2 Aug 2019
International Economy
US President Donald Trump eventually announced an additional 10 percent tariff on the remaining USD300 billion of Chinese imports, effective September 1, 2019, due mainly to the slow progress in the trade talks. In particular, Beijing is bargaining for conditions which are difficult to be achievable. KResearch views that this round of punitive tariffs will add pressure on Thai exports that are linked to China’s manufacturing supply chains, especially electronic parts which are used in household appliance production. Hence, the damage to Thailand’s exports is expected to increase to USD2.4 billion this year due to the escalating trade war (up from our initial projection of USD2.1 billion, which was calculated on the US punitive tariff of 25 percent on USD250 billion of Chinese imports only). The impact will become more evident in 2020 when the indirect effect from the slowing global economy will further drag overall outbound shipments from Thailand next year. ...Read more
25 Jul 2019
KResearch expects the US Federal Reserve to cut the interest rates by 0.25 percent percentage point from 2.25-2.50 percent to 2.00-2.25 percent. Moreover, the Fed is likely to announce to end the balance sheet reduction before the initial schedule to ensure the continuity of the US economic expansion during the Federal Open Market Committee meeting on July 30-31, 2019. The Fed’s policy rate shift signals its flexibility in implementing monetary policy in response to economic environment rather than an attempt to address the slowing business activities. ...Read more
17 Jul 2019
China's economic growth in 2Q19 grew at 6.2 percent, the slowest growth rate in 27 years and down from 6.4 percent in 1Q19. Consequently, China’s gross domestic product in 1H19 rose only 6.3 percent. The slump is a result of a fall in the global and domestic demands. Moreover, the prolonged trade war between the US and China has increased the downward pressure on the Chinese economy. China's exports shrank 1 percent YoY in 2Q19 versus a growth of 1.3 percent YOY in 1Q19. The drop in Chinese exports has taken a toll on China’s industrial sector. China’s Caixin/Markit manufacturing Purchasing Managers’ Index for June declined to 49.4. The reading below 50 signals contraction in China’s manufacturing activity. Moreover, China experienced weaker domestic demand as imports continued to drop to minus growth of 4.1 percent in 2Q19, even though the Chinese government is trying to use various measures to stimulate the economy such as cuts in value added and import taxes and an increase in the government spending budget in infrastructure projects to over 2 trillion Yuan (USD297 billion). However, China’s economy is still losing steam. This shows that these measures may not be enough to boost the economy, and they may only help cushion the slump....Read more
23 Jul 2019
Agriculture
The off-season drought situation in 2019 (May-July 2019) has caused extensive damage. The influence of a mild El Nino condition has resulted in lower than normal rainfall. The amount of water in the dams remains low, adversely affecting main agricultural products such as in-season rice that farmers have already planted. Hence, the rice price is moving up, pushing the average price of rice output in 1H19 higher by 6.4 percent YoY. Nonetheless, the damage caused by lower major-season rice output this year poses challenges to the overall farm income outlook....Read more
22 Jul 2019
Regarding the ongoing cassava mosaic virus epidemic, KResearch views that in 2019 the cassava mosaic virus epidemic may not damage the overall cassava output for this year because normally a small amount of cassava will enter the market in the second half of the year. The cassava price in 2H19 is likely to stay in the range of THB1.7-1.8 per kilogram, versus THB2.02 per kilogram in 1H19. The outlook for cassava this year is not promising because the cassava price is likely to stay at THB1.9 per kilogram on average, or a drop of 20.1 percent YOY. The fall is attributed mainly to a decreasing demand in China because corn stockpiles in China remain high. In 2019, China’s corn stockpiles are expected to reach 209.8 million metric tons, compared to an average volume of stockpiles in the past five years (2014-2018) of 213.5 million metric tons per year. ...Read more
Trading
Skyrocketing gold exports supported Thai shipments to shrink at a slower pace in June 2019. Thailand’s June outward trade reached USD21,409.3 million, representing a contraction for the fourth consecutive month at 2.15 percent YoY. The shrinkage, however, was slower than those reported during the preceding three months due partly to the 317.4 percent YoY surge in gold exports. Excluding gold shipments, Thai exports overall contracted 8.7 percent YoY, led largely by major export categories to all key markets....Read more
5 Aug 2019
Financial Institutions
KResearch projects that the Monetary Policy Committee (MPC) will keep its policy rate steady at 1.75 percent at the fifth meeting of 2019 slated for August 7, 2019. It is expected that the MPC will attach importance to long-term stability at the upcoming meeting as it is experiencing more challenges in implementing its money policy amid numerous downside risks, in particular financial stability risk resulting from a steady acceleration of household debt that may stifle Thailand’s long-term economic performance. To cope with stability risk, the Bank of Thailand (BOT) has implemented both macro and micro prudential policies, namely the LTV ratio. It is also scheduled to introduce loan quality standards, namely the debt service coverage ratio (DSCR), by the end of 2019. However, it may take some time for these measures to yield results. ...Read more
19 Jul 2019
Financial Markets
The Baht rebounded later in the week. The Baht weakened early to mid week, along with net foreign bond selling orders. The Baht later reversed those losses and rebounded amid the weak US dollar sentiment, led by disappointing US economic data, and NY Fed President’s remarks that reinforced expectation of the US rate cut at the FOMC meeting on July 30-31. The IMF’s report, saying that the US dollar is overvalued, also weighed down the US dollar. ...Read more