Stocks will be seriously overvalued if the SET Index reaches 760 points, the Securities Analysts Association warned yesterday, while the market got a downฌgrade from overweight to neutral by MFC Asset Management.
The SET Index has rallied about 90 per cent from the year's trough at about 380 points and it would have doubled at 760, SAA secretarygenฌeral Sombat Narawuttichai said.
At that point, it would risk a steep correction from profittaking, he said.
Even at 700 the SET exceeds its fundamental value based on pricetoearnings (P/E) and discounted cashflow analyses.
The economy can support the SET at only 630-650, some analysts have said.
About 40 per cent of all market securities are overvalued, 50 per cent are undervalued and 10 per cent are in line with their fundamentals.
Thai shares have jumped 61 per cent so far this year, underperforming the Asian region.
Vietnam's Ho Chi Minh Stock Index has gained 84 per cent, Jakarta Composite Index 81 per cent and India's Sensex 74 per cent.
Even though the SAA and MFC Asset Management said the SET Index over 700 points is overvalued, Asia Plus Securities CEO Kongkiat Opaswongkarn and ING Funds (Thailand) managing director Maris Tarab recently estimated that shares would reach 800 within this year.
Sombat said 91 per cent of analysts responding to the SAA's survey were moderately confident in the government's Strong Thailand economic stimulus package, and 9 per cent were highly confident.
Altogether 23 securities analysts answered the questionnaire after the SAA and analysts met Finance Minister Korn Chatikavanich on September 11.
About threefourths of the respondents have medium confidence and the others have high confidence.
Four per cent of the respondents are not confident that the government's investment scheme can go on until 2012 as planned regardless of political changes, 43 per cent have low confidence, 48 per cent have medium confidence and the rest have high confidence.
The analysts agreed unanimously that construction and building material companies would benefit from the scheme but some stocks were overvalued.
After meeting with Korn, some analysts started preparing to upgrade the country's 2010 gross domestic product forecast by about 1 percentage point from the SAA's current consensus of 3 per cent.
Supakorn Soontornkit, senior executive vice president of MFC, told reporters that his company downgraded the stock market as it exceeds his company's base and bestcase scenario for 2009 at 675 and 720 points, respectively.
"I expect that funds flow will continue and shortterm investors can still pile up on stocks but they must be prudent. The SET Index will not reach the 800 level. However, it will not fall below 700 points," he said.
MFC forecasts the SET at 680 in the worstcase, 750 in the basecase and 820 in the bestcase scenarios for next year.
His company recommends investing in three to four-year debt instruments offering coupon rates of 3.54 per cent but avoiding putting money in shorter debt instruฌments as yields are going up.
It is also slightly overweight on commodities and real estate investment trusts.
Pichit Akrathit, president of MFC Asset Management, said his company is marketing the I-Emerging 10 Fund until Monday.
The fund's policy is to invest in equities, debt instruments and deposits in emerging countries worldwide, depending on market conditions.
MFC plans to launch a property fund investing in an office building in Bangkok as well as the Thailand Creativity Fund, investing in innoฌvative businesses.
Friday, September 25, 2009
BUBBLE FEARS DISMISSED
The economy is not developing a bubble as asset prices have not risen beyond the fundamental level, while political uncertainty has also put pressure on economic growth, Kasikornbank president Prasarn Trairatvorakul said yesterday. His comment was in reaction to the Asian Development Bank's statement on Tuesday that it is concerned the Thai economy could develop a bubble as the low cost of funding may lead developers to borrow too much for investment in property assets.
The ADB now forecasts the economy will contract by 3.2 per cent this year.
Prasarn, a former secretarygeneral of the Securities and Exchange Commission and exBank of Thailand official, pointed to the fact that a bubble in the economy generally reflected asset prices that are higher than the fundamental level. Since the 1997 financial crisis, he said, Thai businesses had been very cautious.
So far, he added, the SET Index had rallied significantly as investors expect the Thai economy will recover soon. But the index has also recently corrected, which is a normal movement. Therefore, he does not believe the economy is inflating into a bubble.
Moreover, Prasarn commented that the ADB's forecast of 2009 growth was not too pessimistic given Thailand still faced risk from political uncertainty, which put pressure on economic growth. The political unrest directly affects tourism and domestic consumer confidence, which constrains growth more than in neighbouring countries.
"The Thai economy seems to have recovered this quarter, which is likely to record positive growth compared to the second quarter. And in the fourth quarter, the economy will grow positively as a result of an improvement in the world economic situation. The US, Europe and [notably] Germany show clear recovery signs," he said.
This year, he predicts, the Thai economy is likely to record a contraction of 3 per cent.
Thus, Kasikornbank's net lending will increase by around 4 per cent, against the previous target of 45 per cent. Currently, all sectors - including large corporations, small and mediumsized enterprises and retailers - are expanding.
Credit for investment expansion has returned, he added. For example, the masstransit project, which was postponed early this year, has already started.
In addition, the bank will keep its net interest margin in the targeted range of 3.83.9 per cent by managing its credit expansion rather than competing on pricing.
