HSBC upbeat despite lower forecast

The bank believes the outlook remains bright even though it drastically slashed its economic-growth forecast for Thailand this year from 5 per cent earlier this year to 2.8 per cent in September. It is the latest institution to lower the Thai economic outlook after poorer-than-expected export revenue as well as reduced domestic consumer spending.
The new forecast for growth in gross domestic product is even lower than the Bank of Thailand’s 3.7 per cent. HSBC pegs GDP growth next year at 4.4 per cent, again short of the central bank’s 4.8 per cent.
Ekniti Nitithanprapas, deputy director-general of the Fiscal Policy Office, said on Wednesday that the unit would next month review its GDP growth forecast for 2014, which is now estimated at 5.1 per cent. Possible impacts from the current political chaos will be taken into account, he said.
The Finance Ministry unit forecast growth of 3.7 per cent this year.
“Three main factors to be considered in the revision are: key economic indicators to be released by the National Economic and Social Development Board on November 18, the export forecast for the fourth quarter, and political chaos,” Ekniti said.
In July, HSBC Thailand raised its capital by 33 per cent to Bt16 billion to cope with the positive factors, chief executive officer Tan Siew Meng said yesterday.
After unloading its consumer finance business to Bank of Ayudhya last year, following the group’s policy of divesting consumer finance arms to refocus on the corporate market, HSBC’s Thai unit has also started actively tapping the corporate and investment banking businesses.
Thanks to the group’s global connectivity – 6,600 offices in 80 countries – and expertise in investment banking, HSBC Thailand can cash in on the flows of investment from foreign companies and Thai conglomerates.
This year, HSBC Thailand has participated in landmark deals by Thai conglomerates such as the CP All’s Bt50-billion multi-tranche fixed-rate secured bond, CP All’s acquisition of Siam Makro, and International Beverage Holding’s acquisition of 22 per cent of Fraser and Neave.
The Bt16 billion of registered capital is expected to facilitate lending to customers for at least 12-18 months. More capital injections will be considered annually depending on the funding requirements of customers.
The bank continues to recruit staff to support the sentiment. It currently has a workforce of 500.
Thailand is key country for the group. It is an attractive location for multinational companies that are looking to set up a manufacturing base and looking for connectivity to Asean countries.
The Bt2-trillion infrastructure investment is a positive draw for foreign investors. As soon as the project is kicked off, companies led by mainland China, Hong Kong, South Korea and Germany will participate in the scheme.
“If the Thai government can push the infrastructure projects on time, this will be a crucial driver to help keep Thailand growing steadily and the completion of the infrastructure will attract massive foreign investment,” she said.
However, the infrastructure project will become a risk in HSBC’s view if it does not happen according to the timeline.
“Thai political instability is a risk for doing business here. Not only investors, HSBC is also closely monitoring the situation and hopes it will not worsen,” she said.
External volatility will continue to pressure Thai GDP next year because the growth of the Thai economy relies heavily on the global economy. For example, the Chinese economic slowdown in the first half of this year has significantly affected the Thai economy.
Year to date, HSBC Thailand’s loan growth has been faster than in the same period last year.
As of September 30, HSBC Thailand recorded total assets of Bt193.17 billion, of which net loans were Bt39.36 billion. Deposits were Bt88.09 billion and the bank’s net proportion of non-performing loans was only 0.01 per cent.