidence index on Tuesday, and the Reuters/University of Michigan report on consumer sentiment on Fr iday. The Standard & Poors/Case-Shiller index on home prices for June will be released yesterday, while the Commerce Department will report on new home sale for July today.
LONDON 4,896.23 +45.34
European shares hit their highest closing level in more than 10 months on Monday, boosted by banks and miners, with recent economic data and positive comments from some central banks prompting investors to grab risky assets.
Britains top share index hit its highest closing level in 10-1/2 months, mirroring rallying global equities as reassuring comments from key central bankers helped drive optimism over the pace of global recovery.
The FTSE 100 closed at 4,896.23 points, up 45.34 or 0.93%.
In Frankfurt, the DAX index ended at 5,519.75 points,up 57.01 or 1.04%. In Paris, the CAC-40 index closed at 3,652.17 points, up 36.36 or 1.01%.
The FTSEurofirst 300 index of top European shares ended 0.9% up at 975.19 points, the highest closing level since early October. The index is up 17% this year and has surged 51% from a record low in March.
Banks were among top gainers, with the DJ STOXX banking index, which has jumped 52% this year, rising 1.8% on Monday. St andard Chartered, Barclays, Lloyds, Royal Bank of Scotland and Societe Generale rose 1.5-6.8%.
Economic data is in favour of a stronger recovery than expected. We can be quite bullish on risky assets,said Romain Boscher, head of equity management at Groupama Asset Management.
Inflows will be in favour of equities and outflows will come from money markets. This should last at least for several more weeks, especially with a lot of investors coming back from holidays and jumping on the bandwagon, he added.
Sentiment improved after data showed Euro zone industrial new orders rebounded more than expected in June. The figures followed a survey on Friday showing sales of previously owned US homes jumped 7.2%in July to mark the fastest pace in nearly two years.
Comments from US Federal Reserve chairman Ben Bernanke also added to optimism. He said on Friday that the prospects for a return to growth in the near-term appeared good, although the recovery was likely to be relatively slow..
Miners got strength from higher metals prices, which jumped on bets that the economic crisis was coming to an end. BHP Billiton, Anglo American, Antofagasta,Rio Tinto, Xstrata and ENRC rose 3.3-5.3%.
While the occasional dissenting voice is still heard amidst the bullish discourse surrounding this latest rally, more and more naysayers appear to be jumping on the recovery bandwagon, said Tim Hughes, head of sales trading at IG Index.
With the optimism Monday extending from Asia,through Europe and in early trading at least on to Wall Street, further gains seem pretty likely in the medium-term.
Investors have been shifting money into equities,generally seen as risky assets compared to bonds, for better returns and analysts said the trend was expected to remain in the near term.
The combination of positive growth impulse, expected recover y of the 12M forward earnings estimates and moderate valuation suggests that the uptrend on the equity market will continue, UniCredit strategists said in a note.
Credit default swap indexes sharply fell, indicating a rise in risk appetite in Europe. The Markit iTraxx Crossover index, made up of 44 mostly junk-related credits, fell 21.5 basis points to 581.5.
The VDAX-NEW volatility index was at 27.57, down from 33.08 a week ago when it rose 14%. The lower the index, which is based on sell- and buy-options on Frankfurts top-30 stocks, the higher the appetite for risky assets.
Energy shares were in demand as crude oil prices rose 0.9% on expectations that an economic recovery will spur a rebound in energy demand. BP, Royal Dutch Shell,BG Group, Tullow Oil, Repsol, Total and StatoilHydro added 0.1-2.1%.
Stocks pulled back from their early highs as financial stocks, which had been surging, retreated.Meanwhile, Treasury prices rallied ahead of the latest round of debt auctions.
Analysts had expected a pause after stocks soared last week, lifting the Dow Jones industrials 370 points.The advance picked up momentum Friday after Federal Reserve Chairman Ben Bernanke declared that the economy is on the verge of recovery.