Prasarn said Kasikornbank's interestrate trend remained stable. However, in the first half of next year, both lending and deposit rates are likely to rise, reflecting economic recovery and less liquidity in the system.
The Bank of Thailand's policy rate is likely to increase after commercial banks hike their rates. Prasarn expects the central bank's policy rate to start rising in the second quarter of next year.
He believes the baht's value will keep appreciating as Thailand has a currentaccount surplus as well as continuing capital inflow.
The ADB now forecasts the economy will contract by 3.2 per cent this year.
Prasarn, a former secretarygeneral of the Securities and Exchange Commission and exBank of Thailand official, pointed to the fact that a bubble in the economy generally reflected asset prices that are higher than the fundamental level. Since the 1997 financial crisis, he said, Thai businesses had been very cautious.
So far, he added, the SET Index had rallied significantly as investors expect the Thai economy will recover soon. But the index has also recently corrected, which is a normal movement. Therefore, he does not believe the economy is inflating into a bubble.
Moreover, Prasarn commented that the ADB's forecast of 2009 growth was not too pessimistic given Thailand still faced risk from political uncertainty, which put pressure on economic growth. The political unrest directly affects tourism and domestic consumer confidence, which constrains growth more than in neighbouring countries.
"The Thai economy seems to have recovered this quarter, which is likely to record positive growth compared to the second quarter. And in the fourth quarter, the economy will grow positively as a result of an improvement in the world economic situation. The US, Europe and [notably] Germany show clear recovery signs," he said.
This year, he predicts, the Thai economy is likely to record a contraction of 3 per cent.
Thus, Kasikornbank's net lending will increase by around 4 per cent, against the previous target of 45 per cent. Currently, all sectors - including large corporations, small and mediumsized enterprises and retailers - are expanding.
Credit for investment expansion has returned, he added. For example, the masstransit project, which was postponed early this year, has already started.
In addition, the bank will keep its net interest margin in the targeted range of 3.83.9 per cent by managing its credit expansion rather than competing on pricing.
Prasarn said Kasikornbank's interestrate trend remained stable. However, in the first half of next year, both lending and deposit rates are likely to rise, reflecting economic recovery and less liquidity in the system.
The Bank of Thailand's policy rate is likely to increase after commercial banks hike their rates. Prasarn expects the central bank's policy rate to start rising in the second quarter of next year.
He believes the baht's value will keep appreciating as Thailand has a currentaccount surplus as well as continuing capital inflow.
Rebound in commodities carries stocks higher
A rebound in commodities is drawing investors back into the stock market.
Major stock indicators rebounded Tuesday from a drop the day earlier. The Dow Jones industrials rose 51 points after losing 41 on Monday.
In an about-face, the dollar weakened against other major currencies and commodities like oil and gold bounded higher, lifting energy and mater ial stocks. Financial stocks also rose sharply.
The gains came as the Federal Reserve began a twoday meeting on interest rates. Investors are hoping the Fed will provide a clearer indication of when it may raise rates when it issues a statement at the conclusion of the meeting yesterday.
The Fed is widely expected to keep rates at their record low of near zero for the time being. Rockbottom interest rates have helped fuel the market's nearly seven-month old ra lly, making cash plentiful and cheap and encouraging investors to buy up riskier assets.
The market appears to be following a well-established pattern where brief selloffs are met with more buying as investors fear missing out on a continued rally.
"Reluctantly, investors are continually being dragged into a market that is finding a path of least resistance to the upside," said Art Hogan, chief market analyst at Jefferies & Co.
The consensus on Wall Street is that the economy is healing despite ongoing challenges like unemployment. But investors still have doubts over how strong the recover y will be, and whether the stock market's more than 50% move off of 12-year lows in Marc h accurately reflects the still fragile state of the economy.
"Right now, it's a more orderly market," said Greg Reynholds, senior vice president of asset management at Lenox Advisors. "People are digesting the data, trying to figure out exactly where we're headed."
The Dow Jones industrial average ro se 51.01, or 0.5%, to 9,829.87. The Standard & Poor's 500 index gained 7.00, or 0.7%, to 1,071.66, while the Nasdaq composite index rose 8.26, or 0.4%, to 2,146.30.
More than two stocks rose every one that fell on the New York Stock Exchange, where volume came to 1.3 billion shares compared with 1.2 billion Monday.
In other trading, the Russell 2000 index of smaller companies rose 4.72, or 0.8%, to 620.69.
Gold and silver prices rose after three days of drops,while oil prices gained $1.69 to $71.40 a barrel on the New York Mercantile Exchange.
Commodities rose as the US dollar index, which measures the greenback against a basket of foreign currencies, fell 0.8%, after earlier hitting a fresh low for the year. The dollar has fallen sharply since early March,making commodities cheaper for foreign investors, as its appeal wanes amid low interest rates and unprecedented government spending designed to stimulate the economy.
Demand for energy and material stocks increased as commodities rose. US Steel Corp added $2.22, or 4.6%, to $50.24, while Chesapeake Energy Corp jumped $1, or 3.6%, to $29.11.
Financial stocks were mostly higher after Rochdale Securities analyst Richard Bove raised his target price on Bank of America Corp to $25 a share. Shares of the Charlotte, NC-based bank rose 36 cents, or 2.1%, to $17.61.
