If a year is a long time in politics, it is an eternity in the financial markets. Less than 12 months ago, Thailand was celebrating its status as one of Asia’s best-performing stock markets.
This was even allowing for military coup and geopolitical uncertainty that had driven such volatility within the country, as Thailand’s SET index rallied 19.32% and came second only to the Karachi 100 in Pakistan.
This rally has dwindled considerably, however, with Thai stocks up by just 5.2% at the beginning of January.
In fact, the first two financial quarters have seen the nation’s stock market plummet to become the second-worst performing in Asia, while this decline has also triggered an economic slump that may be hard to recover from.
How Thailand’s Fortunes Have Changed in the Last Year
Of course, some will argue that the seeds for such depreciation were sewn at the height of financial market growth last year, has debt levels soared and company valuations grew at a disproportionate rate.
These fears have been realised in the New Year, particularly as bad loans have begun to weigh heavily on investor sentiment.
The Bangkok Bank and Krung Thai Bank led domestic lenders in reporting a rise in non-performing loans between January and March, which in turn prompted stern warnings from brokerage outlets such as Nomura Securities Co and the Goldman Sachs Group.
Online brokerage firms and trading portals also raised concerns, with investor activity levels declining and the level of sentiment among companies also depreciating.
To cap this sudden and inescapable slide, the benchmark SET index also fell by as much as 1.2% last week, with disappointing quarterly results largely behind this.
The state of the marketplace and falling business sentiment is beginning to hit the economy hard too, with the World Bank having revised its growth projections to just 3.3% per year between 2017 and 2019.
This is the weakest among all eight developing South East Asian nations, with the Philippines and Indonesia set to record annual growth during the same period of 6% and 5% respectively.
The Bottom Line: Can Thailand Recover From Its Economic and Financial Market Malaise?
For some, last years’ figures and economic performance were mere anomalies, which did little more that mask the true sate of the marketplace.
In fact, there is a strong belief that Thailand’s decline began in earnest when the military seized power three years ago, as this had the cumulative effect of restricting competition, hindering growth and driving a monetary policy that is incapable of stimulating the economy.
Over time, these measures have taken hold and left the nation struggling to compete with even less well-resourced contemporaries.
Thailand’s general leaders are taking steps to resolve this issue, however, primarily by conceiving and driving a number of infrastructure projects throughout the nation.
The pick of these is the $5.2 billion high-speed rail venture with China, while significant investment in innovation, technology and advanced industries are sure to drive longer-term growth.
These remain a work-in-progress for now, however, meaning that the government may be forced to take more effective, short-term steps if they are to achieve their objectives.
BOT relaxes rules to Curb Strong Baht
the Bank of Thailand (BOT) decided to relax regulations to facilitate capital outflows to help promote capital flow balance and lessen pressure on the baht.
The Thai baht has been under pressure due to imbalanced capital flows in the current environment of highly uncertain and volatile external conditions, the Ministry of Finance (MOF) and the Bank of Thailand (BOT) decided to relax regulations to facilitate capital outflows to help promote capital flow balance and lessen pressure on the baht.(more…)
Bank of Thailand cuts rate by 0.25% to 1.25 per cent
The latest cut brings the Bot’s policy rate to an historical low, which the bank maintained from April 2009 to July 2010 during the subprime global financial crisis.
On 6 November 2019, the MPC voted 5 to 2 to reduce the policy rate by 0.25 percentage point from 1.50 to 1.25 percent, effective immediately. Two members voted to maintain the policy rate at 1.50 percent.(more…)
Thailand’s loss of trade privileges with US is credit negative
The development is credit negative because Thailand’s export-oriented economy is in a difficult external environment given that a broad-based export slowdown and strong Thai baht are weakening the competitiveness of goods exporters and the country’s tourism industry.
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