I think people still believe there are signs of recovery here, but it doesnt hurt to take a little bit of profits, said Alan Villalon, senior research analyst at First American Funds.
Market experts have been warning, though, that the markets upbeat mood could be tested with reports this week on consumer confidence and housing. Some signs of recovery have emerged already in the housing market, but consumers are still struggling. Improved consumer confidence and spending is widely seen as one of the keys that could help end the recession.
Were lining up here in advance of the data this week, said James Cox, managing partner at Harris Financial Group. This is a good time to get out.
Bank shares gave up some of their early gains and traded mixed, weighed down by losses among regional banks. Investors have been worried that smaller banks could face significant hardships in the coming months as losses among commercial real estate loans pile up.
In a research note late Sunday, Rochedale Securities banking analyst Richard Bove predicted that 150 to 200 more U.S. banks could fail in the current banking crisis on top of the 81 banks that have already failed this year, putting greater stress on the Federal Deposit Insurance Corps deposit insurance fund.
The Dow rose 3.32, or less than 0.1%, to 9,509.28,after earlier rising as much as 82 points. The Standard & Poors 500 index fell 0.56, or 0.1%, to 1,025.57, while the Nasdaq composite index fell 2.92, or 0.1%, to 2,017.98.
Advancing issues were slightly ahead of losers on the New York Stock Exchange, where volume came to 1.23 billion shares.
In other trading, the Russell 2000 index of smaller companies slipped 1.27, or 0.2%, to 580.24.
Bond prices rose as investors prepared for $197 billion in auctions this week. The yield on the benchmark 10-year Treasury note fell to 3.48% from 3.57%late Friday, while the yield on the three-month T-bill fell to 0.15% from 0.16%.
The markets have been choppy lately as investors react to mixed economic data, but so far there hasnt been a big pullback as many have expected. The Standard & Poors 500 index is up 52% since early March.
We still think there is a lot of fear out there, said Ryan Detrick, chief technical strategist at Schaeffers Investment Research. The economy has to validate what the stock market has done.
Justin Golden, strategist at Macro Risk Advisors in New York, said some of the markets recent gains have been magnified by short-covering, in which investors have to buy stock after having earlier sold borrowed shares in a bet they would fall.
A lot of bear investors have thrown in the towel, he said. That shouldnt be confused with people being ultra bullish about the market.
There were no major economic reports Monday, but investors are anxious ahead of the Conference Boards monthly consumer confidence index on Tuesday, and the Reuters/University of Michigan report on consumer sentiment on Fr iday. The Standard & Poors/Case-Shiller index on home prices for June will be released yesterday, while the Commerce Department will report on new home sale for July today.
LONDON 4,896.23 +45.34
European shares hit their highest closing level in more than 10 months on Monday, boosted by banks and miners, with recent economic data and positive comments from some central banks prompting investors to grab risky assets.
Britains top share index hit its highest closing level in 10-1/2 months, mirroring rallying global equities as reassuring comments from key central bankers helped drive optimism over the pace of global recovery.
The FTSE 100 closed at 4,896.23 points, up 45.34 or 0.93%.
In Frankfurt, the DAX index ended at 5,519.75 points,up 57.01 or 1.04%. In Paris, the CAC-40 index closed at 3,652.17 points, up 36.36 or 1.01%.
The FTSEurofirst 300 index of top European shares ended 0.9% up at 975.19 points, the highest closing level since early October. The index is up 17% this year and has surged 51% from a record low in March.
Banks were among top gainers, with the DJ STOXX banking index, which has jumped 52% this year, rising 1.8% on Monday. St andard Chartered, Barclays, Lloyds, Royal Bank of Scotland and Societe Generale rose 1.5-6.8%.
Economic data is in favour of a stronger recovery than expected. We can be quite bullish on risky assets,said Romain Boscher, head of equity management at Groupama Asset Management.
