The Nation

Thailand’s sentiment index dropped to an all-time low of 42 from 60 in the survey.

The Asia Business Sentiment Index climbed 6 points to 71 this month, its highest level in five quarters and the third straight quarterly rise. A reading above 50 indicates a generally positive outlook.

Global economic uncertainty remains the biggest business risk across most countries and sectors, but 44 per cent of the 91 polled companies are now positive about their outlook, up from 30 per cent in the prior quarter.

Corporate sentiment in China, the world’s second-largest economy, remained unchanged at its record low of 50 for a two straight quarters as companies worried about rising costs and global economic uncertainty.

“If you go back a year ago, there was a lot of concern about the global economy – a hard landing in China, a collapse in Europe and a double dip in the US. Some of those fears are still around, but they have certainly faded over the course of last year…

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Bangkok Post

President Somchai Phornchindarak attributed the contraction to increased exports from other countries and territories such as India, China and Hong Kong, where import duties are relatively low compared with Thailand’s 20% duty.

“Global competition is now very intense, and many countries have benefited from the help of their governments in reducing import duties. We have to ask ourselves where we want to position ourselves in the world market,” he said.

The Customs Department said gem and jewellery exports totalled 75.7 billion baht in the first four months of this year, down by 37.9% year-on-year.

Full-year exports came in at 408 billion baht in 2012.

Imports for the first four months totalled 263 billion baht, up by 44.7% year-on-year.

“We’ve seen continued growth throughout our history. This is the first time we’re expecting a contraction…

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Bangkok Post

Sales could total 7 million tonnes this year and 8 million tonnes in 2014, said honorary president Chookiat Ophaswongse. His previous forecast for 2013 was 6-6.5 million tonnes. The National Rice Policy Committee Wednesday approved a 20% reduction to 12,000 baht ($388) a ton from 15,000 baht in support prices for the unmilled white variety, said Commerce Minister Boonsong Teriyapirom. The decision needs to be endorsed by the cabinet.

Thailand has paid farmers as much as 50% above the domestic market rates since October 2011 to boost incomes. Around 588.7 billion baht has been spent on 27 million tonnes of milled rice, equivalent to 70% of annual global imports. The programme may have lost 136.9 billion baht in 2011-2012, the government estimates.

Moody’s said on June 3 that losses hamper the goal of achieving a balanced…

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The Nation

Prasarn Trairatvorakul said the current economic situation, which is seeing capital outflows, does not indicate a necessity for a further rate cut, and other countries in the region have not slashed their benchmark rates yet.

The BOT’s Monetary Policy Committee (MPC) reduced the key rate by 25 basis points to 2.50 per cent at its May 29 meeting. After the move, the yields of short-term bonds reduced, but those of long-term bonds increased, and that led to money-market expectations of no further rate cuts for now.

The MPC will need to consider recent economic data at its next meeting.

In response to the Indonesian central bank’s decision to raise its policy rate, Prasarn said that country had internal problems not shared by Thailand.

Prasarn conceded, however, that the BOT remained concerned about the level of household debts at 78 per cent of gross domestic product, amounting to Bt8 trillion. The central bank is closely monitoring this and is ready to launch control measures if necessary. While Thailand’s macroeconomic conditions remain solid despite the slower growth in the first quarter, the high household…

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The Nation

The new Roland Berger study – “Industry Model 2.0: Raising the Competitiveness of Corporate Japan” – analyses the key differences between Japanese companies and businesses from other major countries. The study also looks at several examples of successful and unsuccessful business models chosen by Japanese companies to define the key features for good business.

In response to the stagnating domestic market and strong competition from foreign businesses, Japanese companies have started developing new strategies. Nevertheless, except for a small number of companies, the traditional business model still remains predominant in Japan. Only 63 per cent of Japanese companies are focusing on fewer than three business segments, compared to over 80 per cent in the US, France or Germany.

“The general assumption is that a diversified portfolio makes it possible to minimise risks. Still, companies with a highly diversified portfolio were as badly hit by recent crises as sector-focused ones, and they had more difficulty in recovering,” says Martin Tonko, partner and co-author of this study. In fact, in contrast to highly diversified groups, Japanese companies focusing on a single sector have experienced annual sales growth above 10 per cent since…

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The Nation

In mid-April, the dollar-baht exchange rate hovered around 28.6. At that level, it had appreciated by a whopping 6.7 per cent since the start of the year – much more than any other Asian currency, and actually one of the best performers in the world.

