34
Classification: Confidential (C-3) Monthly Economic Insight Prepared by TMB Analytics Date: 15 September 2017
Classification: Confidential (C-3)
Monthly Economic Insight
Prepared by TMB Analytics
Date: 15 September 2017
Executive Summary
▪ Global economic outlook was brightened up by strong growth among large economies leading
by China, US, EU and Japan. Additionally, the China services sector also showed sign of faster
pace of expansion from upbeat PMI index and bolstered hopes for rising consumption.
▪ In July, Thai economy showed a further sign of recovery, buoyed by growing export of goods
and improving private demands.
▪ Private consumption continued to expand moderately, supported by strong growth in durable
consumption. Private investment growth eventually turned positive after continual improvement
in business sentiment since the beginning of the year.
▪ July exports continued expanding at 10.5% mainly due to trading partners’ economic recovery.
For the fist seven months of 2017, it grew by 8.2%, the highest growth rate in 6 years. Export
to all markets expanded constantly, and most of export products registered positive growth. In
particular, vehicles (passenger car) returned to positive growth this month.
▪ TMB analytics, however, revised up 2017F export growth to 5.8%. On import side, it jumped by
18.5% in July. For the first seven months it grew by 15.5% owing to an increase in both energy
and export-related products. Therefore we revised up import growth to 11% this year.
-2-
Executive Summary
▪ Manufacturing product increased 3.7%yoy in July, mainly products from food, auto-part,
electronic part and rubber product. Import raw material rose, show a good sign in chemical,
plastic, computer and electronic part.
▪ July 2017, foreign tourist arrivals were 3.08 million (+4.8%yoy), led by visitors from China,
Malaysia, Laos, Korea and India. 7M17, arrivals were 20.4 million (+4.5%yoy), contributed
THB 1.03 trillion (+6.1%yoy), achieved 58%of target. Geopolitical risk seem less affected
as occupancy rate keep rise to 63.7%.
▪ August inflation rate remained subdued at 0.32%. The uplifted price level from higher
energy price was weighed down by drop in fresh food prices as agricultural production
massively expanded.
▪ Year-to-date, Thai baht appreciated against the USD by 8.5% (strongest in Asian) due to
roaring geopolitical risk over Korean peninsula and fading chances of Fed’s rate hike in
December. However, major central banks could start to tighten monetary policies, starting
from December which could boost fund outflows from Thailand . In near term, the dollar is
expected to trade within ranges of 32.80-33.30 THB/USD for the rest of 2017.
▪ TMB Analytics revised 2017 GDP growth up from 3.3% to 3.5% from better export outlook
and project 2018 GDP growth to be 3.8% driven mainly by export goods and services. -3-
Classification: Confidential (C-3)
Economic Updates
Updates on Global Economy
Updates on Thai Economy
Classification: Confidential (C-3)Classification: Confidential (C-3)
Global Economy
-6-
EU Political Uncertainty
Delayed
Trumponomics
CB Ready to
Tighten Policy
Robust Thai
Economic growth
EM Fund Flows
THB
IN OUTIN
Bullish Bearish
Likelihood
Severity*
Low High Medium
Source: TMB Analytics
*Impact to financial market
Medium
IN
What Does Matter in 2017: Key Events to Keep Eyes on
1H2017 2H2017
UK trigger Article
50 German
Election
French
Election
-7-
Theresa May
failed to win
majority in
parliament (317/650 seats)
UK
ElectionItaly
Election
1Q2018
“Bye Bye EUSee you (Softer)Hard Brexit”
“En Marche!” (Forward!)
“Progressive Movement”
Emmanuel Macron beat Marine Le Pen in presidential election
and won 350/577 seats in parliament
Angela Merkel’s
CDU/CSU* party is
expected to win
39% of Bundestag
seats according to opinion polls
5 stars movement
party is losing popularity
Dutch
Election
Mark Rutte beat
Geert Wilders,
destroyed hope for Nethexit
*CDU = Christian Democratic Union of Germany
*CSU = Christian Social Union in Bavaria
Lessening Concerns Over German Election
September 24
-8-
Funding
Source: Bloomberg, ING, GovTrack, RealClearPolitics, FlatIcon, CBO, Wikipedia, and TMB Analytics
“39% of R-Congress are very Conservative … They will oppose my great plans !!!”
