SINGAPORE, SINGAPORE — (Marketwired) — 07/22/13 — In FXPRIMUS- for 19 July, the brokerage firm highlights Thailand-s slowing growth.
Thai big banks and policy makers will likely turn cautious on rising bad debt and slower growth in 2H.
Thailand-s full year growth may slow to 4.6% YoY, when fund outflow is still severe and China faces tremendous growth challenges in the near term, since there is no expected sizable stimulus.
Given the likelihood of growth deceleration and rising non-performing loan (NPL) fears, according to statements from top commercial banks in Thailand, I expect the housing price increase pace in 2H will be from moderate to modest. Despite substantial amounts of supply, construction and labor costs were passed on from developers to purchasers. Property prices in Thailand recovered more than 22% since the political chaos in 2008, and recovery pace accelerated earlier in 2013.
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Source: Bloomberg, FXPRIMUS
Moving forward, 3 factors might “cap” the housing price somewhere:
Major banks in Thailand started tightening loan approval procedures to minimize credit risk. The rise in bad debts is not only reflected in the housing market, but also in various industries, such as the auto market. The third largest lender by assets, Siam Commercial Bank, lowered its full year loan growth target in 2013 this week due to slower growth expectations, after earlier plans to revise the target up due to the “short-lived” resilient growth in 1H.
Nothing looks good in the domestic financial market either. According to funds flow data, global funds sold USD1.4 billion Thai debts since May, a clear move to cope with the Federal Reserve-s (Fed) tapering regime and a much better-than-expected U.S. Non-Farm Payroll (NFP) in July.
The yield on Thailand 10-year notes also jumped above 4% last month, while the Baht fell to a 10-month low.
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Source: Bloomberg, FXPRIMUS
Investment Insights
Substitutions if growth momentum turns negative
The Thai equities outlook remains soft in the near term, together with the Baht underperforming. Hence, it will be tougher for Thai investors to increase profits if focused on the domestic market. Besides the USD, Gold also provided some great opportunities in 2H when tapering might be realized.
According to Mario Singh, FXPRIMUS- Director of Business Development, “I remain with the view of a “less accommodative” Fed policy by the end of the year, despite some dovish expressions from Ben Bernanke yesterday in his testimony before Congress. Bernanke-s concern is borrowing cost, as unwinding risk assets will push the yield on long-term notes higher. This “noise” still has some difficulties in masking the recent resilient labor market.
Gold and the USD still hold negative correlations relatively well. With another factor of global central banks still releasing holdings for the Gold portfolio, the Gold price upside may be limited.
“Based on the technical analysis in the near term, Gold might face some headwinds near the 1,300 level, and I expect the price to stay below it as long as the “Dollar slump” doesn-t appear in the near term.”
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Source: Bloomberg
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