Restocking driving loan needs for working capital

       Improving demand for working-capital loans is being driven by both seasonal factors as well as businesses moving to rebuild inventories, according to local bankers.
       Chansak Fuangfu, a senior executive vice-president of Bangkok Bank, said demand for working capital had been rising steadily, particularly for companies in the manufacturing and agricultural sectors.
       A pickup in demand for manufacturing goods in the global market was leading to an increase in credit demand, as companies moved to restock their inventories.
       Demand for working capital was also rising due to seasonal factors, with manufacturing picking up for production to meet orders for the year-end holidays,and agricultural activity increasing for the harvest season.
       He said higher prices were also increasing working capital requirements,noting that sugar prices as an example had risen 19% from the end of last year.
       But he said that despite the improved trend, overall loan demand remained sluggish, as companies were still reluctant to increase investment considering production-capacity utilisation remained at 60%, compared with 70% last year.
       Bankers and economists, however,expect loan demand and investment to pick up over the next few quarters, as infrastructure spending under the Strong Thailand programme begins.
       Bangkok Bank, the country's largest bank, is targeting overall loan growth of zero to 3% this year, even as the bank forecasts the overall economy will contract by 3% from 2008. The bank reported a 6% contraction in its loan book in the first half of the year compared with the same period last year.
       Thanachart Bank (TBank) executive vice-president Noossara Roonsamrarn agreed that demand for working capital would improve in the second half due to seasonal factors, in particular for the agricultural sector.
       Restocking of inventories by businesses is another factor that will support the short-term loans. But she agreed that demand for term loans had not shown significant signs of recovery, given the weak investment climate.