Trumpcare
Delayed!!
Tax Reform Infrastructure
Will also be Delayed!!
+0.3 Trillion USD over 10 years
Border
Adjustment Tax
-1 Trillion USD over 10 years
-1.2 Trillion USD over 10 years
+1.0 Trillion USD over 10 years
Trumponomics Likely Brings Disappointment This Year
Trump’s great stimulus plan timelines will be extended longer than market’s expectations as Healthcare reforms was delayed indefinitely.
Classification: Confidential (C-3) -9-Source: Fed, ECB, BOJ, Bloomberg, CEIC, and TMB Analytics
1.0
3.0
5.0
7.0
9.0
11.0
13.0
15.0
Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
Fed B/S
ECB B/S
BOJ B/S
Trillion USD
Fed QE
Fed Tightening & Balance sheet reduction
BOJ QE
ECB QE
Dec-17
4.37
Trillion USD
4.40
Trillion USD
4.5
Trillion USD
Global B/S have been Swollen by Quantitative Easing
-10-Source: Fed, BoJ, ECB, Bloomberg and TMB Analytics
Short-term rate: Fed Fund
Dovish Hawkish
Short-term rate: Refin RateDovish Hawkish
Short-term rate: PR-BalancesDovish Hawkish
2H/2017 1H/2018 2H/2018
FED
BOJ
ECB
1 Rate Hike 1 Rate Hike 1 Rate Hike
Start B/S run-off
$ -10 bn $ -20 bn $ -30 bn $ -40 bn $ -50 bn
0 Rate Hike 0 Rate Hike 1 Rate Hike
Start QE Tapering
EUR 60 bn EUR 40 bn
0 Rate Hike 0 Rate Hike 0 Rate Hike
Start QE Tapering
JPY 80 Trillion / year
EUR 20 bn
JPY 60 Trillion / year JPY 40 Trillion / year
ECB’s QE Tapering “Judgement Day” in October
“Real Game Changer”
-150
-100
-50
0
50
100
150
200
250
300
25
30
35
40
45
03 0 05 0 0 0 09 10 11 1 13 1 15 1 1 ›
›
Monetary Base
Fed QE Induced Significant Foreign Net Inflows to Thai Market
Source: TMB Analytics, As of June 2017 -4-
-100
400
900
1,400
1,900
2,400
2,900
09 10 11 1 13 1 15 1 1
0
1
2
3
4
5
6
03 0 05 0 0 0 09 10 11 1 13 1 15 1 1
-40
-20
0
20
40
60
80
100
120
03 0 05 0 0 0 09 10 11 1 13 1 15 1 1
Fed to Shrink Balance Sheet & Hike Rate Without QE, Foreign Fund Flows Decrease
Fed’s Balance Sheet (LHS)
Trillion USD %
Fed Fund Rate (RHS)
Plateau Accumulated Foreign Net Inflows
Billion Baht
Net Foreign Fund Flows
‘1 ‘1
THB Strengthened During Fed’s QE period
USD/THB (LHS)
Billion Baht
Net Foreign Inflows
since 2009
QE
Tapering
QE
CA (RHS)
Billion Baht
‘1
-11-
-100
-50
0
50
100
150
Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17
ST Bonds (TTM < 1y) LT Bonds Net Equity Foreign Flows
-12-Source: Bloomberg, CEIC and TMB Analytics, As of Sep 2017
bn.THB
Allocations move from
DM to EM; debt to
equity as Brexit and Fed hike delay
EM outflows
from fear of
trade protectionism
Inflows to EM
from unclear Trumponomics
YTD Net Inflows = 282 bn. THB
Equity = 6.3 bn. THB (2%)Bond = 276 bn. THB (98%)
-5
5
15
25
35
45
South Korea China Indonesia Thailand Phillippines Malaysia
Equity Bond
bn.USD
Thailand
If Bond Rout is Coming … Risk of Fund Flow Reversal ? Foreign fund continuously flows into Thailand as US election reflected higher risk appetite
Asian Bonds: The dearest destiny of “Foreign” Investors
10
38
0
10
20
30
40
