Growth to slow in 2005
Thai GDP gains may slip to as low as 5%
Bangkok Post, June 30, 2004
Krissana Parnsoonthorn
Nuntawan Polkuamdee
Global economic growth is expected to slow in 2005 due to rising interest rates, high oil prices and a slowdown in the Chinese economy, according to local economists.
A decline in world economic growth would certainly affect Thai growth, according to Supavud Saicheua, managing director of Phatra Securities.
Phatra currently projects global economic growth of 4.4% this year, slowing to 3.5% in 2005. For Thailand , growth is projected at 6.5% this year and 5% to 6% in 2005.
Local economists, speaking at a seminar yesterday at the Stock Exchange of Thailand on local and global growth trends, agreed that external risks affecting the Thai economy included interest rate trends in the United States , volatility in benchmark crude oil prices and growth prospects for the Chinese economy.
The US Federal Reserve is widely expected to announce an interest rate hike of at least one-quarter of a percentage point once it completes its meetings tomorrow. Some analysts expect US short-term rates to rise by one to two percentage points over the next 12 months as authorities seek to curb rapidly growing inflationary pressures.
Oil price volatility is also expected to remain a key theme through 2005. Production surpluses are estimated at just 2% over demand, raising the risks of sharp price hikes if supply is disrupted, say through a terrorist attack in the Middle East .
Kongkiat Opaswongkarn, chief executive of Asia Plus Securities, agreed that operating costs of local companies would rise signification in 2005 on higher interest rates and energy prices.
But he said that despite uncertainties for next year, the SET was still poised to rebound in the second half, given that factors such as oil prices and interest rates had already been factored into current prices.
Dr. Kongkiat said the SET index could reach 900 points by the end of the year, a considerably more optimistic projection than Dr. Supavud's forecast of a high of 770 points. The SET index yesterday closed at 649.62 points, and is down nearly 16% from the end of 2003.
"Thai shares are relatively under priced, considering that corporate earnings are improving while the market price-to-earnings ratio is just 10 times," he said.
"Negative factors should pass shortly, helping investor confidence. And Asia Pacific is increasingly looking to be an attractive market for foreign investors."
Montree Sornpaisarn, chief executive of Kim Eng Securities, said the SET in the first half actually was more positive than during the same period in 2003, when market sentiment was heavily affected by the start of the US-led warin Iraq and later by the Sars outbreak.
But the SET eventually rebounded strongly in the second half of 2003, to post a world =leading 118% gain for the year, he noted.
Reungvit Nandhabiwat, managing director of Ayudhya JF Asset Management, agreed that foreign investors remained interested in the Thai market, although he expected near-term volatility.
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