- Commercial banks’ deposits expanded. At the end of the forth quarter, commercial banks’ deposits increased by 7.8 percent compare a contraction of 0.2 percent in the third quarter. Commercial banks’ deposits increased in all accounts type and in all deposit size; especially in fix account, which increase by 12.7 percent compared to an increase of 1.5 percent at the end of third quarter. Demand for bill of exchange (B/E) has shifted to fix saving especially when financial risks are high due to concerns over deteriorating economic condition and savers’ expectation about further policy rate reduction. In 2008, commercial banks’ deposits contracted in the second and third quarter. However, commercial banks’ deposits picked up noticeably in the last two month of 2008 due to deposit transfer from bill of exchange (B/E) as risks increasingly intensified both in financial market and economic condition which caused demand for bill of exchange (B/E) to decline as seen in the deceleration of B/E demand from 190 percent expansion in January to 19 percent expansion in December.
- Business and personal credits continued to expand but at a slower pace. Commercial banks’ credit (include repurchase position with the Central Bank) rose by 18.4 percent at the end of the fourth quarter, accelerated from 14.3 percent at the end of third quarter. The expansion of credits was mainly attributable to (i) the 204.5 percent expansion of repurchase position with the Central Bank and (ii) the 38 percent increase of loans to other depository corporations at the end of forth quarter. These loans activities reflected liquidity management and profit taking by financial institutes regarding higher risks in other business sectors and personal loans. Meanwhile, loans extended by Depository Corporation (include repurchase position with the Central Bank) slowed down from 11.2 percent expansion in third quarter to 9.3 percent at the end of forth quarter; of which business and household credits increased by 11.2 and 8.1 percent respectively. Classified by sectors, loans to all sectors either slowed down or declined except for loans to banking and financial intermediation that increased by 101 percent at the end of fourth quarter, inline with expansion of Commercial banks’ credits. The slowdown in credit extension reflected a stricter loan standard to reduce default risks that usually rise during the period of economic slowdown. Credit card spending contracted significantly and cash withdrawal declined owing to concern over income prospects and purchasing power in spite of deteriorating economic condition and earning opportunities. Moreover, the expansion of credit card outstanding balance slowed down to 5.6 percent. Throughout 2008, credits expanded continuously in the first three quarter before slowed down in the forth quarter that owing to contraction in credits extended towards business sectors.
- Liquidity and excess liquidity in commercial banking system increased at an accelerated rate. Credits (exclude repurchase position with the Central Bank) to deposit (include bill of exchange) ratio decreased by 87.3 percent. This is consistent with 38.1 percent increase in excess liquidity in commercial banking system (estimated as disposable liquidity) which was approximately at 1.14 trillion baht. However, the increase in excess credit was attributable to the expansion of repurchase position with the Central Bank and cautious lending practices as risk management and asset quality evaluation become more sophisticated.
- The ratio of NPLs to credit outstanding slightly declined. NPLs in financial institutions (excluding BIBF and credit fanciers) at the end of forth quarter were at 217.29 billion baht, equivalent to 3.19 percent of total credits. Throughout 2008, NPLs declined continuously and the NPLs ratio stood at 3.95 percent at the end of 2007. However, the delinquency rate (between 1-3 months) increased from 2.7 percent at the end of 2007 to 3.9 percent at the end of 2008.
- Commercial banks’ earning declined. Net profit of commercial banking system was at1 5.1 billion baht, declined by 7.5 billion baht from last quarter. The reduction of commercial banks’ earning was attributable to an increase in reserve for bad debts which is expected to increase during the period of economic down turn. As a result, commercial banks’ expenses, both interest expense and non-interest expense, increased especially reserve for doubtful debts.
- Thai baht depreciated both in nominal and real effective terms. An average exchange rate in the forth quarter was at 34.78 baht per US dollar; depreciated by 3 percent from the third quarter and the same period of last year. Thai baht had depreciated throughout 2008, especially in the last quarter due to trade deficit and low investors’ confidences in economic condition and political unrest. Comparing Thai baht against other currencies, Thai bath appreciated against most of regional currencies but depreciated against US dollar, Japanese Yen, Chinese RMB and Hong Kong dollar but slower depreciated against other regional currencies. Therefore, average nominal effective exchange rate (NEER) and real effective exchange rate (REER) depreciated by 0.6 and 1.34 percent respectively regarding the third quarter.