015 01 2017YTD
%Bond Outright Trading Activity
Fading’s Fed’s Hike probability
-13-
G-4
ASEAN
Real Yield(Nominal Yield)
1.3%(1.5%)
Source: Bloomberg and TMB Analytics
Attractive Local Real Yield*: One of Culprits for Strong Baht
East Asia
*Real Yield = Nominal Policy rate - Inflation
Thailand real interest rate is exceptionally higher than Asian and G-4 countries which make Thai
Baht a newly proclaimed “Safe Haven of Asia”
0.9%(4.8%)
0.2%(3.0%)
0.6%(1.4%)
-1.0%(1.3%)
-0.6%(3.0%)
0.0%(1.5%)
-0.4%(1.3%)
-0.5%(-0.1%)
-1.7%(-0.4%)
Real Yield(Nominal Yield)
Real Yield(Nominal Yield)
Real Yield(Nominal Yield)
-14-Source: Bloomberg, CEIC and TMB Analytics
Demystify the Movement of Thai Baht with Balance of Payment
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
-40000
-30000
-20000
-10000
0
10000
20000
3/13 9/13 3/1 9/1 3/15 9/15 3/1 9/1 3/1
CA FA BOP
But, in fact “BoP” governs the THB’s trendGenerally, Dollar Index could explain THB’s moves
29
31
33
35
37
950
1000
1050
1100
1150
1200
1250
3/13 3/1 3/15 3/1 3/1
BBDXY (LHS)
THB (RHS)
Index
Correlation = 89%
Million USD
THB
Changes in THB from previous quarter (RHS)
*Bloomberg Dollar Index (BBDXY) captures performance
of 10 leading global currencies vs. US dollar, weighted by
share of international trade and FX liquidity
-2.0
-1.0
0.0
1.0
2.0
3.0
-10
-6
-2
2
6
10
14
-15-
THBBillion USD
BoP = Net Demand for THB
Net
Export
Goods
16%
Net
Export
Services
33%
Foreign net
buy 10%
FDI 10%
Thai net buy
18%
TDI
13%
Q1/2017 Source: BoT, CEIC, MoC and TMB Analytics; as of Sep 2017
2018 Outlook
Surplus
Deficit
Continual expansion of Thai tourism
Increasing EPS growth of listed firms
EEC, BOI attract more investment
No More Robust Trade Surplus
Brightening outlook of Foreign Investment Fund Industry
Growing economy lures more investments from Thai firms
Going Forward: Rising Balance of Payment Is Expected
BoP typically governs
THB’s direction
31.5
32.5
33.5
34.5
35.5
36.5
37.5
De
c-1
6
Ja
n-1
7
Feb
-17
Ma
r-1
7
Ap
r-1
7
Ma
y-
17
Ju
n-1
7
Ju
l-1
7
Au
g-1
7
Se
p-1
7
Oct-
17
No
v-1
7
De
c-1
7
Source: CEIC and TMB Analytics; as of Sep 2017 -16-
Fed hiked policy rate by
25bps and planned to raise the rate 75bps in 2017
Domestic Fundamentals Lessen External Impacts
33.30period-end
1 Fed Hikes and
B/S reduction in December 2017
1 Hikes & Robust Thai Economy
CBs’ Aggressive & Trumponomics
1 Fed Hikes and ECB Hike in 2018
+Pro-growth agendas pass congress
Likelihood Severity*
Pro-growth US Agendas
CB’s Tightening
Cycle
Robust Thai economy
Geopolitical Risks
EM Risk-Off
Likelihood Severity*
Low High
High High High
Medium
Low
High
High
Medium
Macron won
French election
ECB’s
unintentionally
signalQE tapering?
Trump started presidency term
Fed hiked
policy rate by 25bps
*Impact to financial market *Impact to financial market
Strong
THB
Weak
THB
-17-
Stronger Fundamental Self-Support Currencies Against USD
Prolong above-2% inflation will support the GBP.
