Enter your search terms Submit search form
	Web www.asiatradingonline.com www.chiangmailaw.com www.thaitrademe.com

 

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 tghere appears to be no slowness in spending or borrowing

Some foreign speculation on baht, says Thai central bank

BANGKOK, June 11 (TNA) – Bank of Thailand (BoT) Assistant Governor Suchada Kirakul on Tuesday revealed that the central bank had monitored movements of the baht, which had weakened to a 5-month low at 33.30 to the dollar, and found that three or four specific foreign investors were found to have speculated on the currency.She said the foreign investors had purchased and sold the baht in greater amounts than ordered in transactions and without any business support through foreign banks in Thailand and Thai bank branches overseas.The bank had already warned them not to do that and believed that in future the baht would move in a more appropriate manner. Mrs. Suchada conceded that the currency had weakened considerably because foreign investors had dumped Thai shares and brought money out of the stock and gold markets.But she affirmed the baht had moved more steadily at present because exporters and importers in general had placed purchase and sale orders normally.The baht strengthened against the dollar, closing at 33.00/05 baht, compared with 33.21/24 on Monday. Meanwhile, The Stock Exchange of Thailand(SET) composite index lost 13.64 points to close at 791.94 Tuesday. Dealers said investors were concerned over record oil prices and high inflation as well as political turmoil.Regarding mounting concerns over Thailand's economic sluggishness, she said the Thai economy was not in trouble although the country experienced a trade deficit. The bank remains confident that the country's current account would remain in balance or in a small surplus this year if the average price of oil stays at no more than US$124 per barrel as earlier assumed, she added. (TNA)

Standard and Poor's

source: Bkk Post June 13th 2008

ECONOMY :The ratings agency Standard and Poor's has affirmed Thailand's credit ratings as investment grade, but cautioned that political risks and non-performing loans in the banking sector remained risks. The agency affirmed the country's BBB+/A-2 foreign currency ratings and A/A-1 local currency ratings. The outlook is stable.

"A net external creditor position, prudent fiscal management, and relatively light net government indebtedness support the sovereign credit ratings on Thailand," said S&P credit analyst Kim Eng Tan.
"On the other hand, heightened political risks and banking sector non-performing assets are the main weaknesses of the government's creditworthiness." Mr Tan said fiscal discipline was a "key underpinning" for the country's creditworthiness, but that political tensions and the prospect of violence from street protests could affect investor confidence and investment."If the recovery in capital spending stalls as a result [of violent protests], economic growth in the next few years could fall from levels in the past five years," S&P said in a statement.

When inflation goes up, currencies tend to come down, economists say. That rule of thumb has proved true in Southeast Asia this month which has seen inflation across the region pushed to the highest levels in a decade by rising fuel and food prices.

In May, year-on-year inflation peaked at 7.6 per cent in Thailand, 9.6 per cent in the Philippines, 10.4 per cent in Indonesia and a whopping 25.2 per cent in Vietnam, leading to depreciations against the not-so-mighty dollar of the Thai baht, the Philippine peso, the Indonesian rupiah and, most recently, the Vietnamese dong. Further depreciations are anticipated in Vietnam and throughout Southeast Asia in coming months.

"All we need to do is look at how the trade flows and investment flows are going, and for Asia they are going to get worse," he said. "Based on these two trends we would expect Asian currencies to continue to weaken, or at least not return to their previous strengths."

After two years of steadily appreciating Asian currencies against the dollar, ramped up by foreign money pouring in to the region because of its impressive growth, strong exports and stable macroeconomics, a shift towards depreciating currencies is a sign of the changing times.

"The Philippine peso is a good example of how things have changed in 2008," said an economic assessment report of the DBS Bank of Singapore. "This year, growth is expected to slow while inflation has surged."

"Although (the) US dollar and peso (exchange rate) has stopped rising of late, we are mindful that it could still head higher," the report said. "History has shown that the US dollar and peso can return up to 44 per cent of its past three years' move." The depreciation of Southeast Asia currencies has little to do with a strengthening dollar, but much more to do with the region's ongoing dependence on the US economy, analysts said."We're starting to see now virtually every Asian country's export growth to the US is in decline, and in some countries may even be negative year-on-year," McCormack said.

"There is no way that Asia can avoid a slowdown, because we're really looking at a synchronized global slowdown," he said. "Decoupling from the US economy was the buzzword a while ago, but nobody seems to use that term anymore because everyone realizes its not going to happen."

Bank Thai plans fast sale of bad loans

source: Bkk Post June 13 2008

Phirasilp: ``We may be close to death'' - 'Cutting off our skin is only way to survive' BankThai will sell off 29.71 billion baht worth of non-performing loans this month to two state-owned asset management companies in a bid to raise funds to keep its capital funds over minimum legal requirements. Executives told shareholders yesterday that the debt sale was necessary for the bank's survival. ''Cutting off our own skin is the only way we can survive,'' said BankThai president Phirasilp Suphapolsiri. ''If we don't do this, we may die or be close to death. We need to maintain our capital adequacy ratio and turn our loan loss reserves into capital.''

BT's financial statements verify that its capital reserves are already well below the 8.5% required by the Bank of Thailand.

At the end of 2007, capital funds stood at just 1.48% of risk assets, compared with 5.95% at the end of 2006 and 8.56% in 2005. The bank's capital funds fell sharply due to higher provisioning requirements needed to cover potential losses on its offshore investments in sub-prime mortgage assets. BankThai in January raised 1.9 billion baht in a private placement to its two major shareholders, the Financial Institutions Development Fund and US private equity firm TPG Newbridge. But Mr Phirasilp said the bank would not be able to raise additional equity at the moment given that the FIDF, which holds 42% of BankThai, was in the process of possibly selling its stake. As a result, the bank would sell off its distressed asset portfolio by the end of the month to help keep its capital over regulatory minimums. BankThai will sell off its portfolio held by its wholly owned subsidiary Sathorn Asset Management. The assets involve loan principal and accrued interest of 29.71 billion baht but a book value of 3.31 billion baht as of Feb 29. Two FIDF-controlled asset management companies _ Bangkok Commercial Asset Management and Sukhumvit Asset Management _ will purchase the loan portfolio for 3.88 billion baht. Mr Phirasilp said the bank was struggling to raise funds due to regulations requiring the bank to set aside provisions for investment losses.

The Bank of Thailand now requires financial institutions to mark-to-market the value of securities such as collateralised debt obligations and book provisions to cover any losses, even if the securities have yet to be sold. Mr Phirasilp said the bank's BIS ratio would increase to near 9% after the distressed asset sale, and over 9% if it reversed its provisions for its CDOs. But failure to sell the non-performing loans means its capital adequacy ratio would remain under the legal 8.5% minimum, forcing the bank to cut new operations. The capital adequacy ratio acts as a limit on asset growth relative to a bank's capital funds. BankThai officials said that its capital adequacy ratio was now over minimum requirements, due to a capital increase in January and a sale of $159 million in sub-prime CDOs.

The bank currently holds $260 million worth of CDOs, representing assets which the bank plans to hold to maturity. The bank recently set aside additional reserves of 2.48 billion baht to cover potential investment losses, on top of 7.315 billion reserved in 2007. Non-performing loans at the bank stood at 15.7 billion baht or 16% of total loans at the end of March, up from 15% at the end of 2007 and 8% at the end of 2006. BankThai's troubles come even as the FIDF expects to receive final bids for its 42% stake today. Among the reported bidders are HSBC, Standard Chartered and Tisco Bank.