Thailand 'sensitive' to global crises

The openness of Thailand’s economy leaves it vulnerable to many global economic risks, particularly Europe’s worsening sovereign debt crisis and the faltering US recovery, according to Phatra Securities.
Stock markets remain volatile, reacting to any news relating to the European debt crisis, said Supavud Saicheua, managing director and head of research at Phatra Securities.
In the latest sign of this, the Stock Exchange of Thailand soared yesterday on optimism that European policy-makers are making progress in their efforts to shore up troubled banks, analysts said. The SET Index rose 51.07 points, or 5.92 per cent, to 913.72 points on turnover of Bt33.34 billion.
The brokerage house revised downwards its year-end target for the SET Index to 920 points from 1,100.
“Our view is to monitor the situation closely. There is no need to rush when it comes to investing,” Supavud said.
“Now, most people hold cash. So far, cash has been the best [investment] performer this year,” he said.
The European Central Bank’s next meeting should be monitored closely on expectations of a cut in its benchmark interest rate by 25 basis points, the analyst said.
Nonetheless, Thailand could be affected by a likely decline in world demand, as global economic risks become realities, Supavud said.
“Currently, Thailand depends increasingly on exports, but it is exporting less to the big three [markets]” of the struggling US, euro zone and Japan, he said.
Contributions from exports account for 69 per cent of the Kingdom’s gross domestic product, up from 64 per cent in 2000, according to Phatra Securities.
Thai export markets seem to be diversified well away from major economies, Supavud said. However, as much as 16 per cent of total export goes to China, most of it components for re-export to other countries, particularly the United States, whose economy is faltering, he said.
Bank of America Merrill Lynch recently revised downwards its projection for US economic growth to 1.8 per cent in 2012, while euro-zone growth is estimated at 0.8 per cent. Japan is likely to expand 2.7 per cent, according to the bank.
Thailand’s exports of products that are more cyclical, such as rubber, vehicles, petroleum products, plastics, and electronics and electrical appliances, account for 61 per cent of total exports, Supavud said.
Thailand should strengthen domestic demand amid the US and European problems, he said, adding that companies needed to strengthen themselves to compete amid declining demand.
With these rising global risks, Phatra Securities plans to lower its 2012 GDP-growth estimate for Thailand from its current forecast of 4.5 per cent.