Thailand Microeconomic Weekly Update #35

THAILAND MACROECONOMICS WEEKLY UPDATE

The upcoming week holds a potentially optimistic investment perspective as we await the formation of the new cabinet, while also anticipating industrial production, private consumption, and private investment data for July.

  In Q2 2023, Thailand’s GDP grew by 1.8% YoY, falling short of expectations due to weakened exports from global demand constraints, though supported by the tourism sector; the formation of a Pheu Thai Party-led government eases political uncertainty, benefiting the Stock Exchange of Thailand; Srettha Thavisin was officially endorsed as the 30th Prime Minister; the Phue Thai party plans to introduce a ‘Digital Wallet’ with 10,000 Baht per person usable by April 2024, benefiting over 50 million citizens; and while car production increased by 4.72% in July YoY, local sales declined by 8.77% attributed to high household debt.

                                                                                           

  The potential formation of a Pheu Thai Party-led government is expected to ease political uncertainty and benefit the Stock Exchange of Thailand. Srettha Thavisin has been officially endorsed as Thailand’s 30th Prime Minister. The Phue Thai party plans to introduce a ‘Digital Wallet’ providing 10,000 Baht per person, likely ready by early next year and usable by April 2024, benefiting over 50 million citizens. This move will inject more than 560 billion Baht into the economy, with non-smartphone users able to use national identification cards for payments.

  In July, car production in Thailand increased by 4.72%, reaching 149,709 units primarily for exports, while local sales dropped by 8.77% YoY, attributed to high household debt, as reported by the Federation of Thai Industries (FTI). Notably, exports declined by 6.2% more than anticipated due to sluggish global demand, resulting in a customs-based export contraction of 6.2% YoY, leading to a trade deficit of $1.98 billion in July, surpassing the forecasted deficit of $1.3 billion; imports also fell by 11.1% YoY. The Commerce Ministry maintains a 1-2% annual export growth target for the year, with approximately 78% of total export products, including items in agriculture and food industries, expected to expand, driven by concerns about food security in various countries.

INDUSTRY

BANK

   The Ministry of Finance’s recent report highlights a financial landscape with an outstanding balance of THB 24 trillion, including state banks expanding by 5%, commercial banks growing at 1.1%, and business lending contracting by 0.9%; June 2023 saw deposits at financial institutions reach THB 24.56 trillion, growing 2.1% YoY but contracting by 0.5% from the prior month when considering seasonal effects; specialized financial institutions (state banks) grew at 5.0%, while commercial bank deposits expanded slower at 1.1%; outstanding loans totaled THB 20.39 trillion in June 2023, increasing 1.0% YoY but only 0.1% excluding seasonal effects, with business loans contracting by 0.9% and consumer loans growing by 2.1%; and commercial banks’ liquid assets in June 2023 totaled THB 5.34 trillion, adhering to the Liquidity Coverage Ratio (LCR) standard implemented since January 2016.

Bank of Ayudhya Public Company Limited (BAY)

          Bank of Ayudhya has partnered with four prominent Thai businesses to test the acceptance of digital baht currency (CBDC) issued by the BOT. The trial aims to cover transactions from small shops to large businesses and will conclude in the third quarter of 2023. The focus is on understanding how CBDC can work with complex business systems. The collaboration includes diverse sectors like food, retail, and energy.

        After the trial, the BOT won’t immediately release Retail CBDC but will evaluate the results to benefit Thailand’s digital baht infrastructure development. Krungsri is committed to supporting the BOT’s financial solutions to adapt to the changing needs of the country’s commerce.

Kasikornbank Public Company Limited (KBANK)

       Kasikornbank is looking to broaden its presence in Vietnam following approval from the Vietnamese central bank to increase its core capital in the country from $80 million to $285 million in June. In its most recent move, the Thai bank has expressed interest in acquiring Home Credit Vietnam, a lending institution, for an estimated price of $1 billion. Home Credit Vietnam’s primary operations encompass hire-purchase loans, electrical appliance loans, and cash loans. The organization is a subsidiary of Home Credit Group, headquartered in the Netherlands. With a network of 9,000 outlets and a workforce exceeding 6,000 employees, Home Credit Vietnam serves approximately 12 million customers across the country. Despite ongoing discussions between KBANK and HCV, Reuters’ report indicates that a final decision has yet to be reached.