But sell-off from “NO Deal” risk and dovish BOE
could push the pair below 1.25 USD/GBP
GBP/USD
1.291.301.301.25Next 4 quarters
4Q173Q172Q171Q17TMB Forecast
USD/CNY is expected to fluctuate around 6.80
yuan per USD as PBOC lets the pair to move
according to actual transactions
USD/CNY
6.656.556.786.89Next 4 quarters
4Q173Q172Q171Q17TMB Forecast
Stronger EU economy will gradually boost the
EUR, expected to stay above1.15 USD from
faded political rout and hopes for ECB tapering
EU disintegration,
banking problems
Less political risks
& ECB tapering
EUR/USD
1.191.171.141.07Next 4 quarters
4Q173Q172Q171Q17TMB Forecast
Global “risk-on” abandons JPY haven in 01 . the
pair is expected to stay around 110-115 while
dovish BoJ could suppress JPY’s rise in H1
Risk-On & yield
curves steepen
Weak US data &
risk-off market
113111112111Next 4 quarters
4Q173Q172Q171Q17TMB Forecast
USD/JPY
Brexit with No Deal,
Rate cut, More QE
Stronger economy &
no QE extension
Reserve outflows &
waning economy
Stable FX policy &
Improving economy
Source: CEIC and TMB Analytics; as of Sep 2017
Factors to Monitor Factors to Monitor
Factors to Monitor Factors to Monitor
70
101
178
6.4
6.8
7.2
7.6
0
50
100
150
200
01 01 019
Average 5YCorporatebond yield
-18-Source: Bloomberg, PBOC, TradingEconomics and TMB Analytics; as of Aug 17
China Corporate Debt: Napping Black Swan
Rollover Risk Looms As Cost of Funds RiseCorporate debt is absurdly high (156% of GDP)
%to GDP
-500
500
1,500
2,500
3,500
Jan-16 Jul-16 Jan-17
Shadow loans MoMBank loans MoM
Could PBOC tame shadow loans rampages?
Billion Yuan
3
24
0
5
10
15
20
25
30
00 009 010 011 01 013 01 015 01
Trillion Yuan
Shadow banking loans keep swelling up
Billion Yuan
Yearly amount due
on Corporate Bond
rated AA- or lower
Shadow loans = 13% of total debt
%
100162
73 85
160
257
0
100
200
300
400
500
600
00 01 01 01
Corporate Debt Household Debt
Bank Debt Government Debt
Private
Corp.
53%
SOE
109%
0.6
0.8
1
1.2
1.4
1.4
1.5
1.6
1.7
1.8
Jan-16 Jul-16 Jan-17 Jul-17
Russell 3K Value/Growth (LHS)
UST10Y-UST2Y (RHS)45.0
50.0
55.0
60.0
Jan-15 Jan-16 Jan-17
EU_Services_PMI
EU_Mfg_PMI
-19-
▪ New US government
policies create more
volatility to economic
projections
▪ Subdued inflation could be
persist until consumer
spending grows stronger
▪ Economy is projected to
expand 2.0% in 2017 from
1.6% in 2016
United States Eurozone
Activity
3.0%QoQ SAAR Real
GDP 2Q17
Price
1.7%YoY SA CPI
July 17
Labor Mkt
4.4%Unemployment
Rate Aug 17
▪ UK economy keep growing,
amid lessening economic
ramifications from Brexit
▪ Expansions among
manufacturing and service
sectors sustain EU’s growth
▪ Growth in 2017 is expected
to be around +1.9% better
than +1.6% in 2016
EU Activity
2.3%YoY SWDA GDP 2Q17
UK Activity
Industry
Latest Releases Latest Releases
Source: Bloomberg, and TMB Analytics’ projection
1.7%YoY SWDA GDP 2Q17
57.4EU Mfg. PMI
Aug 17
Fading Reflation: Flattening yields curve Steady Expansions in EU Mfg. and Services
Solid Growth Momentum Among Developed Economies
(%)
↑ Expansion
↓ Contraction
Trump’s
Victory spark
Reflation trades
Fading
Trumponomics
= Dying Reflation
+0.8%
+4.9%
-8%
90
95
100
105
110
Jan-17 Apr-17 Jul-17
Nikkei225
TOPIX
USDJPY
-20-Source: Bloomberg, and TMB Analytics’ projection
▪ Economy is likely to
sustain above 1.0%
expansion in 2017
▪ Inflation and consumer
spending gradually improve
▪ Recently, strong Yen could
hamper rising trend of
inflation and hurt Japanese
exporters’ profit margin
Japan China
Activity
2.5%YoY NSA
GDP 2Q17
Price
0.5%YoY SA Core
CPI Jul 17
Export
13.4%YoY NSA
July 17
▪ GDP is likely to grow by
6.3% in 2017 where growth
story still broadly unchanged
▪ Rebound in industrial sector
galvanize rising profits and
debt-repayment ability
▪ Inflation picks up, eases
concern over economic
growth
Activity
6.9%YoY Real
GDP 2Q17
Price
1.8%YoY CPI
Aug 17
Production
52.7Caixin Services
PMI Aug 17