Inflows will be in favour of equities and outflows will come from money markets. This should last at least for several more weeks, especially with a lot of investors coming back from holidays and jumping on the bandwagon, he added.
Sentiment improved after data showed Euro zone industrial new orders rebounded more than expected in June. The figures followed a survey on Friday showing sales of previously owned US homes jumped 7.2%in July to mark the fastest pace in nearly two years.
Comments from US Federal Reserve chairman Ben Bernanke also added to optimism. He said on Friday that the prospects for a return to growth in the near-term appeared good, although the recovery was likely to be relatively slow..
Miners got strength from higher metals prices, which jumped on bets that the economic crisis was coming to an end. BHP Billiton, Anglo American, Antofagasta,Rio Tinto, Xstrata and ENRC rose 3.3-5.3%.
While the occasional dissenting voice is still heard amidst the bullish discourse surrounding this latest rally, more and more naysayers appear to be jumping on the recovery bandwagon, said Tim Hughes, head of sales trading at IG Index.
With the optimism Monday extending from Asia,through Europe and in early trading at least on to Wall Street, further gains seem pretty likely in the medium-term.
Investors have been shifting money into equities,generally seen as risky assets compared to bonds, for better returns and analysts said the trend was expected to remain in the near term.
The combination of positive growth impulse, expected recover y of the 12M forward earnings estimates and moderate valuation suggests that the uptrend on the equity market will continue, UniCredit strategists said in a note.
Credit default swap indexes sharply fell, indicating a rise in risk appetite in Europe. The Markit iTraxx Crossover index, made up of 44 mostly junk-related credits, fell 21.5 basis points to 581.5.
The VDAX-NEW volatility index was at 27.57, down from 33.08 a week ago when it rose 14%. The lower the index, which is based on sell- and buy-options on Frankfurts top-30 stocks, the higher the appetite for risky assets.
Energy shares were in demand as crude oil prices rose 0.9% on expectations that an economic recovery will spur a rebound in energy demand. BP, Royal Dutch Shell,BG Group, Tullow Oil, Repsol, Total and StatoilHydro added 0.1-2.1%.
BERNANKE SET FOR SECOND TERM AS FED CHAIRMAN
US President Barack Obama was to announce late yesterday that he had nominated Ben Bernanke to serve a second term as Federal Reserve chairman, following months of joint combat against the financial crisis.
A White House official said on condition of anonymity that Obama was breaking his vacation on Martha's Vineyard to reappoint Bernanke to a second four-year term beginning in January.
Obama was scheduled to deliver the statement, with Bernanke by his side, in the resort town of Oak Bluffs at 9pm Bangkok time yesterday, before US markets opened.
White House chief of staff Rahm Emanuel told The Wall Street Journal that Obama was reappointing Bernanke because he credits him with "pulling the economy back from the brink of depression".
Bernanke was selected as Federal Reserve chairman by Obama's predecessor, George W Bush, in 2005 to replace retiring Fed chairman Alan Greenspan, who served for 18 years and presided over a golden era of economic prosperity.
At the tail end of Bush's second term and the beginning of Obama's presidency, Bernanke has been a key player in stabilising markets and presceibing the antidote to the worst crisis since the Great Depression of the 1930s.
He has enjoyed broad support on Wall Street, for the sweeping and sometimes unorthodox methods he has used to save the banking sector, redefine the financial industry and keep the recession from turning into a depression.
But Obama may face some opposition in Congress to his decision to reappoint him.
US Senate Banking Committee chairman Chris Dodd vowed to hold a "through and comprehensive confirmation hearing" for Bernanke's renomination, which requires Senate confirmation.
"I still have serious concerns about the Federal Reserve's failure to protect consumers and I strongly believe these responsibilities should go to an independent consumer financial protection agency," Dodd said in a statement, while noting that Obama's decision was "probably the right choice".
Obama's move may be calculated to send a signal of continuity and to reassure financial markets that are still fragile, despite signs the global economy is returning slowly to growth, especially outside the United States.