Among technology stocks, Google In c. shares hit a 13-month high after a Canaccord Adams analyst raised the target price on the stock to $560. Shares rose as high as $501.99 and ended at $499.06, a gain of $2.06.
In economic news Tuesday, a government index showed US home pr ices r ose 0.3% in July from the previous month. The index is still 4.2% below last year's levels.
After soaring 50.1% since hitting a 12-year low in early March, the Dow stands 170 points below the 10,000 mark _a level the average first crossed in March 1999 and hasn't been above since October.
Bond prices rose slightly. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.45% from 3.49% late Monday. AP
LONDON 5,142.60 +8.24
European shares closed higher on Tuesday, snapping a two-day losing streak as a stronger commodity sector tracked firmer crude and metals prices that were supported by a weaker dollar.
Britain's top share index edged higher as miners and oil stocks buoyed by firmer commodity pr ices lent support, though with investors nervous before the Group of 20 leaders' meeting at the end of the week.
The FTSE 100 closed at 5,142.6 points, up 8.24 or 0.16%.
In Frankfurt, the DAX index ended at 5,709.38 points,up 40.73 or 0.72%.
In Paris, the CAC-40 index closed at 3,823.52 points,up 11.36 or 0.30%.
The pan-European FTSEurofirst 300 index of top shares closed up 0.5% at 1,004.41 points. The European index has rallied nearly 56% since hitting a low in March and is up around 18% this quarter, on track to post its best quarterly rise in almost a decade.
"A fairly positive tone to the day. I think it is a general notion that the recession is ov er and the economy is only going to improve from here," said Peter Dixon, economist at Commerzbank.
US Treasury Secretary Timothy Geithner said the US economy appeared to be gathering steam and G20 leaders meeting in Pittsburgh this week would strive to ensure the recovery was balanced.
'But there is a growing sense we are getting a bit ahead of ourselves. We have had a pause in recent days ... and I expect the trend over the next few days is going to be flat," Dixon said.
Energy stocks added most points to the index as oil rose above $71 a barrel, recovering from a sharp fall the previous day. BP, Royal Dutch Shell and Total were 0.7 to 0.9% higher. Miners tracked metals prices higher, with copper and nickel up 1.6 and 3.9%, respectively.
Eurasian Natural Resources Corporation, Rio Tinto and Xstrata rose between 1.1 to 4.4%. Drugmakers,which have lagged behind the rally and offer relatively higher and steadier yields, were also in demand.
Roche gained 1.4% after Phase II data showed that Avastin, which has already been shown to help patients with brain cancer stay alive longer without their condition worsening, may also improve their daily lives.
Banks found favour, with Credit Suisse gaining nearly 3%. The Swiss group is confident it can keep private banking margins between 110 to 120 basis points over the long term and expects average annual net new money growth of 6%.
Banco Santander, Credit Agr icole and Deutsche Bank were up 0.7 to 1.7%. Looking ahead, investors will look closely at the outcome of the two-day Federal Reserve policy meeting which ends yesterday.
Economists expect the FOMC to hold the target range for interest rates steady at zero to 0.25%.
With steering the global economy out of recession the key focus for the G20 leaders meeting in Pittsburgh today and Friday, markets will be looking for any comment indicating the Fed might wind back its stimulus measures given improving macroeconomic data.
"The issue of exit strategies is likely to remain key for policymakers globally, at this week's G20 summit and beyond. It is the outlook for subdued inflation that gives the necessary breathing space for policy support to be withdrawn cautiously," Barclays Wealth said in a note.
Major stock indicators rebounded Tuesday from a drop the day earlier. The Dow Jones industrials rose 51 points after losing 41 on Monday.
In an about-face, the dollar weakened against other major currencies and commodities like oil and gold bounded higher, lifting energy and mater ial stocks. Financial stocks also rose sharply.
The gains came as the Federal Reserve began a twoday meeting on interest rates. Investors are hoping the Fed will provide a clearer indication of when it may raise rates when it issues a statement at the conclusion of the meeting yesterday.
The Fed is widely expected to keep rates at their record low of near zero for the time being. Rockbottom interest rates have helped fuel the market's nearly seven-month old ra lly, making cash plentiful and cheap and encouraging investors to buy up riskier assets.
The market appears to be following a well-established pattern where brief selloffs are met with more buying as investors fear missing out on a continued rally.
"Reluctantly, investors are continually being dragged into a market that is finding a path of least resistance to the upside," said Art Hogan, chief market analyst at Jefferies & Co.
The consensus on Wall Street is that the economy is healing despite ongoing challenges like unemployment. But investors still have doubts over how strong the recover y will be, and whether the stock market's more than 50% move off of 12-year lows in Marc h accurately reflects the still fragile state of the economy.
"Right now, it's a more orderly market," said Greg Reynholds, senior vice president of asset management at Lenox Advisors. "People are digesting the data, trying to figure out exactly where we're headed."