Higher profits reflects higher producer prices
Latest Releases Latest Releases
Strong Yen punishes prospects of exporters
Stabilizing Asian Economies Amid Strengthening Currencies
(%)(%)
Rebased at 100-8.0
-4.0
0.0
4.0
8.0
-40
-20
0
20
40
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
China Industrial Enterprises total profits yoy
China PPI YoY
Thai Economy
6.6
8.0
3.13.3
1.81.6
5.1
2.0
7.2
5.1
3.2 3.2
2.2
3.8
4.9
2.2
GDP 2560E
GDP 2561F
3.5%
3.8%
Thai Economy is Expected to Expand 3.8% in 2018
Source: NESDB, CEIC and TMB Analytics -22-
USD 5.8
USD 4.8
5 20 50 60 15 20 55 15
%Share to GDP
PublicInvestment
ExportServices
PrivateConsumption
ExportGoods
PublicConsumption
PrivateInvestment
ImportGoods
ImportServices
Note: Forecasted as of September 2017
Growth
%YoY
Contribution to GDP
USD 11.1
USD 6.6
1.6 2.3 0.4 0.33. 0.62.00.6
GDP
2018
3.8%
65
70
75
80
85
-30
-20
-10
0
10
20
Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
Services Durable Cons Confidence (RHS)
%yoy Index
Private Investment Growth Finally Turned Positive
Source: BOT, OAE and TMB Analytics
▪ Overall private consumption continued to expand
especially the durable goods, even though
consumption of semi-durable i.e. textile and
clothing, contracted. Consumer confidence
slightly dropped due to concerns on agricultural
price outlook.
▪ Farm income growth became negative as
increase in agricultural production was
overwhelmed by decrease in the price.
▪ Private investment turned positive for the first
time this year mainly from equipment investment
consistent with improving business sentiment.
Continually Strong Growth in Durable Consumption Positive Private Investment Growth
Drop in Farm Income from Strong Price Plunge
44
47
50
53
-4
-1
2
5
Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
Private Investment Biz Sentiment (RHS)
%yoy Index
-30
-15
0
15
30
45
Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
Price Quantity Farm Income
%yoy
-23-
-24-Source: Ministry of Finance and TMB Analytics
Expect Public Investment to grow 7% in 2017
Capital Budget Disbursement RateCapital Budget Disbursement
▪ In July, investment budget recorded further decelerating disbursement mainly due to slow
disbursement of mid-year budget. However, the total investment disbursement of the first
10 month of FY2017 still edged up 4%yoy.
▪ We expect the mid-year budget to be disbursed more rapidly in the rest of the year which
will support the public investment to grow 6.6% in 2017
Note : data include Mid-year budget since Apr 2017
10,000
20,000
30,000
40,000
50,000
60,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
015 01 01
51
0
20
40
60
80
100
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
FY2015
FY2016
FY2017
FY2017 Target87%
Million THB
-25-Source: Ministry of Finance and TMB Analytics
Expect Public Investment Growth 7% in 2017
Capital Budget Disbursement RateCapital Budget Disbursement
▪ In July, investment budget recorded further decelerating disbursement mainly due to slow
disbursement of mid-year budget. However, the total investment disbursement of the first
10 month of FY2017 still edged up 4%yoy.
▪ We expect the mid-year budget to be disbursed more rapidly in the rest of the year which
will support the public investment to grow 6.6% in 2017
Note : data include Mid-year budget since Apr 2017
10,000
20,000
30,000
40,000
50,000
60,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
015 01 01
51
0
20
40
60
80
100
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
FY2015
FY2016
FY2017
FY2017 Target87%
Million THB
11.54.8
60.963.7
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Dec-1
4
Ma
r-15
Jun
-15
Se
p-1
5
Dec-1
5
Ma
r-16
Jun
-16
Se
p-1
6
Dec-1
6
Ma
r-17
Jun
-17
Growth of No. of Tourists (%yoy)
Jul'17Jul'16
+142k
Occupancy Rate (%)
2.95
3.0873k
21k 11k 5k 7k 16k 2k 3k 3k
+8%
+5%+1% +1% +6% +12% +2% +24% +4%
Ju
l'1
6
Ch
ina (
30
%)
Ea
stA
sia
(Ex
cl.