Changing the Fed chairman at such a time might have spooked investors and been seen as a dramatic reversal of policy, considering Bernanke was such a key player in fighting off the crisis.
Bernanke, 55, has worked closely with the Treasury Department and the White House in plotting a route out of the recession and stabilising and reforming the debt-laden US financial sector.
He now faces the delicate decision of how quickly to scale back the massive government effort to pump liquidity into the financial system.
Bernanke, meanwhile, said just last week that appeared good despite financial market strains, but cautioned that any economic growth would be slow at first.
"After contracting sharply over the past year, economic activity appears to be levelling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good," he told central bankers at a meeting in Jackson Hole, Wyoming.
Bernanke famously railed against the spectre of deflation, which he saw as one of the factors which prolonged the Great Depression, and that view has informed his thinking on the financial crisis that has battered the US economy during his moment in the spotlight of history.
A White House official said on condition of anonymity that Obama was breaking his vacation on Martha's Vineyard to reappoint Bernanke to a second four-year term beginning in January.
Obama was scheduled to deliver the statement, with Bernanke by his side, in the resort town of Oak Bluffs at 9pm Bangkok time yesterday, before US markets opened.
White House chief of staff Rahm Emanuel told The Wall Street Journal that Obama was reappointing Bernanke because he credits him with "pulling the economy back from the brink of depression".
Bernanke was selected as Federal Reserve chairman by Obama's predecessor, George W Bush, in 2005 to replace retiring Fed chairman Alan Greenspan, who served for 18 years and presided over a golden era of economic prosperity.
At the tail end of Bush's second term and the beginning of Obama's presidency, Bernanke has been a key player in stabilising markets and presceibing the antidote to the worst crisis since the Great Depression of the 1930s.
He has enjoyed broad support on Wall Street, for the sweeping and sometimes unorthodox methods he has used to save the banking sector, redefine the financial industry and keep the recession from turning into a depression.
But Obama may face some opposition in Congress to his decision to reappoint him.
US Senate Banking Committee chairman Chris Dodd vowed to hold a "through and comprehensive confirmation hearing" for Bernanke's renomination, which requires Senate confirmation.
"I still have serious concerns about the Federal Reserve's failure to protect consumers and I strongly believe these responsibilities should go to an independent consumer financial protection agency," Dodd said in a statement, while noting that Obama's decision was "probably the right choice".
Obama's move may be calculated to send a signal of continuity and to reassure financial markets that are still fragile, despite signs the global economy is returning slowly to growth, especially outside the United States.
Changing the Fed chairman at such a time might have spooked investors and been seen as a dramatic reversal of policy, considering Bernanke was such a key player in fighting off the crisis.
Bernanke, 55, has worked closely with the Treasury Department and the White House in plotting a route out of the recession and stabilising and reforming the debt-laden US financial sector.
He now faces the delicate decision of how quickly to scale back the massive government effort to pump liquidity into the financial system.
Bernanke, meanwhile, said just last week that appeared good despite financial market strains, but cautioned that any economic growth would be slow at first.
"After contracting sharply over the past year, economic activity appears to be levelling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good," he told central bankers at a meeting in Jackson Hole, Wyoming.
Bernanke famously railed against the spectre of deflation, which he saw as one of the factors which prolonged the Great Depression, and that view has informed his thinking on the financial crisis that has battered the US economy during his moment in the spotlight of history.
Temasek says not put off by bank losses
Singapore investment firm Temasek Holdings said yesterday that it had not been put off investing in Western financial institutions despite suffering massive losses from the global financial crisis.
Ho Ching, chief executive of the state-linked firm, said it would invest in in such banks "if the opportunitites look attractive".
Temasek suffered massive losses after pumping billions into Western financial companies that were in need of a capital injection as the economic crisis unfolded.
