Fetco uncertain of impact from pandemic

The impact from the pandemic on business remains ambiguous, with the government expected to continue stimulus policies into next year, says a capital market veteran.

"We do not know how many small and medium-sized enterprises will collapse from the crisis, so a follow-up stimulus package after the crisis is needed," said Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Organizations (Fetco).

Several countries have started to unwind their lockdown measures and open up economies while injecting liquidity into the economic system through fiscal and monetary policies, said Mr Paiboon.

A second wave of the outbreak remains a concern, he said. The government can still impose lockdown measures in some areas, as opposed to the whole country, to support early stages of economic recovery.

For Thailand's economic outlook, the economy is projected to contract by 6-7% this year as tourism revenue will disappear, with non-performing loans poised to rise against the backdrop of Covid-19 crisis, said Mr Paiboon.

The dismal outlook will continue to put pressure on Thailand's stock market upside gain in the short term, but the bourse still has good long-term prospects because of the country's strong economic fundamentals, he said.

The Stock Exchange of Thailand's market capitalisation has dropped by around 3.2 trillion baht year-to-date, while the country's nominal GDP decreased by around 1 trillion mainly due to the Covid-19 pandemic, according to Fetco.

Separately, investor confidence for the three months through July reverted to neutral territory after a three-month slump as sentiment is buoyed by hopes of public stimulus and a tourism recovery.

The Investor Confidence Index rose by 42% to 80.4 from April's 56.7, according to the monthly survey by Fetco.

An index below 80 points is considered bearish, 80-120 is neutral and over 120 is bullish.

Survey results from the Interest Rate Expectation Index show market participants expect the policy interest rate will be cut from the current 0.75% at the next Monetary Policy Committee (MPC) meeting scheduled for May 20.

Yields on five-year and 10-year government bonds are seen as likely not to increase over the 10 weeks, according to the survey.

This sentiment means respondents expect that although the MPC may cut the policy interest rate, there may be an increased supply of government bonds for use in economic stimulus measures in order to raise funds and mitigate the effects of the lockdown, said Ariya Tiranaprakij, senior executive vice-president of the Thai Bond Market Association.