Ch
ina)…
AS
EA
N (
25
%)
Eu
rop
e (
15
%)
Am
eri
ca
s (
4%
)
So
uth
Asia
(5%
)
Mid
dle
Eas
t (4
%)
Afr
ica
(1
%)
Oc
ean
ia (
3%
)
Ju
l'1
7
Jul'16
Million
Million
Jul'17
Ch
ina
(30%
)
Source: Department of Tourism, BOT, and TMB Analytics
▪ During the month of July, 2017, number of foreign tourist arrivals were 3.08 million (+4.8%yoy), led by
visitors from China, Malaysia, Laos, Korea and India.
▪ For the seven-month period, arrivals were 20.4 million (+4.5%yoy), contributed THB 1.03 trillion in
earnings to tourism and related businesses, up 6.1%yoy. We target about 37 million tourists this year.
▪ Geopolitical risk seem less affected to Thai tourism sector as occupancy rate be able to rise to 63.7%.
*Note:± x % represents the growth of tourist arrival (yoy)( %) represents the share of tourist arrivals
Continued Recovery In Tourism Sector
+4.8%
-26-
Number of Tourists (Mill people)
2.95 3.08
-6.7%
+2.8%
Arrivals Be Able To Stand At 3.08 Mill, Up 4.8%yoy Broad-Based Expansion In Foreign Tourist Aarrivals
-27-
-28-
-29-
-30-
Manufacturing Production Picked Up from Domestic Recovery
80
85
90
95
100
105
Jan-14 Jan-15 Jan-16 Jan-17
Diffu
sio
n In
de
x
BA
DG
OO
D
▪ MPI increased 3.7%yoy with capacity utilization rate 60.2% in
July, mainly products from food, autopart, electronic part and
rubber product.
▪ Import raw material goods show improving in chemical, plastic,
computer and electronic part.
▪ However, entrepreneurs sentiment still weak due to concern with
regional economic and flood in northeastern area.
Manufacturing Product Index (MPI)
Negative gr.( MPI < 0%)
Low gr.( 0%<MPI < 3%)
Moderate gr.(3% <MPI<5%)
High gr.(MPI > 5%)
Source: OIE, BOT, FTI, classified industry group and calculated by TMB Analytics
-50
-30
-10
10
30
Jan-14 Jan-15 Jan-16 Jan-17
%Y
oY
Fuel Industry
Industry Indicator
II.Industrial Confidence
I.Raw Materials ImportJul-17
Q1 Q2 Jun July (%MoM,sa)
Capacity Utilization Rate (%) 100.0 60.0 62.6 59.1 61.4 60.2 1.0
Manufacturing Product Index (MPI) (%YoY) 100.0 1.6 0.3 -0.1 -0.3 3.7 1.1
Food 15.3 2.7 2.8 4.9 4.8 10.4 5.6
Vehicle 11.8 2.2 -4.8 -2.3 -1.0 2.8 -2.6
Electronic/Computer & Parts 11.2 2.7 13.9 9.4 10.7 6.8 -2.3
Autopart 9.8 -1.0 -3.2 3.9 7.8 21.1 1.0
Fashion Products 9.8 -2.8 -5.4 -6.2 -8.3 -5.8 -4.1
Steel Products 5.9 5.3 8.8 -11.0 -14.0 2.2 7.0
Rubber Products 5.8 -0.7 -2.6 5.3 5.5 17.2 -2.1
Construction Material 5.6 -0.9 -1.2 -2.7 -1.4 -11.1 -3.4
Electronic/Electric Home Appliance 4.3 15.1 -2.6 -6.9 -18.9 -16.4 -3.4
Beverage 4.0 -0.2 -1.7 -6.8 -5.7 11.6 4.2
Petroleum 3.3 2.4 -0.2 7.5 13.2 1.8 -2.7
Plastics Products 3.1 4.2 -2.6 -1.7 -4.3 0.5 1.7
Papers & Printing 2.7 5.2 -1.2 1.7 4.8 -0.5 -3.1
Furniture and Household Products 1.8 -17.3 -2.0 -5.9 -6.4 -22.5 -19.9
Chemical 1.6 0.5 -1.5 -0.0 -2.1 0.4 0.0
Healthcare 1.3 -1.2 13.4 3.9 5.6 0.1 -1.0
Consumer Goods 1.3 1.1 -5.0 -7.2 -7.1 -1.4 -0.2
Tabacco 1.1 -9.2 -5.0 -9.1 -11.7 16.9 0.9
Agri.Machinery 0.1 5.8 -14.9 1.4 21.1 -26.9 -32.4
(%)
Weight2016
2017
Expect Rate Normalization in 2018 and 1.50% Policy Rate in 2017
Source: MOC, CEIC and TMB Analytics
Headline Inflation Stands above Zero for 2 Consecutive Months
Policy Rate is Expected to be Held at 1.50% as Inflation Remains Low
Subdued Inflation from Large Agricultural Production
▪ August inflation remained subdued due to low
prices of fresh food which was caused by
large agricultural production. Energy price
continued to increase as global energy price
rose.