PROPERTY AND CONSTRUCTION

WHA Corporation Public Company Limited (WHA)

    WHA Corporation Public Company Limited, the Company is the leader of one-stop service which covers all of customer demands relating to logistics services, has shown impressive performance in Q2/2023 with Normalized total revenue and share of profits amounted to THB 3,150.5 million, increasing 40.7%, and normalized profits stood at THB 817.3 million, an increase of 141.4% YoY.The major contributor was the land business revenue, which reached THB 1,470.3 million, reflecting a significant surge of 108.9% compared to the corresponding period in the previous year. This surge is primarily attributed to an elevated count of land transfers, both domestically and internationally.

ENERGY AND UTILITIES

BCPG Public Company Limited (BCPG)

    BCPG Public Company Limited, a company that generates and sells electricity from renewable energy  as well as investments in related ventures, has disclosed company performance during the first half of the year with net profit of THB 713 million, a decrease of 57.9% from the same period of last year. This is due to profit recognition from 2022 sales and geothermal plant investments.  Furthermore, there was a temporary suspension of a hydropower plant in Lao PDR, aimed at augmenting electricity transmission for improved sales to Vietnam. Nevertheless, the hydropower plant has since resumed operations and is now engaged in selling electricity to the Electricity Authority of Vietnam. In addition, in the second half of the year 2023, the company will recognize the full operating results of the hydroelectric power plant in Lao PDR, the oil depot business in Thailand. And realized profit sharing from natural gas power plants that the company has invested in the United States. The total production capacity is 577 MW and another 280 MW is under acquisition.

TOURISIM

  The Tourism Authority of Thailand aims to attract more couples from Hong Kong to choose Thailand as their wedding destination. They see potential in Hong Kong tourists, particularly those who are married or planning to marry. In 2014, their goal was to increase the number of married couples from Hong Kong choosing Thailand for their weddings. Currently, around 50,000 couples have wedding ceremonies in Thailand each year, with about 10% of them being from the new generation with higher purchasing power.

  Hong Kong tourists have historically traveled to Thailand accounting for 454,008 people during January and July 2023. The Tourism Authority of Thailand aims to increase this number to 700,000 tourists in 2023, with an expected average expenditure of 10,000 baht per person per day, or a total of 30,000 baht per person per trip. This is a significant increase from the 7,000 baht per person per day, or 21,000 baht per person per trip spent in 2019.

  Looking forward, the Tourism Authority of Thailand plans to increase the spending of Hong Kong tourists by 10% and has an ambitious target of attracting 1 million Hong Kong tourists by 2024 for travel in general.

TRANSPORTATION AND LOGISTICS

Don Muang Tollway Public Company Limited (DMT)

  Don Muang Tollway Public Company Limited (DMT) is expecting a positive performance in Q3/23 due to increased traffic and recovering tourism. The Managing Director, “Dr. Sakda Panwai,” is confident that this year’s revenue will grow over 30%, supported by a 45% increase in toll revenue during H1 compared to the previous year. DMT plans to issue an interim dividend of 0.35 baht/share on September 8. The company aims to maintain its revenue target of more than 30% growth for the year. In H1, toll revenue reached 1,130.03 million baht, an increase 45% from the same period of previous year, with average daily traffic surpassing 110,000 cars compared to 85,000 cars in the prior year.

ENERGY AND UTILITIES 

PTT Oil and Retail Business Public Company Limited (OR)

   PTT Oil and Retail Business Public Company Limited is focusing on expanding its Non-Oil business segment. They plan to add 400 Amazon Cafes annually and increase EV Stations by 500 to 800 units. The company currently has 300 stores and is exploring mergers and acquisitions in areas like Healthcare and Beauty. They are also considering listing 1 to 2 subsidiaries on the Stock Exchange of Thailand, with “OhKajhu” being a potential first candidate. These strategies aim to boost tourism and oil consumption, leading to continuous growth in the Mobility business and overall performance in the second half of the year.

SECTORAL UPDATE

                  (The SET closed the week today at 1,560.20 points, an increase of 2.79 points (+0.18%), trading value of 51,602.42 million baht.)

The SET Index established a support base while testing resistance at 1518 and 1560 points, buoyed by buying pressure in banking stocks, although the RSI is on an upward trend amidst selling pressure and reduced volume; concurrently, the USD/THB exhibits volatility within a range of 35.00 to 35.30 due to a strengthening USD and anticipation of the FED statement at Jackson Hole, resulting in a weaker baht due to the trade deficit.

                                                                                 August 25th investors types that continue to be net sellers.
For the year foreign investor selling has accumulated but looking in the short term some foreign buying has return in the past week signaling a positive trend for the stock market
 

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