It took a stake in Wall Street icon Merrill Lynch but when the US firm was bought by Bank of America, Temsek divested its interest. It also bought into British lender Barclays but later also offoaded that stake.
It is estimated Temasek lost more than US$5.4 billion (Bt184.4 billion) from the sale of its holdings in the two banks, Dow Jones Newswires quoted sources as saying.
Temasek made its divestments just before the global markets maade a recovery at the start of the year.
Ho, the wife of Prime Minister Lee Hsien Loong, said last month that by theh end of March Temasek's portfolio had lost more than (Bt946.9 billion) compared with a year ago.
Ho Ching, chief executive of the state-linked firm, said it would invest in in such banks "if the opportunitites look attractive".
Temasek suffered massive losses after pumping billions into Western financial companies that were in need of a capital injection as the economic crisis unfolded.
It took a stake in Wall Street icon Merrill Lynch but when the US firm was bought by Bank of America, Temsek divested its interest. It also bought into British lender Barclays but later also offoaded that stake.
It is estimated Temasek lost more than US$5.4 billion (Bt184.4 billion) from the sale of its holdings in the two banks, Dow Jones Newswires quoted sources as saying.
Temasek made its divestments just before the global markets maade a recovery at the start of the year.
Ho, the wife of Prime Minister Lee Hsien Loong, said last month that by theh end of March Temasek's portfolio had lost more than (Bt946.9 billion) compared with a year ago.
NZ extends retail deposit guarantee
The New Zealand government has extended its retail deposit guarantee scheme until the end of 2011,Finance Minister Bill English said yesterday.
He said the scheme, which was introduced last year at the height of financial market turmoil, was still needed despite the worst of the crisis having passed.
"The planned extension will help maintain confidence in New Zealand's financial institutions while achieving an orderly exit from the scheme," English said.
He also said taxpayers had already paid out around NZ$68 million (US$47 million) under the guarantee scheme after problems at one or two small finance companies.
The current scheme was due to expire in mid-October next year. It would now continue until Dec 312011, but with changes applying from the original expiry date.
Among the changes are the setting the maximum claim per individual to NZ$500,000(US$342,000) for bank customers and NZ$250,000 for non-bank institutions. The previous limit was NZ$1 million regardless of which type of institution.
Also financial institutions not rated BB or higher by credit ratings agencies will no longer be covered by the scheme.
"The announcement strikes the right balance between the need for stability in the financial market, certainty for investors and institutions about where the government is heading with the guarantee and also the risk to the taxpayers,"English said.
The scheme, which all of New Zealand's major banks and most of its nonbank finance companies have signed up to, is open to all retail deposits provided by banks and non-bank deposit takers.
Over the past two years New Zealand's NZ$18 billion non-finance sector has seen at least 25 companies collapse or seek to restructure deposits with more than NZ$5 billion owed to investors.
A similar scheme covering wholesale deposits was also introduced last November to support lending between banks.
He said the scheme, which was introduced last year at the height of financial market turmoil, was still needed despite the worst of the crisis having passed.
"The planned extension will help maintain confidence in New Zealand's financial institutions while achieving an orderly exit from the scheme," English said.
He also said taxpayers had already paid out around NZ$68 million (US$47 million) under the guarantee scheme after problems at one or two small finance companies.
The current scheme was due to expire in mid-October next year. It would now continue until Dec 312011, but with changes applying from the original expiry date.
Among the changes are the setting the maximum claim per individual to NZ$500,000(US$342,000) for bank customers and NZ$250,000 for non-bank institutions. The previous limit was NZ$1 million regardless of which type of institution.
Also financial institutions not rated BB or higher by credit ratings agencies will no longer be covered by the scheme.
"The announcement strikes the right balance between the need for stability in the financial market, certainty for investors and institutions about where the government is heading with the guarantee and also the risk to the taxpayers,"English said.
The scheme, which all of New Zealand's major banks and most of its nonbank finance companies have signed up to, is open to all retail deposits provided by banks and non-bank deposit takers.