- Stock market declined continually in line with the contraction in world’s stock markets and deteriorating political conditions. In the fourth quarter, average daily trading value was 12.67 billion baht, increased from average 12.2 billion baht in the third quarter. SET index closed at 449.96 points at the end of the fourth quarter, down from 569.54 points at the end of previous quarter which equivalent to 20.99 percentage drop. Net sale of foreigner investor was recorded at 37.2 billion baht. The volatility of SET index dramatically increased in the fourth quarter especially in mid of October where SET index touch its lowest at 384.15 points due to the worsening global financial crisis that eroded earning of multinational corporations as well as the rising solvency risk. However, SET index technically rebounded in December to 451.72 points as a consequence of window dressing transaction of financial institutions’ and trust funds’ as well as the a more stable political condition. For the whole year of 2008, SET index trended downward and tumbled from 858.10 points at the end of 2007 to 449.96 points at the end of 2008 which equivalent to 48 percentage drop. Average daily trading value was at 15.92 billion baht and the foreign investors recorded a net sell of 162.34 billion baht compare to a net buy of 55.02 billion baht in the 2007. The most critical factors for SET in 2008 were the slowdown in global economic condition and the deteriorating domestic political condition.
- Bond trading increased compare to the fourth quarter last year but declined from the previous quarter. In the fourth quarter, daily average outright trading was at 65.7 billion baht, increased from 47.3 billion baht in the same period of last year but slightly declined from 74.9 billion baht in previous quarter. Net buy of foreign investors recorded at 4.04 billion baht, declined from 8.78 billion baht in previous quarter, which was equivalent to a drop of 54 percent, caused by trading cycle of Thai bond market. Government bond price index increased by 11 percent from previous quarter. Government bond yields declined in all maturity by 150-202 bps comparing the end of last year, especially in long-term maturity bond (1-10 years) due to policy rate reduction in December and investors’ expectation of a further interest rate reduction. In 2008, daily average trading value was at 70.29 billion baht, increased from 42.99 billion baht per day in 2007. Foreign investors had a net buy of 68.37 billion compared to a net sale of 40.27 billion baht; this was partially attributed to the decline in stock market that shifted investment port to bond market. Throughout the year, bond yield movement was volatile due to the expectation of the lower interest rate. In the first half of 2008, bond yield increased inline with an upward trend of policy interest rate and trended downward in the second half of the year. In comparison to previous year, government bond yield of all maturity decreased by 99-225 bps and price index increased by 13 percent.
Capital Flows and Trading values of Foreign Investors ---------------------------------------------------------------------------------------------------
2006 | 2007 | 2008 End of Period Year | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 ---------------------------------------------------------------------------------------------------
- Net Capital Flows (Billion USD) 5.7 | -2.7 | 0.7 | 0.4 | -1.4 | 13.2 | -3.1 | 0.7 | na
---------------------------------------------------------------------------------------------------
- Net value of foreign investors | | | | | | | | in SET (Billion Baht) 55.0 | 30.6 | 66.9 |-2.2 |-40.3 |-13.9 -36.1 |-74.8 |-37.2 --------------------------------------------------------------------------------------------------- - Net value of foreign investor | | | | | | | | in BEC (Billion Baht) 35.5 |-34.2 |-18.7 | 7.9 | 4.6 | 29.1 | 26.5 | 8.8 | 4.0 ---------------------------------------------------------------------------------------------------
- Corporate fundraising decreased from the same period last year, in the fourth quarter private fundraising was at 267.26 billion baht compare to 382.32 billion baht in the same period of last year. Corporate fundraising in the fourth quarter came mostly from an issuance of debt securities (mostly issued by financial sector) which accumulate to 266.78 billion baht, decreased from 344.08 billion baht from the same period last year. Fundraising through equity securities recorded 0.48 billion baht, decreased noticeably from 48.42 billion baht in the same period last year due to worsening market condition and business underperform. Overall 2008, corporate fund raising accumulated to 1,231.91 billion baht, declined from 1,274.75 billion baht in 2007, of which 96.4 percent was fundraising through debt securities issuance, in line with national investment direction.
