Docstoc

Kim Eng Offices Kelive

Document Sample
Kim Eng Offices Kelive Powered By Docstoc
					 KELIVE                                                                                             Thailand
                                                                                                11 April 2007
 R E S E A R C H


 ECONOMICS

MPC cites weakening domestic demand as reason for 50 bps
rate cut
Key benchmark rate lowered to 4.00%
The Bank of Thailand’s Monetary Policy Committee (MPC) reduced its one-day repurchase rate this
afternoon by 50 bps to 4.00%, as widely expected. The accompanying statement from the MPC left little
doubt that the Bank of Thailand sees the sharper-than-expected slowdown in domestic demand in the first
quarter as a greater risk than inflation, even with the recent increase in global crude prices. Furthermore,
the rate cut and greater gap between US dollar and Thai baht rates should help ease pressure on an
appreciating baht and give relief to the export sector. As such, we believe that this unusual 50 bps rate cut
is a major step in the right direction.

Banks should immediately begin another round of deposit rate cuts
We believe that commercial banks will immediately announce another round of deposit rate cuts. With
average funding costs already coming down from previous deposit rate cuts, we believe that banks should
soon be in a position to lower lending rates and still maintain their net interest margins.

GDP forecast range expected to be lowered again to below 4.00%
Due to slower-than-expected economic growth in the first quarter, we believe that the official GDP forecasts
will need to be lowered from the current range of 4.00-4.50% to below 4.00%. The government is talking
about using both monetary and fiscal policy to stimulate demand. However, monetary policy will not be
effective until commercial banks actually lower lending rates and it usually takes 3-6 months before lower
rates help stimulate demand. Secondly, the government is still have difficulties in accelerating budget
disbursement, so higher deficit spending would also be ineffectual. Thirdly, there are fears that the
strengthening baht and global economic slowdown will finally slow down export growth, which, thus far this
year, has been surprisingly resilient at 17-18%. The Commerce Ministry is projecting full-year export
growth of 12.5%.

Another 50 bps rate cut expected later this year
We believe that there are still quite compelling arguments for the Bank of Thailand to lower rates a further
50 bps over the next few MPC meetings on May 23, July 18 and August 29. We believe that subsequent
rate cuts will prod the commercial banks to continue lowering deposit rates and start more aggressive
lending rate cuts.

Interest rate plays in bank and property sectors likely to gain
As the Thai stock market widely anticipated this 50bp rate cut, we are unlikely to see a near-term rally just
before the 4-day Songkran holiday. However, we believe that the pending commercial bank rate cuts,
particularly lending rate cuts, should help improve overall market sentiment. We have turned more bullish
on the market over a one-two month view. We continue to recommend investors to buy interest rate
stocks, such as banks and property stocks, as well as selected blue chips and dividend stocks. Among our
favourites are BBL, KBANK, QH, PS, SCC and PTT.
                                                                                           Analyst : George Huebsch
                                                                                       E-mail: George.h@kimeng.co.th




                                                       1
Kim Eng Offices



  Singapore                               London                                    New York                                Hong Kong
  Kim Eng Securities                      Kim Eng Securities                        Kim Eng Securities USA Inc              Kim Eng Securities
  (Private) Limited                       (London) Limited                          (Member of the NASD)                    (Hong Kong) Limited
  (Member of the SES)                     (Member of the FSA)                       406, East 50th Street                   (Exchange Participant)
  9 Temasek Boulevard                     6th Floor, 20 St. Dunstan’s Hill          New York, NY 10022                      Room 1901, Bank of America
  #39-00 Suntec Tower 2                   London EC3R 8HY, UK                       U.S.A.                                  Tower 12 Harcourt Road
  Singapore 038989                        Telephone: 20 7621 9298                   Telephone: 212 688 8886                 Central, Hong Kong
  Telephone: 65 6336 9090                 Dealers’ telephone: 20 7626 2828          Facsimile: 212 688 3500                 Telephone: 852 2810 7755
  Telex: KESECS RS 25871                  Facsimile: 20 7283 6674                                                           Telex: KIMEN HX 68698
  & RS 21857                                                                                                                Facsimile: 852 2877 0104
  Facsimile: 65 6339 6003


  Malaysia                                Indonesia                                 Philippines                             Thailand
  Kim Eng Research Sdn Bhd                PT Kim Eng Securities                     ATR-Kim Eng Securities, Inc.            Kim Eng Securities (Thailand)
  (Formerly known as                      9th Floor, Deutsche Bank Bldg             (Member of the PSE)                     Limited
  Mutual Scope Sdn Bhd)                   JI. Imam Bonjol 80                        17th Floor Tower One &                  (Member of the SET)
  Co. No. 274244V                         Jakarta 10310                             Exchange Plaza                          The Offices at Central World,
  Suite 16.02, 16th Floor                 Indonesia                                 Ayala Triangle, Ayala Avenue            20-21th Floor,
  Kompleks Antarabangsa                   Telephone: 62 21 3983 1360                Makati City, Philippines                999/9 Rama I Road,
  Jalan Sultan Ismail                     Facsimile: 62 21 3983 1361                Telephone: 63 2 849 8888                Pathumwan, Bangkok 10330
  50250 Kuala Lumpur, Malaysia                                                      Facsimile: 63 2 848 5738                Thailand
  Telephone: 603 2141 1555                                                                                                  Telephone: 66 2 658 6300
  Facsimile: 603 2141 1045                                                                                                  Facsimile: 66 2 658 6384


  Taiwan                                  South Korea
  Yuanta Core Pacific Securities          Kim Eng Research Pte Ltd
  11/F, No 225, Nanking East Rd           Korea Liaison Office
  Section 3 Taipei                        17th Floor Kyobo Securities
  Taiwan                                  Building
  Telephone: 63 2 849 8888                26-4 (Uisadangno 93)
  Facsimile: 63 2 848 5738                Youido-Dung, Yongdungpo-Gu
                                          Seoul, Korea 150-737
                                          Telephone: 82 2 3775 2268
                                          Facsimile: 82 2 3775 2309




Disclaimer : Due to different characteristics, objectives and strategies of institutional and retail investors, the research reports of Kim Eng Research and KELIVE
Research may differ in either recommendation or target price, or both. KELIVE Research is intended for retail investors (http://kelive.kimeng.co.th) while Kim Eng
Research is intended only for institutional investors based outside Thailand (www.research.kimeng.com). It is therefore important for each investor to read and
understand the assumptions and basis of recommendation of each report

This research report is prepared for general circulation. It does not have regard to the specific investment objectives, financial situation, or particular needs of any
specific person who may receive this report. The information contained herein is provided on the basis of information received or provided to us, but its completeness
and accuracy are not guaranteed. Opinions expressed in this report are subject to change without notice, and no part of this publication is to be construed as an offer, or
solicitation of an offer, to buy or sell any securities or financial instruments whether referred to therein or otherwise. We do not accept any liability whatsoever whether
direct or indirect that may arise from the use of information contained in this report, or a reliance on our opinion expressed in this report. Kim Eng Securities (Thailand)
Public Company Limited, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the
securities mentioned in this report.

                                                                                       2

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:7
posted:11/6/2012
language:English
pages:2