Over the past two years New Zealand's NZ$18 billion non-finance sector has seen at least 25 companies collapse or seek to restructure deposits with more than NZ$5 billion owed to investors.
A similar scheme covering wholesale deposits was also introduced last November to support lending between banks.
SEC, BANK OF AMERICA DEFEND MERRILL BONUS PAYMENTS
The Securities and Exchange Comission and Bank of Amelrica on Monday defended the fairness of their proposed $33-million (Bt1.2-billion) settlement over executive bonuses paid out by Merrill Lynch, and the bank maintained it didn't mislead investors in the affairs.
In a court filing, Bank of America suggested that shareholders should have already known about the $3.6 billion in bonuses given the media attention surrounding its takeover of Merrill after it was first announced last September.
"There was no false or misleading statement or omission" in a proxy statement for voting shareholders, Bank of America said in its filing to US District Judge Jed Rakoff in Manhattan, who has held up approving the settlement. In addition, the bank noted that Merrill disclosed the size of its bonus pool when it reported financial results earlier in 2008.
With their separate filings, the SEC and Bank of America met the Monday deadline set by Rakoff two weeks ago for them to provide fuller information so that he can decide whether to approve the settlement announced on August 6. After a period of review, Rakoff could rule or order additional hearings.
The bank, without admitting or denying the allegations, agreed to pay the fine to settle charges that it misled investors about Merrill's plans to pay bonuses to executives even as it prepared to report billions in losses.
Bank of America is one of the biggest US banks as well as one of the largest recipients of aid under the government's financial bail-out programme, getting $475 billion. The SEC said in its filing that the government's capital investment in the bank doesn't change the standard the agency applied in arriving at the $33 million penalty.
Regulators have claimed that Bank of America had said in its proxy statement thatg it would not pay out bonuses to Merril employees in fiscal year 2008, when, in fact, the bank authorised bonus payments of as much as $5.8 billion.
The acquisition and bonus payments have caused Bank of America internal problems and angered shareholders. Bank of America's CEO Ken Lewis's management ability has beken questioned and shareholders stripped him of his chairman's title in April.
In a court filing, Bank of America suggested that shareholders should have already known about the $3.6 billion in bonuses given the media attention surrounding its takeover of Merrill after it was first announced last September.
"There was no false or misleading statement or omission" in a proxy statement for voting shareholders, Bank of America said in its filing to US District Judge Jed Rakoff in Manhattan, who has held up approving the settlement. In addition, the bank noted that Merrill disclosed the size of its bonus pool when it reported financial results earlier in 2008.
With their separate filings, the SEC and Bank of America met the Monday deadline set by Rakoff two weeks ago for them to provide fuller information so that he can decide whether to approve the settlement announced on August 6. After a period of review, Rakoff could rule or order additional hearings.
The bank, without admitting or denying the allegations, agreed to pay the fine to settle charges that it misled investors about Merrill's plans to pay bonuses to executives even as it prepared to report billions in losses.
Bank of America is one of the biggest US banks as well as one of the largest recipients of aid under the government's financial bail-out programme, getting $475 billion. The SEC said in its filing that the government's capital investment in the bank doesn't change the standard the agency applied in arriving at the $33 million penalty.
Regulators have claimed that Bank of America had said in its proxy statement thatg it would not pay out bonuses to Merril employees in fiscal year 2008, when, in fact, the bank authorised bonus payments of as much as $5.8 billion.
The acquisition and bonus payments have caused Bank of America internal problems and angered shareholders. Bank of America's CEO Ken Lewis's management ability has beken questioned and shareholders stripped him of his chairman's title in April.
Thai firms to boost dollar bond sales
Thai companies will increase sales of dollar bonds as limited investor demand for baht securities forces them to seek funding elsewhere, according to Standard Chartered Plc.