The Dow Jones industrial average ro se 51.01, or 0.5%, to 9,829.87. The Standard & Poor's 500 index gained 7.00, or 0.7%, to 1,071.66, while the Nasdaq composite index rose 8.26, or 0.4%, to 2,146.30.
More than two stocks rose every one that fell on the New York Stock Exchange, where volume came to 1.3 billion shares compared with 1.2 billion Monday.
In other trading, the Russell 2000 index of smaller companies rose 4.72, or 0.8%, to 620.69.
Gold and silver prices rose after three days of drops,while oil prices gained $1.69 to $71.40 a barrel on the New York Mercantile Exchange.
Commodities rose as the US dollar index, which measures the greenback against a basket of foreign currencies, fell 0.8%, after earlier hitting a fresh low for the year. The dollar has fallen sharply since early March,making commodities cheaper for foreign investors, as its appeal wanes amid low interest rates and unprecedented government spending designed to stimulate the economy.
Demand for energy and material stocks increased as commodities rose. US Steel Corp added $2.22, or 4.6%, to $50.24, while Chesapeake Energy Corp jumped $1, or 3.6%, to $29.11.
Financial stocks were mostly higher after Rochdale Securities analyst Richard Bove raised his target price on Bank of America Corp to $25 a share. Shares of the Charlotte, NC-based bank rose 36 cents, or 2.1%, to $17.61.
Among technology stocks, Google In c. shares hit a 13-month high after a Canaccord Adams analyst raised the target price on the stock to $560. Shares rose as high as $501.99 and ended at $499.06, a gain of $2.06.
In economic news Tuesday, a government index showed US home pr ices r ose 0.3% in July from the previous month. The index is still 4.2% below last year's levels.
After soaring 50.1% since hitting a 12-year low in early March, the Dow stands 170 points below the 10,000 mark _a level the average first crossed in March 1999 and hasn't been above since October.
Bond prices rose slightly. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.45% from 3.49% late Monday. AP
LONDON 5,142.60 +8.24
European shares closed higher on Tuesday, snapping a two-day losing streak as a stronger commodity sector tracked firmer crude and metals prices that were supported by a weaker dollar.
Britain's top share index edged higher as miners and oil stocks buoyed by firmer commodity pr ices lent support, though with investors nervous before the Group of 20 leaders' meeting at the end of the week.
The FTSE 100 closed at 5,142.6 points, up 8.24 or 0.16%.
In Frankfurt, the DAX index ended at 5,709.38 points,up 40.73 or 0.72%.
In Paris, the CAC-40 index closed at 3,823.52 points,up 11.36 or 0.30%.
The pan-European FTSEurofirst 300 index of top shares closed up 0.5% at 1,004.41 points. The European index has rallied nearly 56% since hitting a low in March and is up around 18% this quarter, on track to post its best quarterly rise in almost a decade.
"A fairly positive tone to the day. I think it is a general notion that the recession is ov er and the economy is only going to improve from here," said Peter Dixon, economist at Commerzbank.
US Treasury Secretary Timothy Geithner said the US economy appeared to be gathering steam and G20 leaders meeting in Pittsburgh this week would strive to ensure the recovery was balanced.
'But there is a growing sense we are getting a bit ahead of ourselves. We have had a pause in recent days ... and I expect the trend over the next few days is going to be flat," Dixon said.
Energy stocks added most points to the index as oil rose above $71 a barrel, recovering from a sharp fall the previous day. BP, Royal Dutch Shell and Total were 0.7 to 0.9% higher. Miners tracked metals prices higher, with copper and nickel up 1.6 and 3.9%, respectively.
Eurasian Natural Resources Corporation, Rio Tinto and Xstrata rose between 1.1 to 4.4%. Drugmakers,which have lagged behind the rally and offer relatively higher and steadier yields, were also in demand.
Roche gained 1.4% after Phase II data showed that Avastin, which has already been shown to help patients with brain cancer stay alive longer without their condition worsening, may also improve their daily lives.
Banks found favour, with Credit Suisse gaining nearly 3%. The Swiss group is confident it can keep private banking margins between 110 to 120 basis points over the long term and expects average annual net new money growth of 6%.
Banco Santander, Credit Agr icole and Deutsche Bank were up 0.7 to 1.7%. Looking ahead, investors will look closely at the outcome of the two-day Federal Reserve policy meeting which ends yesterday.
Economists expect the FOMC to hold the target range for interest rates steady at zero to 0.25%.
With steering the global economy out of recession the key focus for the G20 leaders meeting in Pittsburgh today and Friday, markets will be looking for any comment indicating the Fed might wind back its stimulus measures given improving macroeconomic data.
"The issue of exit strategies is likely to remain key for policymakers globally, at this week's G20 summit and beyond. It is the outlook for subdued inflation that gives the necessary breathing space for policy support to be withdrawn cautiously," Barclays Wealth said in a note.
Funds stabilise as 'vanished' cash returns
Thailand's fund industry has returned to normal, with net assets under management industry-wide projected to exceed 1.82 trillion baht in 2010, according to Pichit Akrathit, the president of MFC Asset Management.
The figure would represent a 3.73%increase from the 1.75 trillion baht now managed by local funds, and is based on a 2010 target for the Stock Exchange of Thailand index of 820 points.
