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Published on August 18, 2007

The surprise move to ease money conditions comes amid efforts by the Fed to help banks deal with the current credit crunch and follows its infusions of US$57 billion (Bt1.96 trillion) into money markets in recent days.

The primary discount rate is the rate applied when lending money to the country's commercial banks.

There have been increased calls for the Fed to lower the federal funds rate amid the recent downturn on Wall Street triggered by the concern over a credit crunch resulting from the problems in the US sub-prime mortgage sector.

In its statement, the Fed said "financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward.

"In these circumstances ... to promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility," it said.

It also announced a change to the Reserve Banks' usual practice to allow the provision of term financing for as long as 30 days, renewable by the borrower.

"These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding," the statement said.

The sub-prime fiasco in the US has wide international implications out of fear of spillover effects on the global economy, including Thailand.

Also yesterday, the Bank of Japan injected 1.2 trillion yen (Bt36.5 billion) into the money market in a continued effort to ease the credit crunch caused by the US home-loan market.

Thai authorities, though cautious about developments, said no special measures would be introduced, although companies relying on exports to the US are expected to suffer from lower demand.

Thai companies are currently suffering from the strength of the baht against the US dollar, as well as higher costs.

Some 469 listed companies and property funds posted net earnings of Bt229.4 billion in the first half, down 17 per cent from a year earlier, according to the Stock Exchange of Thailand.

For the second quarter alone, they posted a combined net profit of Bt114.58 billion, down 10 per cent from the same period last year.

Although they represent a tiny part of corporate Thailand - with about 60,000 companies in all - they are the country's biggest enterprises.

Of the 469 companies and funds, 367 reported a net profit while the remainder were in the red.

"The disappointing net profit for the first-half period could be ascribed to higher costs coupled with lower foreign-exchange gains due to baht appreciation.

"In addition, banks in the period had to set aside provisions to comply with International Accounting Standard 39," stock exchange president Patareeya Benjapholchai said.

Sales revenue in the period, however, rose by 5 per cent year on year to Bt2.86 trillion.

Net profit of companies on the SET 100 accounted for 90 per cent of the total net profit, down 13 per cent year on year.

The resources sector was the best performer. Its companies recorded a combined net profit of Bt105.45 billion, down 8 per cent from the same period last year.

Real estate posted the second-highest net earnings, to the tune of Bt41.18 billion, up 29 per cent.

The results confirmed difficulties that most companies faced in the first half.

Many small- and medium-sized enterprises reported losses. Thai Silp South East Asia Import Export shut down in July on continued losses, while listed Union Footwear discontinued business, foreseeing no future in footwear.