China's good news limit losses at Thai bourse

 

 

 

At the close, the SET Index gained 2.53 points or 0.21 per cnet to end the day at 1,187.64 points, on turnover of Bt26.85 billion. During the day, the index swung from 1,183.23 points to 1,193.09 points. 

In the afternoon, the market swung back to the positive territory as there is a sign that China's manufacturing is beginning to recover. In the morning, the index was under selling pressure, following Moody's Investors Service's change in the rating outlook on Germany, the Netherlands and Luxembourg to negative. It however affirmed Finland's stable outlook. The four are now rated "AAA".

 

In its statement, Moody's explained that the July 23 action followed its view that all the four sovereigns are adversely affected by the following two euro-area-wide developments:

 

1.) The rising uncertainty regarding the outcome of the euro area debt crisis given the current policy framework, and the increased susceptibility to event risk stemming from the increased likelihood of Greece's exit from the euro area, including the broader impact that such an event would have on euro area members, particularly Spain and Italy.

 

2.) Even if such an event is avoided, there is an increasing likelihood that greater collective support for other euro area sovereigns, most notably Spain and Italy, will be required. Given the greater ability to absorb the costs associated with this support, this burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form.

 

"These increased risks, in combination with the country-specific considerations discussed below, have prompted the changes in the rating outlooks of Germany, the Netherlands and Luxembourg. In contrast, Finland's unique credit profile remains consistent with a stable rating outlook," it said.

 

Moody's said that the risk of an exit by Greece from the euro area has increased relative to the rating agency's expectations earlier this year. 

 

"In Moody's view, a Greek exit from the monetary union would pose a material threat to the euro. Although Moody's would expect a strong policy response from the euro area in such an event, it would still set off a chain of financial-sector shocks and associated liquidity pressures for sovereigns and banks that policymakers could only contain at a very high cost. Should they fail to do so, the result would be a gradual unwinding of the currency union, which Moody's continues to believe would be profoundly negative for all euro area members. The rating agency has reflected this risk by raising the score for the "Susceptibility to Event Risk" factor in its sovereign rating methodology from "very low" to "low" for these three countries."

 

Even in the absence of any exit, the contingent liabilities taken on by the strongest euro area sovereigns are rising as a result of European policymakers' continued reactive and gradualist policy response, as is the probability of those liabilities crystallising. Moody's view remains that this approach will not produce a stable outcome, and will very likely be associated with a series of shocks, which are likely to rise in magnitude the longer the crisis persists. 

 

The continued deterioration in Spain and Italy's macroeconomic and funding environment has increased the risk that they will require some kind of external support. The scale of these contingent liabilities is of a materially larger order of magnitude for these countries due to their size and their debt burdens; for example, the size of Spain's economy and government bond market is around double the combined size of those of Greece, Portugal and Ireland. 

 

Over the long term, Moody's believes that institutional reforms within the euro area have the potential to strengthen the credit standing of most or all euro area governments; however, over the transitional period (which could last many years), the additional pressure on the strongest nations' balance sheets will increase the pressure on their credit standing.

 

Finland, with its stable outlook, is now the sole exception among the Aaa-rated euro area sovereigns. Although Finland would not be expected to be unaffected by the euro crisis, its net assets (Finland has no debt on a net basis), its small and domestically oriented banking system, its limited exposure to, and therefore relative insulation from, the euro area in terms of trade, and its attempts to collateralise its euro area sovereign support together provide strong buffers which differentiate it from the other Aaas.