EU moves soothe corporate Thailand

Phongsak Assakul, chairman of the Board of Trade of Thailand, said he was more confident in the euro-zone economy, although Germany, which is the economic giant of the bloc, has not yet come up with full support for the euro financial system. 

He made the comment in response to last week’s European Union summit where leaders agreed to create a single banking supervisory body, which is expected to lead to an injection of capital into troubled banks in the region. 

The move should create a good psychological impact globally, and will ensure that the euro-zone economy will not easily collapse, as leaders will help solve the problems, he said.

However, it will be difficult for Thai exports to grow in the EU market, so Thailand should focus more on Asia, particularly Asean, as the growth of the Chinese economy is also slowing.

Payungsak Chartsuthipol, chairman of the Federation of Thai Industries, said he was still concerned over the sovereign-debt and banking crises in the EU, although stock markets had recovered.

“The euro-zone economies are still highly fluctuating. However, the recovering shares and the serious action that EU leaders have taken should create better confidence that the EU economy will not easily fail,” he said.

Payungsak added that the slowing growth of China was another concern among businesses as it would affect global economic growth.

Sutee Losoponkul, executive vice president of CIMB Thai Bank, said the European Banking Authority had called for banks to increase their capital to levels adequate to serve loans and withstand financial and economic shocks. 

The increased capital requirement is aimed at restoring confidence to European traders because the current crisis might lead to defaults on debt payment if they cannot get credit support from banks. 

However, Thai exporters must be aware of the risk of payment defaults by their trade counterparts in Europe because the problems in the euro zone remain, he said, adding that export volumes to the zone were expected to slow further.

As for China, even though growth of its economy is beginning to slow, the country still estimates that its gross domestic product will grow by 7-8 per cent this year, which is sufficient to help sustain overall economic growth in Asia. 

Meanwhile, Paiboon Nalinthrangkurn, chief executive officer of Tisco Securities, said yesterday that the Thai brokerage’s stock outlook for the second half of this year was for fund inflows, marking a net buy of more than Bt100 billion in Thai equities by foreigners this year. That figure is higher than the Bt900,000 estimated at the beginning of the year, buoyed by good signs surrounding the euro zone’s debt crisis and the Stock Exchange of Thailand’s strong fundamentals.

In the first half, foreigners bought Thai equities worth Bt80 billion while they sold Bt20 billion, making a net buy of Bt60 billion. 

“It’s believed that fund inflows will stay in the country for two years, as a result of a low trending interest rate in the US. Therefore, there is high liquidity across the world, with some of funds spilling over into markets with strong fundamentals,” he said. 

“The Thai market is very attractive, as the country’s GDP is expected to grow by 6 per cent [this year]. If the political factor is stable, the market will be bullish.” 

However, if fund inflows are quick, there could also be quick outflows, making the SET Index in the second half volatile. “The SET Index should hit 1,300 points as targeted, based on the political-stability factor.”

Paiboon suggested that the government should take advantage of a period of fund inflows to mobilise money for infrastructure projects for which it recently announced an investment budget of Bt2.2 trillion.