Central bank studies local impact of China slowdown
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The Bank of Thailand is assessing the implications of China's economic slowdown for the Thai economy, already fearful of global jitters over the looming end of the US' quantitative easing.
Central bank governor Prasarn Trairatvorakul said yesterday: “Normally, we have teams to follow up on new issues. A team has been collecting information about China’s economic slowdown to see its impacts on the overall economic picture and export sector.”
The report should be ready for the Monetary Policy Committee meeting on July 10, he said.
Foreign investors around the globe have been spooked by Goldman Sachs’ downward revision of the Chinese economy and the growing credit crunch in that country. The deceleration in China, the world’s economic engine, could drag down other Asian economies. Its huge market consumed 12 per cent of Thai exports in the first four months of this year.
Some brokerages have warned that listed companies, particularly those with investment exposure to China, would need to be monitored. They include Bangkok Bank, Kasikornbank, Banpu, Charoen Pokphand Foods, Hana Micro-electronics, Indorama Ventures, Saha Union and Saha Group.
DBS Vickers Securities (Thailand) said the slowdown will chill the global economy as China is a source of big demand for fuel, petrochemical products, grain, metals, steel and coal. Commodity prices would remain subdued for at least six months, so these companies would suffer.
“A sharp downturn could hurt the companies. Investors are recommended to unload shares in the companies for safety,” said an analyst from KT-Zmico Securities.
Concerned with the darkening outlook here, foreign investors have been withdrawing from the Thai bourse, with net sales of Bt2 billion yesterday alone. Bad news from China has fuelled the capital outflows that started in late May, when the US hinted it is slamming the brakes on liquidity injections.
Prasarn assured Thai businesses that the current pace of outflows posed no problem for domestic liquidity. The outflows even eased the central bank’s cost in draining the excess liquidity.
“Liquidity is intact. There is excess liquidity that must be absorbed, but the volume has shrunk from Bt4.9 trillion to Bt4.7 trillion. Liquidity in the financial market is still enough to support economic activities,” he said.
Official data showed global funds pulled a net US$2 billion from Thai bonds and equities this month up to yesterday.
Despite continued outflows, the baht yesterday advanced 0.6 per cent to 30.93 per dollar as of 3.33pm in Bangkok, the most since June 14, data compiled by Bloomberg showed, on market expectation that the central bank would step in to halt the sharp decline.
