Executives predict more stability

Bangkok Post (6 November 2007)

Listed-company executives project economic growth next year to grow 4.4% thanks to greater stability in local politics.

Kobsak Pootrakool, executive director of the SET Research Institute, said that more than half of 110 companies listed on the Stock Exchange of Thailand surveyed agreed that politics would become more stable after the Dec 23 election.

About one-third of the firms, however, believed that little change would occur after the election, while 18% believed that greater instability could occur.

Dr Kobsak said 52 firms urged the new government to accelerate infrastructure megaproject investments; 44 wanted the government to boost economic growth through local consumption; and 18 said exports should be the top priority.

A strong three-quarters of the firms surveyed predicted economic growth to pick up six months after the election, with only 18% predicting little change and 7% forecasting a further downturn.
Overall, listed-company executives projected economic growth of 4% to 4.4% in 2008, with inflation projected at 2% to 3%.

According to the Bank of Thailand, economic growth this year is projected at 4%, down from 5% in 2006. Two-thirds of the listed firms said they planned to increase investments over the next 12 months, while 29% forecast no change in capital expenditures and 5% planned to cut spending.

Some 76 companies said they favoured new bank loans to finance investment, while 64 said they would use retained profits. Twenty companies planned corporate bond issues and 16 new share issues. Ten companies said they would borrow from foreign banks for new investment, while five favoured foreign bond issues.

''To raise fund through the SET or to increase capital is more difficult due to the relatively long process required. Borrowing from banks is still the easiest way to raise funds,'' Dr Kobsak said.
Listed firms agreed that rising oil prices in the global market would put pressure on material prices, leading some manufacturers to eventually hike sales prices to maintain margins.

Dr Kobsak said the recent runup in oil prices was likely to be temporary. New records were reached due to tensions between Iraq and Turkey and the onset of the winter season in the northern hemisphere.

''The factors that would affect investment plans the most are local economic growth, politics, interest rates, world economic trends, high oil prices and government investment,'' he said.

The stronger baht had helped 35% of the companies due to lower import costs, while another 32% said the currency had no impact on operations and another 18% cited some gains. Only 11% of the firms said the stronger baht was significantly negative to their operations.

Meanwhile, the Stock Exchange of Thailand posted sharp losses yesterday as most Asian markets ended lower on growing fears about the impact of the sub-prime mortgage crisis in the US.

Reports that the head of Citigroup had resigned and that the bank would take losses of up to $11 billion due to the sub-prime crisis shook regional markets. Hong Kong markets also tumbled after regulators announced further delays in allowing mainland Chinese residents to trade in the market.

The SET index closed yesterday at 872.86, down 21.48, in trade worth 19.16 billion baht. Foreign investors were heavy net sellers of 5.2 billion baht worth of stock, with retail investors net buyers of 4.8 billion and local institutions net buyers of 400.4 million.

Sukit Udomsirikul, assistant managing director of Siam City Securities, said the SET index could drop to 830 to 850 as foreign investors reshuffle their allocations to the region.

Recent comments by the US Federal Reserve that further interest-rate cuts in the US were unlikely due to the weak dollar were negative for the equities markets, he said.