Downgrade possible, says KBank

Downgrade possible, says KBank

Thailand's credit outlook is at risk of being cut to negative from stable by three large international credit rating agencies by the third quarter due to the protracted political chaos, says a senior executive at Kasikornbank (KBank).

If there still is no functioning government by July as expected, the big three credit rating companies — Moody's Investors Service, Standard & Poor's and Fitch Ratings — will likely trim Thailand's credit outlook to negative, while the country's sovereign credit ratings are expected to remain unchanged, said Kobsit Silpachai, KBank's head of capital market research.

Seasonal ratings are often reviewed in the third quarter.

Thailand now looks riskier than its BBB-rated peers, and its long-term risk is higher than short term as reflected by its credit-default swap insuring Thai debt against default for one year being three basis points higher than its peers, Mr Kobsit said.

The spread for five years widened to 25 basis points.

The Japan Credit Rating Agency lowered Thailand's outlook to negative from stable early last month but affirmed the credit rating.

"The ratings agencies are likely to retain Thailand's stable outlook for a while despite the ongoing political instability thanks to the country's high international reserves of US$190 billion," he said.

Thailand's BBB credit rating is equal to that of the Philippines, which was recently upgraded from BB, but foreign capital outflows could intensify and the baht could weaken. The bank predicts the baht will fall to 33.50 to the US dollar this year.

The US Federal Reserve is expected to start normalising its policy rate in October or November 2015 after completing its monthly asset purchase pullback, but the Bank of Thailand could keep its rate unchanged at 2% throughout this year, as a rate reduction would not support loan growth or the economy, he said.

Kasikorn Research Center, a subsidiary, cut its Thai GDP growth forecast to 1.8% this year, assuming export growth of 5%.

KBANK shares closed yesterday on the Stock Exchange of Thailand at 195.50 baht, up 50 satang, in trade worth 704 million baht.

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