Tuesday, November 12, 2019

Property shares rise as MPC reduces policy rate, research house issues caution

Aug 07. 2019
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By Silapakorn Sangsinchai
The Nation

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In a surprising move on Wednesday, the Monetary Policy Committee (MPC) adjusted the country’s policy interest rate from 1.75 per cent to 1.5 per cent.

After the decision to reduce the policy rate was announced, the share prices of several property companies rose. Among those with the most noticeable changes were Ananda Development (ANAN), which closed at Bt3.46 recording a 1.17 per cent rise with Bt17.13 million in trade value; Pruksa Holding (PSH) closed at Bt21.7 or 1.4 per cent increase with Bt41.23 million in trade value; Land and House (LH) closed at Bt11.2 rising 2.75 per cent with Bt360.15 million in trade value, Quality House (QH) closed at Bt3.02 up 1.34 per cent with Bt50.39 million in trade volume, and Origin Property (ORI) closed at Bt8.35 rising 3.73 per cent with Bt95.34 million in trade volume.

Amnat Ngosawang, senior director of securities analysis at KTB Securities (Thailand), said MPC’s decision to bring down the policy rate meant good news for the property business as it will help boost consumers’ purchasing power and reduce their debt burden, while at the same time reduce the project cost for property developers.

“I expect to see the property market’s turnover to gradually improve in the third and fourth quarters,” he said.

The Stock Exchange of Thailand Index, however, dropped by 0.12 per cent when it closed at 1,669.44, as investors sold banks’ shares for fear of a downturn in profits. Investors expect large commercial banks to cut their interest rates shortly in response to the central bank rate cut.

Meanwhile, Kasikorn Research Centre has expressed caution about the impact of the policy rate cut, saying this was the first time in four years that the MPC has decided to reduce policy interest rate in order to remedy a slowdown in both exports and domestic demand amid a lower-than-targeted general inflation rate.

Kasikorn estimated that two factors could affect Thailand’s financial policies in the future. The first is the swiftness of financial policy transfer mechanism, which includes the reduction of interest rate among financial institutes, turnover rate in bond market and economic reactions from other sectors towards this policy rate adjustment.

The second is the uncertainty of negative factors, which could manifest at anytime amid abnormal situations such as the US-China trade war, doubts over US President Donald Trump’s international policies and domestic situations that could affect the effectiveness of Thailand’s economic stimuli.

MPC’s decision shows that the company is giving priority to the latter, as it is designing financial policies in response to negative factors that could affect the economy. It remains to be seen whether MPC’s decision will improve the source of negative factors, and how the outcome of this adjustment will affect the committee’s estimation of the country’s economy and future financial policies.

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