Cost of funding likely to rise as Trump takes power, forum told
THAILAND should speed up its investment projects including the “Thailand 4.0” model, as the cost of funds will be on an uptrend due to the expected steady increases in interest rates after Donald Trump becomes the US president early next year, a forum heard yesterday.
Paiboon Nalinthrangkurn, chief executive officer of Tisco Securities and chairman |of the Investment Analysts Association, told the seminar organised by the Federation |of Thai Capital Market Organisations that Trump’s policy to rebuild the US economy would result in more |fiscal debt.
This might prompt the US Federal Reserve to raise its policy interest rate more than twice a year. This should be seen in 2018.
Rising rates will reduce interest in the bond market but the stock market will begin outperforming.
Investors will move their money from the debt to the equity market.
All in all, this is a good time for the military-led government to mobilise funds to support infrastructure projects before the general election at the end of next year, Paiboon said.
Surong Bulakul, chairman of the Thai Listed Companies Association (TLCA), said trade flows would change significantly under Trump’s reign, and Thai traders must learn to deal with the new pattern.
He said the government must rapidly implement the Thailand 4.0 model to make the domestic economy stronger and offset the impact from the change of trade flows.
Thailand has high exposure to exporting foods to the US. Thailand’s agencies should be cautious in negotiating with the US over such matters because Trump will seek ways for the US to gain in competitiveness, he said.
Benjarong Suwankiri, head of TMB Analytics, sees less chance for any free-trade agreement between Thailand and the US because Trump’s “American first” policy is a clear signal that he wants to reduce external dependence.
His fiscal policy will drive up inflation in the US, and this will influence interest rates.
As trade patterns are |changing, the Regional Comprehensive Economic Partnership will be the crucial agreement for Asia, and Thailand should focus more on the RCEP to drive trade activities in the region, he said.
Kobsak Pootrakool, vice minister of the Prime Minister’s Office, said that since the relationship between the US and the global market will not be good, Asia should integrate more to realise opportunities as the investment destination of the global market.
Paiboon said the US was not competitive as a production base in many areas, and 70 per cent of its economy depended on the service sector.
The returns from the service sector are better than from manufacturing, he said.
At a separate event, Ittirit Kinglake, president of the Tourism Council of Thailand, said Trump’s victory was not that big a worry because Thai tourism did not depend much on the US market. Instead, the key sources of arrivals are Asia, Europe and Oceania.
Andrew Gulbrandson, head of research and consulting at JLL Thailand, does not expect Thailand’s real-estate investors and market to feel any impact from the US election, at least in the short term.
Unlike Hong Kong’s dollar, the Thai baht is not directly pegged to the US currency and has remained fairly stable over the past several months.
It is unlikely that Thailand’s real-estate pricing will become more attractive to international investors than it was before the US election.
If there is a sustained devaluation in the US dollar, such as seen in the UK’s pound after the Brexit vote over the summer, the United States may become a more attractive investment destination for Thai real-estate players than in the past years .
However, because of a high level of uncertainty and the fact that no new policy directions should take place until at |least the first quarter of next year, it may be premature |for any investors to rush |into the market, Gulbrandson said.
“Having said that, demand for real estate in all markets is highly dependent upon macroeconomic conditions.
“As such, it will be important to keep a close eye on |how policies and programmes enacted by the new US administration impact global markets, particularly in the case of China, which is one of Thailand’s major trading partners and a growing source of real-estate investment into Thailand,” he said.
Emerging-country stock markets and currencies are, in the near term, expected to underperform those of developed countries, particularly the US after Trump’s victory, Trinity Securities said in a research note.
