FeTCO expects floods to cut 2011 growth by 1ppt Skip to main content

FeTCO expects floods to cut 2011 growth by 1ppt

The Nation October 13, 2011 6:09 am
FeTCO expects floods to cut 2011 growth by 1ppt

The Federation of Thai Capital Market Organisation (FeTCO) estimates that the severe flooding will cost the economy about Bt100 billion, likely shaving 1 percentage point off gross-domestic-product growth this year.

Speaking at the "Investment Forum" hosted by Tisco Securities and Krungthep Turakij yesterday, FeTCO president Paiboon Nalinthrangkurn said that while damage of Bt100 billion was manageable, close monitoring was vital to check whether the effects spread into other parts of the economy.

"What worries us is that if Bangkok were to be submerged, that would disrupt all economic activity," said Paiboon, who is also chief executive officer at Tisco Securities.
Bangkok contributes 25 per cent of the country's GDP.

Listed companies' earnings growth is also likely to fall below the previously expected 1015 per cent because of the flooding crisis, but not by much, he said. However, this should be alleviated by the planned corporate tax cut to 23 per cent, which was approved by the Cabinet on Tuesday.

Each listed company could make an additional 10percent profit as a result of the tax reduction, which would take overall listed firms' earnings growth to an estimated 20 per cent, more than outweighing the potential effect of the floods on their performance, he added.

Susheel Narula, managing director for research department at Kasikorn Securities, told the forum that listed companies' overall 2011 earnings growth would not likely be affected by the floods, although there could be an impact on one or two quarters.

Early next month, Kasikorn Securities is ready to review its economic forecast, as well as the estimate of listed companies' earnings growth and its targets for the Stock Exchange of Thailand Index for both this year and 2012. The massive economic damage from the floods will be largely felt next year, after repair and restoration work begins, he said.

The floods crisis and the latest European efforts to resolve the euro-zone sovereign-debt crisis will be taken into account in the securities' company's planned forecast revision.

Previously, it estimated the SET Index would reach 1,100 points by yearend, and 1,300 points by the close of next year. Its earlier forecast for 2012 economic growth was 4.5 per cent.

In the next four weeks, the SET Index could witness high volatility, moving in a range of 820950 points, Susheel said. If the index is at 950 points, there could be a risk, he said, suggesting that investors should then sell and reduce their equity portfolio.

The SET Index yesterday added 7.97 points to close at 952.77 points, on turnover of Bt26.54 billion.

The movement of the index will depend largely on the result of the 17country euro zone's meeting in the next four to five weeks, as it has to inform a meeting of the Group of 20 of its conclusion on the capital restructuring of financial institutions on November 34, Susheel said.
In the worst case, if the European Union sovereign-debt crisis were to spread due to no resolution being found, the SET Index would probably drop to 730 points, he said. However, if a suitable resolution were agreed, that would support gradual growth without any economic crisis and investors would not withdraw their money from Asia swiftly.

With the combination of the floods and the economic problems in the United States and Europe, the SET Index is anticipated to undergo continued volatility in the next six months, said Paiboon, adding that it should end this year at 1,000 points, against the earlier forecast of 1,180 points.

Long-term investors could continue holding Thai stocks, he said.

Tanarat Pasawongse, managing director at Hua Seng Heng Gold Futures, said the floods had resulted in less active gold-bar trading, due largely to investors turning their attention to flood relief and the fact that there had been too much speculation on gold.

The domestic goldbar price, which was Bt24,600 per baht weight yesterday, is expected to reach Bt26,000 late this year, said Tanarat. Gold is expected to touch US$1,800 (Bt55,480) an ounce late in the year.

Immediate delivery gold was at $1,687.13 at 11.11am in London yesterday, while gold for December delivery was $1,688.60 on the Comex in New York.



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