Portfolio assets held by the asset management industry would fall to around 1.804 trillion baht assuming the SET index stayed at around 750 points in 2010.
he index closed yesterday at 730.52 points, up 6.15, in trade worth 32.5 billion baht.
Dr Pichit said that from August to November 2008,130 billion baht in assets vanished from the local fund industry.
The funds have since returned over the past four months, he said, adding that there was a 60% correlation between the SET and net asset values for the fund industry.
Local stocks also still have room to move upward, even with the more than 60% gain posted by the SET for the year to date.
Dr Pichit noted that over the past year, foreign investors had injected 40 billion baht in funds into local stocks,representing just 20% of the total outflows seen during the global crisis.
He added that Thailand's financial system had also shown signs of growing maturity, with fund assets now accounting for 27.8% of total bank deposits compared with 20% before the global financial crisis.
By the end of 2010, total net assets held by local funds is projected to rise to 28.8% of bank deposits.
Narongchai Akrasanee, the chairman of MFC Asset Management, agreed that global financial markets have largely normalised.
"Still, there remains a number of risk factors that deserve close monitoring,including the extent of financial losses post-crisis and the speed in which the real sector recovers," he said.
Supakorn Soontornkit, a senior executive vice-president at MFC Asset Management, cautioned that local stocks could see a short-term correction on profit-taking that could push the index to 680 to 700 points.
MFC plans to launch several new funds over the next few months, including a commercial property fund now in the filing process with the Securities and Exchange Commission.
The company also expects to see progress under the Thailand Creativity Fund,a new fund to be placed with institutional investors and emphasising investments in innovative companies.
The figure would represent a 3.73%increase from the 1.75 trillion baht now managed by local funds, and is based on a 2010 target for the Stock Exchange of Thailand index of 820 points.
Portfolio assets held by the asset management industry would fall to around 1.804 trillion baht assuming the SET index stayed at around 750 points in 2010.
he index closed yesterday at 730.52 points, up 6.15, in trade worth 32.5 billion baht.
Dr Pichit said that from August to November 2008,130 billion baht in assets vanished from the local fund industry.
The funds have since returned over the past four months, he said, adding that there was a 60% correlation between the SET and net asset values for the fund industry.
Local stocks also still have room to move upward, even with the more than 60% gain posted by the SET for the year to date.
Dr Pichit noted that over the past year, foreign investors had injected 40 billion baht in funds into local stocks,representing just 20% of the total outflows seen during the global crisis.
He added that Thailand's financial system had also shown signs of growing maturity, with fund assets now accounting for 27.8% of total bank deposits compared with 20% before the global financial crisis.
By the end of 2010, total net assets held by local funds is projected to rise to 28.8% of bank deposits.
Narongchai Akrasanee, the chairman of MFC Asset Management, agreed that global financial markets have largely normalised.
"Still, there remains a number of risk factors that deserve close monitoring,including the extent of financial losses post-crisis and the speed in which the real sector recovers," he said.
Supakorn Soontornkit, a senior executive vice-president at MFC Asset Management, cautioned that local stocks could see a short-term correction on profit-taking that could push the index to 680 to 700 points.
MFC plans to launch several new funds over the next few months, including a commercial property fund now in the filing process with the Securities and Exchange Commission.
The company also expects to see progress under the Thailand Creativity Fund,a new fund to be placed with institutional investors and emphasising investments in innovative companies.
EXPORTERS URGED TO COVER RISK
Exporters have been advised to cover their currency risk, with the baht likely to remain volatile against the greenback toward yearend and both the euro and yen having strengthened in recent months. The Thai unit is however expected to remain strong at around 33-33.50 per dollar.
The US dollar yesterday weakened for the first time in three days against the euro on speculation that Group-of-20 leaders this week will call for gains in other currencies to help reduce global trade imbalances.
The baht rose toward a 13-month high as losses in the dollar led to speculation the Bank of Thailand will tolerate gains in the currency as the economy recovers. Amid capital inflows, Thai stocks yesterday jumped 1.57 per cent or 11.21 points to close at a 14month high of 724.37, while the bluechip SET50 gained 8.64 points to close at 517.04.
"It [US dollar] has been oversold over the medium term. Thus, it will be volatile toward the year's end …We still maintain our forecast at Bt33.5 a dollar within this year," said Usara Wilaipich, senior economist of Standard Chartered Bank (Thai).
The baht rose 0.2 per cent to 33.64 per dollar as of 5pm yesterday in Bangkok, according to data compiled by Bloomberg. The currency reached 33.61, the strongest level since August 2008. It has gained 3 per cent so far this year, the thirdbest performance among the region's 10 mosttraded currencies.
However, Usara warned that aside from US dollar, exporters and importers should also monitor the euro and yen, which have been much stronger over the past seven months. They are therefore recommended to cover their currency risk for these two currencies as well.
The US currency dropped to $1.4714 per euro as of 1.31pm in Tokyo, from $1.4680 the previous day in New York. It declined to 91.75 yen from 91.93 yen and weakened to $1.6237 per pound sterling from $1.6217. The yen was little changed at 135.01 versus the euro from 134.96.