▪ We expect higher inflation rate in later half of
the year and averaged at 0.7% in 2017 from
increase in energy price.
-31-
%yoy
Aug 2017 0.3%
Avg 2016 = 0.2%
▪ Policy rate is expected to be maintained at
1.50% throughout 2017 to accommodate
economic recovery especially private investment.
Moreover, inflationary pressure remained low.
▪ We expect the rate normalization to begin in
2018 as global interest rate is on an upward
trend following 3 expected fed rate hikes in 2017.
However, there is still concern over recovery of
private investment, which can delay Thai rate
normalization.
%
1.45
2.62
1.0
1.5
2.0
2.5
3.0
15Q1 15Q3 16Q1 16Q3 17Q1 17Q3
TGB2YTGB10Y
Source: MOC, CEIC and TMB Analytics -32-
% TMB’s Projection
0
1
2
3
4
5
15Q1 15Q3 16Q1 16Q3 17Q1 17Q3 18Q1 18Q3
2017 Policy Rate: 1.5%
%
2018 Policy Rate: 2.0%
2017 TGB 2Y: 1.45%
2017 TGB 10Y: 2.62%
Policy Rate will Reach 2.0% in 2018 amid Global Tightening Cycle
TGB yields will gradually rise as BoT hike rate
2018 TGB 2Y: 1.86%
2018 TGB 10Y: 3.05%
33
1.4
2.1
2.9 3 3
3 3
1.52
2.252.5
2.75
33.253.25
0
1
2
3
4
5
6
00 00 00 010 01 01 1 1 1 19 0 1 3
0.1-0.1
-0.7
-0.5-0.3
0.00.3 0.3
-1.5
-0.5
0.5
1.5
2.5
3.5
00 00 00 010 01 01 1 1 1 19 0 1 3
Source : Minute of FOMC March 14-15 ,2017 ; Bank of Thailand, TMB Analytics, as of Aug 2017
Federal Funds Rate
Entering rising rate
environment
*Projection of Fed funds rate is from FOMC’s projection as of March 2017
*Projection of Thai policy rate is from TMBA’s projection as of May 2017
Projection%year end
%year end
Thai-US Policy Rate Differentials
Projection
*Thai RP minus US Fed funds rate
▪ Thai economic expansion
leads to rising inflation.
▪ Acceleration in US rate hike
puts pressure on Thai
policy rate as fund outflows
could be intensified
Thai policy rate
Fed funds rate
US policy rate is higher
than Thai policy rate
▪ Thai policy rate uptrend to
begin in 2018
-32-
Brace Yourselves Negative Rate Differential Is Coming!
THANK YOU
Disclaimer
This document is issued by TMB Analytics, a division of TMB Bank PCL. All analyses are based on information available to
the public. Although the information contained herein is believed to be gathered from reliable sources, TMB makes no
guarantee to its accuracy and completeness. TMB may have issued, and may in the future issue, other reports that are
inconsistent with, and reach different conclusions from, the information presented in this report. Opinions or predictions
expressed herein reflect the authors’ views, not that of TMB, as of date of the analysis and are subject to change without
notice. TMB shall not be responsible for the use of contents and its implication.