Foreign investors were piling into Thailand, Thai exporters went into shock and a fierce debate was raging among policymakers on whether to cut interest rates.

Financial markets can shift rapidly, but the movements of the past two months have been even more extreme than anyone ever expected. The baht has completely reversed direction and in fact it has weakened much more quickly than it had strengthened. By early this month, the baht had moved back above 30.6, where it had begun the year, and then even briefly passed the 31.0 level.

The reversal was partly due to aggressive comments from Thai authorities, including some very public preparations of capital controls. It was also partly due to a big shift in global market sentiment, with investors heading back to the US dollar after surprisingly conservative policy signals from the United States.

The root factor is that Thai financial markets have become much more integrated with global markets over the past few years. Foreign participation in Thailand has surged and that makes local prices and rates much more dependent on…

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The Nation

BOT Governor Prasarn Trairatvorakul said yesterday that if the Fed cancels its domestic bond purchases and foreign investors pull their money out of Thailand, that would not rattle the local money market or upset the country’s financial stability and liquidity.

The country has various monetary tools at its disposal, a suitable level of foreign reserves and prudent interest-rate policy, while foreign investment in government and BOT bonds amounts to only Bt800 billion (US$26 billion), or 12 per cent of total Thai bonds. The recent foreign selling dropped foreign bond holdings slightly to 11 per cent.

“Comparing [foreign holdings] to the country’s international reserves of $200 billion, we have sufficient reserves,” Prasarn said.

Liquidity is staying at Bt4.7 trillion.

Given the global economic uncertainties, the central bank is constantly monitoring money-market movements, focusing on the Thai economic balance, and is closely following changes in factors with caution for its monetary…

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Bangkok Post

The IMF also noted that volatility in capital flows and political unrest were other potential risks to the country’s growth outlook. The IMF released the report following its annual mission to the country earlier this month.

Luis Breuer, the IMF mission chief, said in a statement that Thailand’s economic fundamentals were strong, “including a track record of growth, stability and fiscal discipline, healthy balance sheets of commercial banks and corporations, high international reserves, and manageable public debt”.

Short-term growth is expected to be led by strong private demand and a rise in public spending.

The IMF noted that while the increase in fiscal spending following the global financial crisis and 2011 floods was “justified”, Thailand should consider gradually withdrawing fiscal stimulus to “create fiscal space for priority infrastructure…

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The Nation

In the past year alone, the country has jumped to 15th from 20th. By category it places 17th in breadth but 33rd in depth.

Thailand is one of the six Asian countries or territories in the top 25 for overall connectedness – a measure of both depth and breadth of connectivity. Singapore ranks second, Hong Kong 12th, South Korea 14th, Malaysia 16th and Taiwan 21st.

Jerry Hsu, chief executive officer for Asia-Pacific at DHL Express, said yesterday that the GCI debunked the damaging myth of total globalisation as “globaloney”.

“The index reveals a world operating in a range of 10-to-20-per-cent globalisation with 50-60 per cent of international flows happening intra-regionally.

“This means there’s still huge potential for greater connectivity between countries, especially since levels remain lower than [before] the financial crisis. The potential gains could reach trillions of dollars and during this period of slower growth, greater international connectedness should be embraced as a vital engine for economic recovery and prosperity…

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The Nation

“The main reason exporters closed is that they faced losses,” said Deputy Commerce Minister Natthawut Saikua.

The department reported a total of 181 export firms collapsing in the first five months of the year, including 54 in May.

According to the department’s survey, 39 per cent of businesses winding up last month said they had faced losses.

Natthawut said that although the baht depreciated slightly last month, its strength since early in the year had affected some exporters, particularly small and medium-sized enterprises.

He said the department would be able to compile clearer figures on the impact of the baht’s strength on export companies next month.

Export businesses that closed last month included those in steel and ores, consumer goods, machinery, agricultural supplies, jewellery, footwear and garments.

In the first five months, 4,221 companies shut down, a decline of 7 per cent compared with the same period…

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