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1. KBank Capital Market Perspectives Market Updates
Macro / FX / Rates
Trade balance in July surprised at $2.8bn
25 August 2011
Overview:
• Thailand’s custom-cleared exports surprised on the up side in July while trade balance Nalin Chutchotitham - Kasikornbank
surplus recorded a substantial $2,797.7mn, the largest monthly surplus this year. Exports nalin.c@kasikornbank.com
grew by 38.3%yoy (vs. 16.8% in June) and imports growth was at 13.5%yoy (vs.
26.1% in June). Nevertheless, the export number is partly distorted by the exports of
unwrought gold which was relatively high at $995mn, compared to the H1/2011 monthly
average of $568mn. Still, exports excluding gold were rather robust at 32.1% yoy
growth while the trade balance surplus excluding gold was at $2,572mn.
• Given the high surplus in July, trade balance surplus in 2011 ($6.24bn) had exceeded that
of the same period in 2010 ($5.32bn). This may exert more pressure on the USD/THB to
decline going forward as we continue to expect trade balance surpluses for the rest of the
year, albeit a shrinking one.
• Still, exports in several other categories were relatively high in July and total exports
increased for the third consecutively month (without seasonal adjustments). In particular,
the industrial sector saw an increase of 34.9%yoy and 7.9%mom. Exports in the
electronics and electrical appliances industries expanded by 15.6%yoy and
12.3%yoy, respectively, indicating some resilience of Thailand’s key exports amid the
global economic slowdown. Meanwhile, exports of vehicles and parts rose strongly by
15.6%yoy after contracting by 22.8%yoy in May and rising by a negligible pace of 2.2%
yoy in June. This is in line with the rebound in domestic car sales in June and July,
suggesting that imports of key parts from Japan had resumed. Agriculture sector’s
exports declined slightly from a total of $4,315mn in June to $3,792mn in July (-12.1%
mom) but that still accounted for a gain of 53.5% from the previous year.
• Export to various destinations: Exports to Asia (includes 9 ASEAN economies,
mainland China and Hong Kong SAR, 8 South Asian economies, South Korea, and
Taiwan) continued to experience robust growth at 47.0%yoy in July (Jan-July period at
30.5%yoy). Asia’s market share had also risen to 49.4% of total exports this year
compared to the 47.4% last year. Part of the increase of Asian markets’ share had been
due to the slower pace of growth in exports to the U.S., Japan, and EU (15). Due to the
fact that these countries are experiencing a slowdown this year, their total market share
had declined from 30.6% last year to 29.9% this year.
• Meanwhile, exports to the other potential markets (mainly Australia, Middle East, Africa,
Latin American, Russia, and the rest of EU) rose by 28.4%yoy, also relatively robust
compared to the whole year’s average growth of 14.1%yoy.
Custom Department’s export and import growth Exports and imports value in USD mn
% yoy USD mn
80 22,000
70 20,000
60 18,000
50 16,000
40 14,000
30 12,000
20 10,000
10
8,000
0
6,000
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
Import (% YoY) Export (% YoY) Exports Imports
Source: Bloomberg, KBank Source: Bloomberg, KBank
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2. • Imports in June declined from a high of $19,806.1mn in June to $18,723.4mn in July and
recorded a 13.5% yoy growth due to a relatively high base last year. However, we suspect
that there might be a reduction of inventory building by various businesses, as imports of
raw materials and intermediate goods contracted by 3.7% yoy while the growth of capital
goods’ imports also slowed down to 18.3%yoy pace compared to the January – July
period growth of 25.2% yoy. Nevertheless, imports of consumer goods remained rather
strong at 22.8% yoy, little changed from the average of the first half of the year.
• Since the beginning of the year, Thai baht continued to be under an appreciation
pressure, creating much concerns for the exports sector. However, such pressure did not
show up much in actual appreciation. Thai baht appreciated by a mere 0.3% against the
U.S. dollar since the beginning of year, trailing behind most of the other Asian currencies.
Nevertheless, the baht did appreciate most strongly in the region (after Japan) back in the
year 2010. We suspect that much of the adjustment had been done by exporters last
year, given the more volatile USD/THB movements then. This would bode well for
exports for the rest of the year, although the risks of slower growth in the major economies
had increased.
• Given the affirmation by the Federal Reserve that the fed fund rates would remain at near-
zero for another 2 years and the gradual pace of recovery in the U.S. economy, we
continue to expect the broad-based weakness of the greenback to push USD/THB lower.
However, the continued expansion of domestic economy is likely to help boost imports
growth going forward, inducing a lower trade balance surplus in the coming months. In
sum, we continue to target the USD/THB at 29.00 at the end of this year.
