Economics Markets Strategy - the DBS Vickers Securities Equities ...

More documents

Recommendations

Info

Economics: Thailand Economics – Markets – Strategy short-term. However, as we discussed in the previous paragraph, both the coup and the general elections have failed to bring political stability, revealing instead the deep divisions in Thai society at present. This means that confidence that the political mess can be resolved in the future should begin to fade. This may drag the “future” confidence sub-index down towards the “present” index at some point. This, in turn, is negative for the longer term outlook. Thankfully, we can still count on the relatively healthy labour market and strong farm incomes in 1Q08 to support consumption spending at around 3%. Investment - expected only in export oriented sectors where capacity is tight In 1Q08, investment spending began to turn around (Chart 5) in light of elevated capacity utilisation rates and pent up demand, especially in export-oriented sectors. Indeed, business sentiment, especially with regards to investment turned around sharply according to a BoT survey (Chart 6). Chart 5: Investment vs capacity utilisation % YoY % 20 77 Chart 6: Business sentiment: investment sub-index Index 58 15 10 5 75 73 71 56 54 52 50 0 -5 Gross capital formation Capacity Utilisation Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 69 67 48 46 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 However, the renewed spike up in political uncertainty implies that further recovery in investment should be restricted to sectors and companies with very high capacity utilisation where orders cannot be met unless capacity is expanded. Capacity utilisation is now running above 90% in some sectors such as electrical and electronic, food, chemicals and paper (Chart 7). This should help support investment spending growth at 5%-6%, a little better than the 3% growth seen in 2006 and 2007, but disappointing nonetheless. Chart 7: Capacity utilisation - 90% in many sectors even as headline rate is not high %, 4qma 105 Mar-05 Mar-08 100 95 90 85 80 75 70 65 60 Paper Chem Petro pdts IC Disk drives Zinc Comm. Car Tyre Wshg Mach 116
Economics – Markets – Strategy Economics: Thailand Exports going strong - around 15% if price effect is taken into account Export growth has accelerated in the last three months. Exports grew by 28% (YoY) and 20% (3mma) in Apr08. After accounting for higher commodity prices, manufacturing exports appear to be growing at circa 15% annual rate. This is illustrated in the chart below. Petroleum products, jewellery, and manufactured food (bright red bar in the chart), all of which have seen unusually large price increases, are the key drivers behind the rise in exports in the last six months (Chart 8). In any case, 15% export growth rate is indeed remarkable considering that the US struggles with 1% annualised consumption spending. Accounting for commodity price jump still means Thai export growth is around 15% Chart 8: Mfg exports by commodity accounting for commodity price rise % pt- YoY, 3mma 40 35 30 25 20 15 10 5 Machinery (mainly PC) Vehicles and parts Base metal Oil, jewellery, food (px effect) Electronics (IC, HDD) Electrical appliance All the rest Mfg exports 0 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 The 1Q08 GDP report showed that exports in real terms rose by 5.7% (QoQ, sa) or 23% annualised. Exports expanded at a similar rate in 4Q07. Clearly, Thai manufacturing sector is competitive in many electrical and (low-end) electronic products. In the past year, exports to Asia and other emerging markets have been the key driver of Thai export growth (Chart 9). Furthermore, Asia (ex-Thai) exports to US has also been very weak (Chart 10). In other words, final demand doesn’t merely lie in the US and exports to Asia have not been merely recycled to the US. As such, even as US economic growth is weak, we are confident that Thai exports should grow at the annual rate of 15% going forward. This should support full year 2008 export growth at 20%. Thai exports to Asia not merely headed to US Chart 9: Exports to Asia driving export growth…. % YoY, 3mma 35 30 25 20 15 10 5 0 -5 -10 TH exports: to Asia Th exports: to US Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Chart 10: …and these are not merely headed to US % YoY, 3mma 35 30 25 20 15 10 5 0 TH exports: to Asia Asia ex-Thai exports: to US Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 117
Page 1 and 2:
Economics Markets Strategy 3Q 2008
Page 3 and 4:
Economics - Markets - Strategy June
Page 5 and 6:
Economics - Markets - Strategy June
Page 7 and 8:
Economics - Markets - Strategy Econ
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19 and 20:
Page 21 and 22:
Page 23 and 24:
Page 25 and 26:
Economics - Markets - Strategy Curr
Page 27 and 28:
Page 29 and 30:
Page 31 and 32:
Page 33 and 34:
Page 35 and 36:
Page 37 and 38:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44:
Page 45 and 46:
Economics - Markets - Strategy Yiel
Page 47 and 48:
Page 49 and 50:
Page 51 and 52:
Page 53 and 54:
Page 55 and 56:
Page 57 and 58:
Page 59 and 60:
Economics - Markets - Strategy Asia
Page 61 and 62:
Page 63 and 64:
Page 65 and 66:
Page 67 and 68: Economics - Markets - Strategy Asia
Page 73 and 74: Economics - Markets - Strategy Econ
Page 117: Economics - Markets - Strategy Econ
Page 155: Economics - Markets - Strategy 3Q 2
show all

Economics Markets Strategy - the DBS Vickers Securities Equities ...

Create successful ePaper yourself

Delete template?

Save as template?