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Published on November 6, 2007

Seventy-five per cent of executives from 110 listed companies believe the economy will recover within six months of the general election, according to a Stock Exchange of Thailand survey.

However, their major concern is that profits will be squeezed as they cannot hike product prices despite increases in the cost of raw materials, Kobsak Pootrakool, executive director of the SET's Research Institute, said yesterday.

Steep falls in Wall Street and regional stock markets sent Thai shares into a tailspin yesterday. The SET Index lost 2.4 per cent at 872.86 on selling pressure in blue-chip energy and bank stocks. Hong Kong's Hang Seng took the hardest blow in the region, diving 5 per cent.

Buoyed by a belief of greater political stability, more than 75 per cent of the surveyed executives expect the economy to rebound.

The majority of the respondents, who represented eight industries, forecast that the economy would grow at 4.4-4.5 per cent next year, better than their estimate for this year at 4-4.4 per cent.

About 66 per cent of the respondents said they would raise their companies' investments over the next 12 months, 29 per cent would maintain investment levels, and the remainder said they would lower investments.

Kobsak said 76 per cent of respondents reported that borrowing from domestic banks was their preferred means of financing investments, while 64 per cent said they would use their companies' accumulated profit.

He said 20 per cent would raise funds from domestic bond issuance, 16 per cent from capital-increase shares, 10 per cent from foreign bank loans, and 5 per cent from overseas bonds.

Regarding risks to their investment plans, 69 per cent said they were nervous about the domestic economy, 47 per cent were concerned about the political situation, 23 per cent were concerned about foreign exchange, and 19 per cent were worried about rising oil prices.

"Oil prices during the end of the surveyed period were quite stable, so that's why it was the factor of least concern. Oil experts said they believe that the record high oil prices would not last long and it could decline to US$80 [Bt2,720] per barrel over the next two months," he said.

Asked about risks and pressure over prices, 43 per cent of the respondents said product prices in the third quarter of this year were unchanged, 36 per cent raised their prices, while the remainder lowered them.

Kobsak said 48 per cent of respondents said they would not raise their prices this quarter, 40 per cent they would increase their prices, and the rest would lower them.

More than 72 per cent of respondents said the cost of raw materials had risen in the third quarter, 23 per cent said their costs were unchanged and only 5 per cent said their costs had declined.

Kobsak said 78 per cent of respondents believed that the cost of raw materials would go up in the fourth quarter, 17 per cent said they would stay the same and the remainder said they would fall.

"These figures reflect that if listed companies do not adjust themselves, their profitability might be eroded, as the survey showed a high possibility of raw-material price hikes, but they cannot raise their product prices," he said.

"To maintain profitability, listed companies should seek to slim down other costs to cushion the impact on their profits," he added.

"However, over 40 per cent believed that prices would increase and this might push up inflationary rates."

Asked about the exports outlook over the next three months, 47 per cent of the respondents said exports would either get worst or be unchanged, while the rest were more optimistic.

Meanwhile, Pensri Suteesarn, president of the Association of Listed Companies, said 50 per cent of respondents believed the political situation would improve after the December election.

Pensi said 32 per cent were more pessimistic and said the current situation would prevail, while 7 per cent said it would get worse.

Fifty-two per cent expect the government to proceed with mega-infrastructure projects, 44 per cent want the government to stimulate domestic consumption, 18 per cent want the central bank to stabilise the baht, and 12 per cent want the government to stimulate exports.

 The Nation