Appreciation of Asian currencies against USD year-to-
Appreciation of Asian currencies against USD, 3 months
date months
INR -3.0% Change against USD, year-to-date INR -1.6% Change against USD, 3-month
THB 0.3% TWD -0.3%
TWD 0.9% IDR 0.1%
MYR 2.6% KRW 1.3%
PHP 3.1% THB 1.5%
CNY 3.4% CNY 1.6%
KRW 3.5% PHP 2.6%
IDR 4.7% MYR 2.6%
JPY 5.0% SGD 3.3%
SGD 6.2% JPY 6.1%
-5.0% -3.0% -1.0% 1.0% 3.0% 5.0% 7.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
Source: Bloomberg, KBank Source: Bloomberg, KBank
Spot gold price in 2011 Monthly trade balance inclusive and exclusive of gold
$/oz USD mn
2000 3500
3000
1900
2500
1800 2000
1700 1500
1000
1600
500
1500 0
1400 -500
-1000
1300
-1500
Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11
Gold prices (LHS) Trade balance (USD mn) Trade balance ex. Gold (USD mn)
Source: Bloomberg, KBank Source: CEIC, KBank
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3. Table 1. Monthly Key Economic Indicators Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11
Manufacturing index (ISIC) 189.6 189.5 188.3 187.0 180.3 182.0 195.7
% YoY -3.4 4.1 -3.0 -6.7 -8.1 -3.7 3.3
Industrial capacity utilization rate (%) (ISIC) 62.4 62.3 59.5 66.1 54.4 58.8 63.6
Retail sales (% YoY) 8.4 9.6 9.0 4.1 7.9 8.4 n.a.
Total vehicle sales (units) 93,122 68,398 77,213 93,008 67,283 55,851 70,259 72,902
Motorcycle sales (units) 167,707 165,152 188,248 191,437 174,244 163,411 205,392
Unemployed labor force ('000 persons) 389 268 268 374 268 276 163
Unemployment rate (%) 1.0 0.7 0.7 1.0 0.7 0.7 0.4
Consumer prices (% YoY) 3.00 3.03 2.87 3.14 4.04 4.19 4.06 4.08
core 1.40 1.32 1.45 1.62 2.07 2.48 2.55 2.59
Producer prices (% YoY) 4.7 6.0 7.4 5.9 6.6 6.2 4.5 5.2
External Accounts (USD mn, unless specified otherwise)
Exports 17,219.0 16,523.0 18,406.0 21,072.0 17,243.0 19,284.0 20,816.0
% YoY 18.6 21.4 29.1 31.0 24.7 17.3 16.4
Imports 15,892.0 17,111.0 16,375.0 19,180.0 17,720.0 19,010.0 18,931.0
% YoY 8.6 31.2 18.6 27.2 26.3 34.4 23.5
Trade balance 1,327.0 -588.0 2,031.0 1,892.0 -477.0 274.0 1,885.0
Tourist arrivals ('000) 1,840 1,810 1,822 1,765 1,506 1,376 1,490
% YoY 9.5 12.8 12.8 22.7 35.9 68.8 56.3
Current account balance 1,750.0 1,090.0 3,823.0 1,881.0 -165.0 -511.0 2,499.0
Balance of payments 2,263 1,689 4,271 1,365 3,570 -2,600 -972
FX reserves (USD bn) 172.1 174.0 179.2 181.5 189.9 186.2 184.3
Forward position (USD bn) 19.6 19.0 17.7 20.8 21.4 23.5 24.4
Monetary conditions (THB bn, unless specified otherwise)
M1 1,302.4 1,326.2 1,346.4 1,345.6 1,347.6 1,396.4 1,337.4
% YoY 10.9 15.5 13.4 13.8 14.0 10.7 13.3
M2 11,776.4 11,817.2 12,152.9 12,280.3 12,481.0 12,575.1 12,610.6
% YoY 10.9 11.5 13.7 13.1 15.2 14.3 16.3
Bank deposits 10,584.9 10,606.3 10,834.2 10,893.1 10,982.1 11,094.3 10,993.3
% YoY 8.7 8.8 10.3 9.1 10.1 8.5 10.1
Bank loans 9,947.0 10,064.5 10,209.7 10,308.2 10,376.2 10,517.7 10,677.6
% YoY 12.6 14.5 15.1 14.9 15.3 15.6 16.1
Interest rates (% month end)
BOT 1 day repo (target) 2.00 2.25 2.25 2.50 2.75 2.75 3.00 3.25
Average large banks' minimum lending rate 6.12 6.37 6.37 6.62 6.75 6.75 6.87 7.13
Average large banks' 1 year deposit rate 1.32 1.51 1.51 1.67 1.86 1.86 2.03 2.16
Govt bond yield 1yr 2.38 2.54 2.68 2.83 3.00 3.15 3.50 3.64
Govt bond yield 5yr 3.26 3.40 3.48 3.41 3.38 3.50 3.78 3.86
Govt bond yield 10yr 3.77 3.85 3.89 3.75 3.70 3.79 3.91 4.02
Key FX (month end)
DXY US dollar index 79.03 77.74 76.89 75.86 72.93 74.64 74.30 73.90
USD/THB 30.06 30.93 30.60 30.28 29.88 30.32 30.73 29.76
JPY/THB 37.01 37.60 37.47 36.42 36.80 37.17 38.13 38.76
EUR/THB 40.23 42.35 42.25 42.86 44.24 43.64 44.56 42.84
Source: Bloomberg
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4. Disclaimer
For private circulation only. The foregoing is for informational purposes only and not to be considered as an offer to buy or
sell, or a solicitation of an offer to buy or sell any security. Although the information herein was obtained from sources we
believe to be reliable, we do not guarantee its accuracy nor do we assume responsibility for any error or mistake contained
herein. Further information on the securities referred to herein may be obtained upon request.
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