Usara said the US dollar was likely to remain weak as greenback liquidity was still flooding the market, as with a threemonth LIBOR low for the dollar at lower than 0.3 per cent, it had become a carrytrade currency. Moreover, the market believes the greenback could continue to remain weak.
Today, the US Federal Open Market Committee will announce its stance on whether to maintain the quantitative easing or to announce an "exit plan". If easing is maintained, the dollar will continue weakening, she added.
Nitinai Sirismatthakarn, senior vice president, Research Group, SCB Securities, believes the baht will remain at around 33 per dollar or slightly weaker over the next three to four months.
He said the Bank of Thailand is expected to keep the baht level moving in tandem with the Kingdom's trading peers.
Last week, he said, the baht had weakened by 30 satang, which means the central bank intervened slightly more than other regional central banks had done in their currencies. Otherwise, the baht would have strengthened by 50 satang, he added.
The baht's value, Nitinai said, also depended more on capital inflows, which are expected to be significant but not as huge as in the past.
"It's just a dollar play," said Tetsuo Jerry Yoshikoshi, a senior economist with Sumitomo Mitsui Banking Corp in Singapore. "The Bank of Thailand has allowed the baht to strengthen a bit. Some traders must be convinced that the central bank is now more tolerant."
Sukit Udomsirikul, assistant managing director at Siam City Research Institute, said the baht was tending to appreciate to 33 to 32 per dollar on the back of the continuous capital inflow, which is likely to result in the SET Index reaching the 800-point mark.
However, he warned that if foreign investors' net buying on the stock market was Bt30 billion a month, it would be an alarming sign because such a level would indicate excessive cash flow.
Since the beginning of this month, foreign investors have bought Thai shares with a net amount of Bt18 billion.
Sukit voiced concern that the global economy, including Asia, could face a fresh round of economic bubble due to the flood of capital inflow to speculate in stock markets and currencies amid the trend of a weak US dollar.
Stock markets will drop sharply in the second quarter next year on anticipation that central banks will change to a hawkish mode by jacking up their policy rates. This is expected to be seen in the first quarter at the earliest following rising inflationary pressure, he said.
"The further the world travels along the road to economic recovery, the greater the amount of fund flows, particularly to the region, pushing up the baht. While appreciation of the baht favours industries with high import content, it harms export industries," SCB Securities said in a note released yesterday.
The brokerage said petroleum refineries and the motor vehicle and industrial machinery sectors would take advantage of the trend of a stronger baht.
However, the rubber products, rice and sugar sectors will experience difficulties.
Overseas investors bought US$549 million (Bt18.5 billion) more Thai equities than they sold this month through yesterday, while the SET Index of shares climbed 9 per cent in the same period.
Finance Minister Korn Chatikavanij said on September 18 that there was "no overt policy" for a targeted baht rate. The Dollar Index, which ICE uses to track the greenback against its six major trading partners, fell 0.3 per cent yesterday before the Federal Reserve met to set interest rates this week.
According to all 93 economists surveyed by Bloomberg News, the Fed will keep its target rate for overnight loans within a range of zero to 0.25 per cent at its twoday policy meeting.
The US dollar yesterday weakened for the first time in three days against the euro on speculation that Group-of-20 leaders this week will call for gains in other currencies to help reduce global trade imbalances.
The baht rose toward a 13-month high as losses in the dollar led to speculation the Bank of Thailand will tolerate gains in the currency as the economy recovers. Amid capital inflows, Thai stocks yesterday jumped 1.57 per cent or 11.21 points to close at a 14month high of 724.37, while the bluechip SET50 gained 8.64 points to close at 517.04.
"It [US dollar] has been oversold over the medium term. Thus, it will be volatile toward the year's end …We still maintain our forecast at Bt33.5 a dollar within this year," said Usara Wilaipich, senior economist of Standard Chartered Bank (Thai).
The baht rose 0.2 per cent to 33.64 per dollar as of 5pm yesterday in Bangkok, according to data compiled by Bloomberg. The currency reached 33.61, the strongest level since August 2008. It has gained 3 per cent so far this year, the thirdbest performance among the region's 10 mosttraded currencies.
However, Usara warned that aside from US dollar, exporters and importers should also monitor the euro and yen, which have been much stronger over the past seven months. They are therefore recommended to cover their currency risk for these two currencies as well.
The US currency dropped to $1.4714 per euro as of 1.31pm in Tokyo, from $1.4680 the previous day in New York. It declined to 91.75 yen from 91.93 yen and weakened to $1.6237 per pound sterling from $1.6217. The yen was little changed at 135.01 versus the euro from 134.96.
Usara said the US dollar was likely to remain weak as greenback liquidity was still flooding the market, as with a threemonth LIBOR low for the dollar at lower than 0.3 per cent, it had become a carrytrade currency. Moreover, the market believes the greenback could continue to remain weak.
Today, the US Federal Open Market Committee will announce its stance on whether to maintain the quantitative easing or to announce an "exit plan". If easing is maintained, the dollar will continue weakening, she added.
