Economics Markets Strategy - the DBS Vickers Securities Equities ...
Economics Markets Strategy - the DBS Vickers Securities Equities ...
Economics Markets Strategy - the DBS Vickers Securities Equities ...
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
<strong>Economics</strong> – <strong>Markets</strong> – <strong>Strategy</strong><br />
<strong>Economics</strong>: Thailand<br />
Exports going strong - around 15% if price effect is taken into account<br />
Export growth has accelerated in <strong>the</strong> last three months. Exports grew by 28%<br />
(YoY) and 20% (3mma) in Apr08. After accounting for higher commodity prices,<br />
manufacturing exports appear to be growing at circa 15% annual rate. This is<br />
illustrated in <strong>the</strong> chart below. Petroleum products, jewellery, and manufactured<br />
food (bright red bar in <strong>the</strong> chart), all of which have seen unusually large price<br />
increases, are <strong>the</strong> key drivers behind <strong>the</strong> rise in exports in <strong>the</strong> last six months<br />
(Chart 8). In any case, 15% export growth rate is indeed remarkable considering<br />
that <strong>the</strong> US struggles with 1% annualised consumption spending.<br />
Accounting for<br />
commodity price<br />
jump still means<br />
Thai export growth<br />
is around 15%<br />
Chart 8: Mfg exports by commodity accounting for commodity price rise<br />
% pt- YoY, 3mma<br />
40<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
Machinery (mainly PC)<br />
Vehicles and parts<br />
Base metal<br />
Oil, jewellery, food (px effect)<br />
Electronics (IC, HDD)<br />
Electrical appliance<br />
All <strong>the</strong> rest<br />
Mfg exports<br />
0<br />
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08<br />
The 1Q08 GDP report showed that exports in real terms rose by 5.7% (QoQ, sa)<br />
or 23% annualised. Exports expanded at a similar rate in 4Q07. Clearly, Thai<br />
manufacturing sector is competitive in many electrical and (low-end) electronic<br />
products. In <strong>the</strong> past year, exports to Asia and o<strong>the</strong>r emerging markets have<br />
been <strong>the</strong> key driver of Thai export growth (Chart 9). Fur<strong>the</strong>rmore, Asia (ex-Thai)<br />
exports to US has also been very weak (Chart 10). In o<strong>the</strong>r words, final demand<br />
doesn’t merely lie in <strong>the</strong> US and exports to Asia have not been merely recycled<br />
to <strong>the</strong> US. As such, even as US economic growth is weak, we are confident that<br />
Thai exports should grow at <strong>the</strong> annual rate of 15% going forward. This should<br />
support full year 2008 export growth at 20%.<br />
Thai exports to<br />
Asia not merely<br />
headed to US<br />
Chart 9: Exports to Asia driving export growth….<br />
% YoY, 3mma<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
-5<br />
-10<br />
TH exports: to Asia<br />
Th exports: to US<br />
Apr-06 Oct-06 Apr-07 Oct-07 Apr-08<br />
Chart 10: …and <strong>the</strong>se are not merely headed to US<br />
% YoY, 3mma<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
TH exports: to Asia<br />
Asia ex-Thai exports: to US<br />
Apr-06 Oct-06 Apr-07 Oct-07 Apr-08<br />
117