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THAILAND FINANCE & BANKING 2008

SITUATION

The Financial situation in Thailand is somewhat in the dark at the moment of writing. June 2008 to date there has been speculation on the Thai Baht and with the Government spending on mega projects using Bonds there does not seem to be an alarms ringing. The Government is also under a censure debate. Some Banks have overloaded on their sub primes as this has not been exemplified out yet so Banks are not really saying what their present situation is like. In the meantime construction costs keep rising and there appears to be no slowness in spending or borrowing

Bank of Thailand issues call for spending spree


The Nation June 21, 2008
The government should fully disburse its budget this year to boost economic growth to 6 per cent, a deputy governor of the Bank of Thailand (BOT) said yesterday.
She said this was because the central bank needed to raise its policy interest rate to fight inflation before it is too late. Atchana Waiquamdee said the government could achieve 6-per-cent growth if its budget disbursement reached 94 per cent and state enterprises actually used at least 80 per cent of their investment budget. Skyrocketing oil prices could affect economic growth, as the current price is already beyond the central bank's worst-case scenario of US$113 (Bt3,800) per barrel. But the better-than-expected US economy was a positive factor for the Kingdom's economy, she said. The deputy governor said the central bank needed to control "inflation expectation" amid a negative real policy interest rate or else consumer spending would accelerate, which would fuel inflation incessantly. Moreover, the country's capacity use is nearly full, because the labour market is tight with a low unemployment rate. Rising prices of goods and services will put additional pressure on wage adjustment, Atchana said.
"We must consider whether the real policy interest rate is proper for the economy. If we do not slow down inflation, it may not stay under control. This will force us to use a strong dose of medicine, which would eventually drag down the economy," she said.
"Giving gradual doses and keeping a close eye on whether the economy can bear them or not is better than letting inflation overshoot and eventually get out of control," the deputy governor said.

Nimit Nontapunthawat of Bangkok Bank said if inflation expectation was allowed to occur, inflation would be high and prolonged. This would dampen the country's savings, including deposits of Bt6 trillion, resulting in a slump in purchasing power and economic growth.

He predicts the baht will move between 32 and 34 to the US dollar this year.

Foreigners cash out
source: Bkk Post June 21 2008

Singapore - A new report by Citigroup blames rising inflation and fears stagnation have triggered a flight of foreign funds out of regional markets - although Thailand is still a net gainer.
China has taken the biggest hit, the finance house said on Saturday, with the funds offloading $2.78 billion worth of mainland shares between January and mid-June this year. Foreign fund managers have sold about $4.6 billion in Asian equities, nearly double the $2.48 billion they invested during the corresponding period of 2007, the report said. But the data was not all grim. Taiwan emerged with $2.1 billion from foreign funds this year, Thailand is still $109.1 million in the black, India $34 million and Indonesia $11 million, the report said.

"For the first time since the 1997-98 Asian crisis, Asia is in a sell-off mode, inspired by developments taking place in its very neighbourhood, namely energy-driven inflation," the Straits Times quoted Merrill Lynch strategist Mark Matthews as saying. Foreign fund managers sold $254 million in Malaysian equities, compared to $1.1 billion pumped in last year, the report said. The city-state is another underperformer, with $229.8 million worth of equities sold this year compared with the $1.1 billion fund flow into Singapore equities last year. "Whether you are selling coiled steel or cut flowers, the cost of transport is a problem," Matthews told the newspaper. "You have to ask whether it still makes sense to ship stuff from China when the price of a sea voyage from Shanghai represents half of the value of the product."
He expressed hopes that high oil prices will encourage Asian manufacturers to embark on more cost-cutting in order to survive and get more market share.

Merchant Banks
Merchant Banks Address Telephone/Fax Website & or Email
Finansa Plc. TISCO Tower, 16/F
48/29, 48/32 North Sathorn Road
Bangkok 10500, Thailand
Tel:(662) 697 3700/800
Fax:(662) 266 6688
www.finansa.com
mailbox@finansa.com
Bangkok Bank Public Company Limited 333 Silom Road Bangkok 10500 Thailand Tel:(662) 230 1000 www.bangkokbank.com
info@bangkokbank.com
Bangkok First Investment & Trust PCL 23rd Fl., Bangkok Insurance Bldg., 25 Sathon Tai Rd., Sathon, Bangkok 10120,
Thailand
Tel:(662) 677 4300
Fax:(662) 677 4301
www.bfit.co.th

American Express - Thailand - Merchant Services
S.P. Building, 388 Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400, Thailand. Tel:(662) 273 5544
Fax:(662) 273 0309
www24.americanexpress.com/thailand
       

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