Left Brain Right B - the DBS Vickers Securities Equities Research

Regional Equity Strategy 4Q 2009
Country Assessment
Thailand Stock Market: Foreign Net Buy (Sell) Position
Btm
40,000
30,000
20,000
10,000
-
(10,000)
(20,000)
(30,000)
(40,000)
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Source: SET, DBS Vickers
Foreign net buy (sell)
Avg Daily Turnover (RHS)
As of 17 Sep 09
Btm
30,000
25,000
20,000
15,000
10,000
5,000
2Q09 growth marks the end of recession. 2Q09 GDP grew
9.2% (QoQ, saar), within consensus expectations but lower
than our 12% forecast, and marking the end of the
recession. Y-o-y contraction was in between our forecast (-
4.6%) and consensus forecast (-5.2%), due to revisions to
preceding quarters’ data.
The second quarter expansion comes after two quarters of
negative output growth – minus 24% (QoQ, saar) and minus
7% (QoQ, saar). This implies that the 30% drop in output
since Oct08 has recovered. In other words, output dropped
7.5% from the peak in 3Q08 and has grown by 2.3% from
the bottom reached in 1Q09.
A breakdown by expenditure revealed the turnaround in
second quarter was driven mainly by a pause in inventory
drawdown and a large rise in public investment spending
(60% QoQ, saar). In fact, stocks contributed a full 20 ppts
(QoQ, saar) to second quarter growth. We note the difficulty
of implementing public investment projects (because of
political uncertainties) has been one of the key constraints of
Thailand’s growth in the past few years. From this
perspective, the acceleration in government investment
spending is positive.
However, two aspects within the positive growth data
disappointed; they are exports and domestic consumer
spending. Exports fell a disappointing 9% (QoQ, saar)
marking the fourth consecutive quarter of contraction.
Private consumption rose only 3% (QoQ saar), following the
shocking 14% (QoQ, saar) drop in the previous quarter.
-
Thailand: Real GDP Growth – recovery in 2Q09
Real GDP Growth 2Q08 3Q08 4Q08 1Q09 2Q09
(% Chg y-o-y)
Private
2.5 2.7 2.1 -2.6 -2.5
Consumption
Government
-3.7 -2.9 11.0 2.8 5.9
Consumption
GFCF 1.9 0.6 -3.3 -15.8 -10.1
Private 4.3 3.5 -1.3 -17.7 -16.1
Public -5.2 -5.5 -10.2 -9.1 +9.6
Exports 11.9 11.2 -8.9 -16.4 -21.8
Imports 6.7 13.1 1.0 -31.4 -25.4
GDP 5.5 3.8 -4.2 -7.0 -4.9
Source: NESDB, DBS Vickers
July data continues to point to recovery. July supply and
demand side data point to continued strong recovery in
output in the third quarter. Sequential (seasonally adjusted),
manufacturing output, private consumer spending and
investor spending rose 1.9%, 3.4% and 1.6%, respectively.
Export and import volumes grew 1.9% and 3.5%,
respectively in July. On the whole, we expect c.7% (QoQ,
saar) growth in 3Q – not far from the over 9% (QoQ, saar)
growth in 1Q - which should help to restrict the 2009
growth to close to our forecast of -3.2%. The big picture we
are expecting is the large sequential pick up in GDP in 3Q,
like that witnessed in 2Q, followed by a moderation in
growth to c.4% p.a. from 4Q onwards.
Corporate earnings recovered further in 2Q09. Aggregate
2Q09 net profit grew 17% q-o-q to Bt92bn, but it is still
20% below 2Q08 profit, the peak of the previous earnings
cycle. Aggregate 2Q09 earnings exceeded our and
consensus forecasts by 15% and 11%, respectively. Strong
results were seen for most sectors, except Contractors and
Media. Other key observations are: (i) earnings of most
commodity companies continued to recover from 1Q09 led
by higher product prices and stock gains; (ii) consumer
staples (Commerce) were still resilient; (iii) exporters
(Electronics and Food) are turning around significantly; and
(iv) Banks reported solid 2Q09 results.
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