KIMENG : BOT raises the policy rate; likely the last
โพสต์แล้ว: พฤหัสฯ. ส.ค. 25, 2011 4:30 pm
KIMENG : BOT raises the policy rate and likely to be last this year
MPC raises policy rate for a sixth time as expected
After the MPC meeting yesterday afternoon, the group raised the policy rate by another 25 bps to 3.50% inline with market estimates. This was the ninth time the MPC hiked the interest rate since July 2009 and the BoT stated the inflation risk from domestic demand expansion and the acceleration of consumer inflation from the new populist policies means there is a possibility of a hike in the policy interest rate once again to 4.00% (current rate at negative -0.35%) to sustain long-term growth of the Thai economy. This meeting had the highest split-vote ever at 5-2, which reflects the different views among the MPC members. The BoT also said that the next rise would depend on the current economic situation at that time.
Economic expansion risk will rule yearly interest rate trend
From the MPC statement, we see that the BoT view is inline with our previous estimate on the higher risk of world economies, especially in the US and Europe, that are facing serious public debt problems. The BoT will be weight measuring Thai economic expansion risks rather than the inflation risks from the higher negative internal and external factors, especially the lower-than-expected Thai 2Q11 GDP. Analysts from MS, Citigroup, CS, JP Morgan, GS and UBS have revised downward this years and next years world economic estimates from the public debt impact, the slow response in employment markets and the likely unexpected results from a new FED stimulus package, which will not likely have much impact on economic demand. Thus, we believe the BoT framework for the rest of this year will move forward with greater caution and we believe this current policy rate hike will be the last for the year along with other Asian central banks, such as South Korea, Taiwan and Indonesia.
High inflation estimated to slow in 2H11
Domestic product prices are forecast to continue high from good domestic demand and the new government stimulus package, especially the minimum wage increase, and will accelerate inflation to offset the lower oil and commodity prices. However, we see the inflationary trend slowing significantly in 4Q11 and remaining below 4% yoy from the high base last year and stable oil prices (assumption of no severe impact from new economic policies). Thus this will lead the BoT to not feel the need to raise the policy interest rate at their next 2 meetings (19 October and 30 November) when peak inflation will have already topped.
Flat interest rate benefits domestic consumers and investment sector
The interest rate rise and the slowdown in inflationary trend in 2Q11 are directly positive for the consumer sector and investment sector. We recommend accumulating loan sector shares (TCAP & TISCO), auto sector shares (SAT) and consumer shares (BJC), which will benefit from consumer products and auto sector expansion and also the recovering NIM for the rest of this year.
MPC raises policy rate for a sixth time as expected
After the MPC meeting yesterday afternoon, the group raised the policy rate by another 25 bps to 3.50% inline with market estimates. This was the ninth time the MPC hiked the interest rate since July 2009 and the BoT stated the inflation risk from domestic demand expansion and the acceleration of consumer inflation from the new populist policies means there is a possibility of a hike in the policy interest rate once again to 4.00% (current rate at negative -0.35%) to sustain long-term growth of the Thai economy. This meeting had the highest split-vote ever at 5-2, which reflects the different views among the MPC members. The BoT also said that the next rise would depend on the current economic situation at that time.
Economic expansion risk will rule yearly interest rate trend
From the MPC statement, we see that the BoT view is inline with our previous estimate on the higher risk of world economies, especially in the US and Europe, that are facing serious public debt problems. The BoT will be weight measuring Thai economic expansion risks rather than the inflation risks from the higher negative internal and external factors, especially the lower-than-expected Thai 2Q11 GDP. Analysts from MS, Citigroup, CS, JP Morgan, GS and UBS have revised downward this years and next years world economic estimates from the public debt impact, the slow response in employment markets and the likely unexpected results from a new FED stimulus package, which will not likely have much impact on economic demand. Thus, we believe the BoT framework for the rest of this year will move forward with greater caution and we believe this current policy rate hike will be the last for the year along with other Asian central banks, such as South Korea, Taiwan and Indonesia.
High inflation estimated to slow in 2H11
Domestic product prices are forecast to continue high from good domestic demand and the new government stimulus package, especially the minimum wage increase, and will accelerate inflation to offset the lower oil and commodity prices. However, we see the inflationary trend slowing significantly in 4Q11 and remaining below 4% yoy from the high base last year and stable oil prices (assumption of no severe impact from new economic policies). Thus this will lead the BoT to not feel the need to raise the policy interest rate at their next 2 meetings (19 October and 30 November) when peak inflation will have already topped.
Flat interest rate benefits domestic consumers and investment sector
The interest rate rise and the slowdown in inflationary trend in 2Q11 are directly positive for the consumer sector and investment sector. We recommend accumulating loan sector shares (TCAP & TISCO), auto sector shares (SAT) and consumer shares (BJC), which will benefit from consumer products and auto sector expansion and also the recovering NIM for the rest of this year.