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| • EXCH RATES |
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Baht/$ 33.18/21
Bid/Ask
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GOLD |
13,650
- 100
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ECONOMY
DARANA CHUDASRI
A currency crisis in Vietnam should not have a significant impact on Thailand, according to James Woodward, country head for UBS Thailand.
The Swiss bank projects that Thai economic growth this year will reach existing forecasts of 5%, although it has increased its headline inflation estimate for the country to 7.4% from 5.5% earlier.
Mr Woodward said the recent announcement by the Vietnamese government that it was cutting its economic growth target this year to 7% from a range of 8.5% to 9% was a positive sign.
''Vietnam's economic problems are not like the [1997] 'tom yum kung' crisis, which ultimately spread through the region,'' he said.
''Thailand's economic fundamentals still support GDP growth of 5% this year. While we do not believe Thailand will escape the global slowdown, given the recent buoyancy in the data, we now look for the Thai economy to be one of the few economies worldwide to experience an acceleration in average growth between 2007 and 2008.''
Mr Woodward said capital outflows from Thai equities in recent months stemmed from fears of inflation, particularly in emerging markets such as Thailand, Indonesia and the Philippines.
Inflation reached a 10-year high of 7.6% in May, spurred by soaring global food commodities and energy prices. Annual inflation in the first five months of the year averaged 5.8%.
The Stock Exchange of Thailand has fallen by 6% in the past month, largely due to foreign sell-offs over concerns of slowing economic growth, declining business and consumer confidence and political instability.
The SET index closed yesterday at 782.64 points, down 8.16, in trade worth 16.12 billion baht.
But Mr Woodward said he was bullish about Thai equities, viewing current valuations as relatively cheap considering earnings growth projections of 20% this year and market yields of 3.7%.
''There are good stocks to buy on a selective basis. ... Investors should wait and see for now, with interesting stocks to monitor being property, selective banks, and selective energy companies,'' he said.
Jim O'Sullivan, a UBS managing director for economic research, said the bank viewed the US economy would stay in recession until the fourth quarter.
The US economy was expected to contract 1% in the second and third quarters before rebounding by 2% in the fourth, he said. Unemployment, now around 5.5%, should hit 6% in the fourth quarter due to sluggish growth before stabilising in 2009.
He said the recession was relatively mild altogether, but should be sufficient to put ''significant downward pressure on inflation''.
UBS currently projects the US economy to grow by just 1% this year before rebounding to 1.9% in 2009.
Growth would remain modest as a result of the credit crunch from the collapse of the US housing and sub-prime mortgage markets as well as the sharp jump in commodities prices, particularly crude oil. But the US mortgage market has bottomed out, while US exports from March to May showed 10% growth thanks to the weakening dollar.
Mr O'Sullivan said the US Federal Reserve should continue to ease interest rates by another 0.5 percentage points this year to 1.5%. Rates should begin to increase in late 2009.
Oil prices, meanwhile, should flatten out to around $120 per barrel for the year, he added.
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