Nitinai Sirismatthakarn, senior vice president, Research Group, SCB Securities, believes the baht will remain at around 33 per dollar or slightly weaker over the next three to four months.
He said the Bank of Thailand is expected to keep the baht level moving in tandem with the Kingdom's trading peers.
Last week, he said, the baht had weakened by 30 satang, which means the central bank intervened slightly more than other regional central banks had done in their currencies. Otherwise, the baht would have strengthened by 50 satang, he added.
The baht's value, Nitinai said, also depended more on capital inflows, which are expected to be significant but not as huge as in the past.
"It's just a dollar play," said Tetsuo Jerry Yoshikoshi, a senior economist with Sumitomo Mitsui Banking Corp in Singapore. "The Bank of Thailand has allowed the baht to strengthen a bit. Some traders must be convinced that the central bank is now more tolerant."
Sukit Udomsirikul, assistant managing director at Siam City Research Institute, said the baht was tending to appreciate to 33 to 32 per dollar on the back of the continuous capital inflow, which is likely to result in the SET Index reaching the 800-point mark.
However, he warned that if foreign investors' net buying on the stock market was Bt30 billion a month, it would be an alarming sign because such a level would indicate excessive cash flow.
Since the beginning of this month, foreign investors have bought Thai shares with a net amount of Bt18 billion.
Sukit voiced concern that the global economy, including Asia, could face a fresh round of economic bubble due to the flood of capital inflow to speculate in stock markets and currencies amid the trend of a weak US dollar.
Stock markets will drop sharply in the second quarter next year on anticipation that central banks will change to a hawkish mode by jacking up their policy rates. This is expected to be seen in the first quarter at the earliest following rising inflationary pressure, he said.
"The further the world travels along the road to economic recovery, the greater the amount of fund flows, particularly to the region, pushing up the baht. While appreciation of the baht favours industries with high import content, it harms export industries," SCB Securities said in a note released yesterday.
The brokerage said petroleum refineries and the motor vehicle and industrial machinery sectors would take advantage of the trend of a stronger baht.
However, the rubber products, rice and sugar sectors will experience difficulties.
Overseas investors bought US$549 million (Bt18.5 billion) more Thai equities than they sold this month through yesterday, while the SET Index of shares climbed 9 per cent in the same period.
Finance Minister Korn Chatikavanij said on September 18 that there was "no overt policy" for a targeted baht rate. The Dollar Index, which ICE uses to track the greenback against its six major trading partners, fell 0.3 per cent yesterday before the Federal Reserve met to set interest rates this week.
According to all 93 economists surveyed by Bloomberg News, the Fed will keep its target rate for overnight loans within a range of zero to 0.25 per cent at its twoday policy meeting.
AIG IMPROVING BUT MAY NEVER FULLY REPAY GOVT
Despite some progress, congressional investigators have cast doubt on whether efforst by American International Group (AIG) to restructure its operations and pay back the government will ever prove successful.
Still, the company's shares jumped about 15 per cent after the head of the House Committee on Oversight and Government Reform said the panel would examine a plan to reduce the AIG bailout package.
In the biggest taxpayer-funded bailout of a single company, the Federal Reserve and Treasury Department have provided $182.3 billion to the insurance giant. The Government Accountability Office (GAO) said that as of early September, AIG's outstanding balance of aid was US$120.7 billion (Bt4.05 trillion).
The GAO found "some progress in AIG's ability to repay the federal assistance". But improvement in the company's stability depends on its long-term health, market conditions and continued government support.
The report concluded that "the ultimate success of AIG's restructuring and repayment efforts remains uncertain".
Responding to the report, AIG spokesman Mark Herr said: "AIG remains committed to reducing risk and repaying taxpayers."
Fearing that AIG's collapse could take down the entire US financial system and the broader economy, the Fed first came to AIG's rescue last September.
The original $85-billion aid package came one day after Lehman Brothers filed for bankruptcy, the largest in US corporate history. AIG burned through the first lifeline, though, and continued to haemorrhage cash. It needed help three more times from the government, which owns about 80 per cent of the company because of the bailout.
Congressional investigators acknowledged that the federal assistance has "helped stabilisbe AIG's tance has "helped stabilisbe AIG's financial situation". But they said the government remains exposed to credit and investment risks that "could result in the Federal Reserve and Treasury not being repaid in full".
Representive Edolphus Towns, chairman of the House Oversight Committee, will have the panel study a plan by AIG's former CEO Maurice Greenberg to reduce and restructure the company's bailout package, a committee spokeswoman said on Monday.
Standard and Poor's equity analyst Chaterine Seifert upgraded her rating on AIG's stock to "Hold" from "Sell" on Monday, saying Towns' review of Greenberg's plan should boost the insurer's stock price in the near term.
Still, the company's shares jumped about 15 per cent after the head of the House Committee on Oversight and Government Reform said the panel would examine a plan to reduce the AIG bailout package.
In the biggest taxpayer-funded bailout of a single company, the Federal Reserve and Treasury Department have provided $182.3 billion to the insurance giant. The Government Accountability Office (GAO) said that as of early September, AIG's outstanding balance of aid was US$120.7 billion (Bt4.05 trillion).