- The Movement of Oil Price
- World Crude Oil Price : steady declining
In the fourth quarter of 2008, average world crude oil price (Dubai, Brent, Oman and WTI) stood at 55.3 US Dollar/barrel, decreased by 36.6 percent from the same period last year and decreased by 52.0 percent from previous quarter. Oil price continued to decline because of the contraction of world oil demand and economic activities which is a result of widespread economic crisis, as well as high excess production capacity from OPEC and non OPEC countries.
In 2008, average world crude oil price (Dubai, Brent, Oman and WTI) stood at 96.4 US Dollar/barrel, increased by 36.4 percent. Oil prices in 2008 was volatile all year through. Average crude oil price increased by 75.1 percent in the first half while increased by 6.7 percent in the second half of 2008. However, since early of the year 2009 crude oil price began to be stable for average world crude oil price (Dubai, Brent, Oman and WTI) stood at 43.9 US Dollar/barrel, similar to average price level of December 2008 which stood at 42.0 US Dollar/barrel. Also, crude oil price in 2009 tend to be stable than the 2008 price.
- Domestic retail petrol prices: decrease in tandem with world oil price. In the forth quarter of 2008, retail petrol prices decrease due to the declination of both world crude oil price and excise tax in gasohol and diesel under “6 months 6 measures” economic package. (Effective on 25 July 2008 — 31 January 2009) Retail Benzene 95 price was at 29.79 baht per litre, decreased by 6.0 percent in the same period of the previous year. Retail Benzene 91 price was at 26.35 baht per litre, decreased by 14 percent in the same period of the previous year. Gasohol 95 (E10) and 91 price stood at 21.01 and 20.20 baht per litre respectively, decreased by 24.8 and 25.4 percent respectively. High speed diesel and bio-diesel (B5), average price were 22.7 and 21.55 baht per litre respectively, decreased by 20.2 and 21.8 percent respectively. Nevertheless, retail petrol price in the first three respectively quarters was in the high price level therefore the average price for the whole year of 2008 was as follow ; retail benzene 95 was at 35.33 baht per litre, increased by 21.1 percent compared to the previous year., benzene 91 was at 33.43 baht per litre, increased by 18 percent., Gasohol 95 (E10) and 91 price were at 28.97 and 28.16 baht per litre respectively, increased by 10.7 and 9.9 percent respectively., high speed diesel and bio-diesel (B5) were at 31.26 and 30.39 baht per litre respectively, both increased by 21.8 percent.
Crude Oil Price
US$/Barrel OMAN DUBAI BRENT WTI Average 2007 Year 68.75 68.83 72.60 72.64 70.70 2008 Q1 92.34 91.50 96.72 98.03 94.65
Q2 117.75 117.02 112.21 124.02 120.25
Q3 114.16 113.32 116.24 117.85 115.39
Q4 53.21 52.75 56.54 58.89 55.35
Year 94.37 93.65 97.93 99.69 96.41
Jan-09 44.45 44.12 45.02 41.93 43.881-10 Feb-09 44.67 44.30 45.00 39.96 43.48
Source: reuters
Retail Petrol Price
Baht/litre ULG95 UGR91 Gasohol HSD HSD B5
95E10 95E20 91E10
2007 Year 29.18 28.32 26.17 - 25.62 25.66 24.95
2008 Q1 33.39 32.22 29.38 27.47 28.57 29.78 29.04
Q2 38.43 37.26 34.12 32.22 33.29 36.35 35.47
Q3 39.72 37.87 31.37 30.05 30.56 36.21 35.52
Q4 29.79 26.35 21.01 19.72 20.20 22.70 21.55
Year 35.33 33.43 28.97 27.37 28.16 31.26 30.39
2009 Jan 30.29 21.99 17.44 16.14 16.64 18.61 17.11
1-11 Feb 34.25 25.65 20.82 19.52 20.02 19.57 18.07Source: EPPO
(Continue to).../1.2 World Economic..