"Thai companies are at a crossroads right now," said Ratch Sodsatit, executive vice-president and capital markets head of the London-based bank's Thai unit."Domestic liquidity is not strong enough for them and tapping the dollar market in a big way will be key to solving that."
Thai companies have sold 288.7 billion baht ($8.5 billion) worth of local currency notes this year, passing the 270.3 billion they raised in all of 2008,according to data compiled by Bloomberg. Sales rose as lending by Krung Thai Bank, Siam Commercial Bank and nine other Thai banks shrank 3.2%,driven by a reduction in loans to companies and small businesses, Citigroup said in a note on Aug 20.
Petroliam Nasional Bhd, the Malaysian state-owned oil company known as Petronas, sold $4.5 billion worth of bonds on Aug 6 in the biggest dollar issue by an Asian company outside Japan this year, Bloomberg data show.PTT Plc, Thailand's biggest energy company, is in talks with banks for a sale that may be of similar size, said Mr Ratch.
PTT is well-placed and highly likely to tap the dollar-bond market because it is a long-dated issuer and, in many cases, the limit in terms of the percentage local investors can hold of them has been reached, he said.
"Thai institutional investors are buying only the safest debt, making the dollar bond market increasingly important for riskier borrowers," he added.
"The market has shifted over the past year and mutual funds are staying away from anything rated less than A-minus."
Individual investors, jaded by bank deposit rates as low as 0.8%, are the most active buyers of corporate debt in Thailand, he said.
A ranking of A- is the seventh-highest investment grade from Standard &Poor's, the New York-based ratings company.
Easy Buy Plc, the consumer finance company controlled by Japan's Acom Co, sold 3.5 billion baht worth of threeyear notes on July 24, paying a 4.9%coupon. The securities were priced to yield 250 basis points more than benchmark rates and 95% of the offer was taken up by individuals, said Mr Ratch.
Standard Chartered Bank (Thai) is ranked seventh among Thai corporate bond sales this year with a market share of 4.3%, Bloomberg data show.
"Thai companies are at a crossroads right now," said Ratch Sodsatit, executive vice-president and capital markets head of the London-based bank's Thai unit."Domestic liquidity is not strong enough for them and tapping the dollar market in a big way will be key to solving that."
Thai companies have sold 288.7 billion baht ($8.5 billion) worth of local currency notes this year, passing the 270.3 billion they raised in all of 2008,according to data compiled by Bloomberg. Sales rose as lending by Krung Thai Bank, Siam Commercial Bank and nine other Thai banks shrank 3.2%,driven by a reduction in loans to companies and small businesses, Citigroup said in a note on Aug 20.
Petroliam Nasional Bhd, the Malaysian state-owned oil company known as Petronas, sold $4.5 billion worth of bonds on Aug 6 in the biggest dollar issue by an Asian company outside Japan this year, Bloomberg data show.PTT Plc, Thailand's biggest energy company, is in talks with banks for a sale that may be of similar size, said Mr Ratch.
PTT is well-placed and highly likely to tap the dollar-bond market because it is a long-dated issuer and, in many cases, the limit in terms of the percentage local investors can hold of them has been reached, he said.
"Thai institutional investors are buying only the safest debt, making the dollar bond market increasingly important for riskier borrowers," he added.
"The market has shifted over the past year and mutual funds are staying away from anything rated less than A-minus."
Individual investors, jaded by bank deposit rates as low as 0.8%, are the most active buyers of corporate debt in Thailand, he said.
A ranking of A- is the seventh-highest investment grade from Standard &Poor's, the New York-based ratings company.
Easy Buy Plc, the consumer finance company controlled by Japan's Acom Co, sold 3.5 billion baht worth of threeyear notes on July 24, paying a 4.9%coupon. The securities were priced to yield 250 basis points more than benchmark rates and 95% of the offer was taken up by individuals, said Mr Ratch.
Standard Chartered Bank (Thai) is ranked seventh among Thai corporate bond sales this year with a market share of 4.3%, Bloomberg data show.
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