The GAO found "some progress in AIG's ability to repay the federal assistance". But improvement in the company's stability depends on its long-term health, market conditions and continued government support.
The report concluded that "the ultimate success of AIG's restructuring and repayment efforts remains uncertain".
Responding to the report, AIG spokesman Mark Herr said: "AIG remains committed to reducing risk and repaying taxpayers."
Fearing that AIG's collapse could take down the entire US financial system and the broader economy, the Fed first came to AIG's rescue last September.
The original $85-billion aid package came one day after Lehman Brothers filed for bankruptcy, the largest in US corporate history. AIG burned through the first lifeline, though, and continued to haemorrhage cash. It needed help three more times from the government, which owns about 80 per cent of the company because of the bailout.
Congressional investigators acknowledged that the federal assistance has "helped stabilisbe AIG's tance has "helped stabilisbe AIG's financial situation". But they said the government remains exposed to credit and investment risks that "could result in the Federal Reserve and Treasury not being repaid in full".
Representive Edolphus Towns, chairman of the House Oversight Committee, will have the panel study a plan by AIG's former CEO Maurice Greenberg to reduce and restructure the company's bailout package, a committee spokeswoman said on Monday.
Standard and Poor's equity analyst Chaterine Seifert upgraded her rating on AIG's stock to "Hold" from "Sell" on Monday, saying Towns' review of Greenberg's plan should boost the insurer's stock price in the near term.
Thailand's economy on a roll, PM tells US
Thailand's economic recovery has begun,Prime Minister Abhisit Vejjajiva has told US investors.
The prime minister, who is in the US to attend the 64th Session of the United Nations General Assembly and the G-20 Pittsburgh Summit until Sunday, yesterday met with representatives of securities companies that trade in the US.
Mr Abhisit said he told executives the Stock Exchange of Thailand index had bounced back by almost 60% over the past nine months and the country's economic growth had turned positive.
He also told executives about the government's medium- and long-term plans to stimulate the economy under the "Thailand: Investing from Strength to Strength" scheme, particularly the water supply, communications and service sector projects.
This message sends the right signal to US investors and it should result in new investment in Thailand, Mr Abhisit said.
"Over the past several years, Thailand has had more economic competitors,but the country's infrastructure has been ignored over the past seven to eight years," he said.
"We only had a new airport."He said if Thailand did not invest in new infrastructure the country would lose its competitive advantage. The gov-ernment's clear development plan would boost investor confidence, he said.
Mr Abhisit said US executives asked about Thailand's political stability over the past few years.
He said he told them the government had a tangible plan for reconciliation which includes political reform.
"I believe foreign investors understand democracy, that people can view things differently ... the [United Front for Democracy against Dictatorship] rally that took place [on Saturday] and went well which should have positive effects on the country," he said.
Major US investors, including some of the world's top 10 investors, showed interest in the "Thailand: Investing from Strength to Strength" scheme as it would involve 140 billion baht in government spending, said Deputy Commerce Minister Alongkorn Ponlaboot who accompanied Mr Abhisit on the trip.
The prime minister told executives the worst point of Thailand's economic crisis had passed. All economic indices are showing signs of recovery.
The positive trend will revitalise ThaiUS business activities, Mr Alongkorn quoted Mr Abhisit as saying.
Mr Alongkorn said next year the volume of Thailand's exports to the US was expected to rise by 10%.
The prime minister, who is in the US to attend the 64th Session of the United Nations General Assembly and the G-20 Pittsburgh Summit until Sunday, yesterday met with representatives of securities companies that trade in the US.
Mr Abhisit said he told executives the Stock Exchange of Thailand index had bounced back by almost 60% over the past nine months and the country's economic growth had turned positive.
He also told executives about the government's medium- and long-term plans to stimulate the economy under the "Thailand: Investing from Strength to Strength" scheme, particularly the water supply, communications and service sector projects.
This message sends the right signal to US investors and it should result in new investment in Thailand, Mr Abhisit said.
"Over the past several years, Thailand has had more economic competitors,but the country's infrastructure has been ignored over the past seven to eight years," he said.
"We only had a new airport."He said if Thailand did not invest in new infrastructure the country would lose its competitive advantage. The gov-ernment's clear development plan would boost investor confidence, he said.
Mr Abhisit said US executives asked about Thailand's political stability over the past few years.
He said he told them the government had a tangible plan for reconciliation which includes political reform.
"I believe foreign investors understand democracy, that people can view things differently ... the [United Front for Democracy against Dictatorship] rally that took place [on Saturday] and went well which should have positive effects on the country," he said.
Major US investors, including some of the world's top 10 investors, showed interest in the "Thailand: Investing from Strength to Strength" scheme as it would involve 140 billion baht in government spending, said Deputy Commerce Minister Alongkorn Ponlaboot who accompanied Mr Abhisit on the trip.
The prime minister told executives the worst point of Thailand's economic crisis had passed. All economic indices are showing signs of recovery.
The positive trend will revitalise ThaiUS business activities, Mr Alongkorn quoted Mr Abhisit as saying.
Mr Alongkorn said next year the volume of Thailand's exports to the US was expected to rise by 10%.
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