Rosy outlook for Thai stocks as global economy shifts

The US dollar weakness has been a key factor driving this correction, which also allows US manufacturing and other export industries to grow faster than before.

According to a US investment bank report, US export growth is now moving closer to that of China, where domestic retail sales growth exceeds that of the export sector.

In addition, there has been a huge transfer of wealth from oilconsum¬ing economies to oilproducing countries due to the high crude oil prices, which set a new record at US$147 (Bt4,974) per barrel last month.

Oil prices last week fell to the $110120perbarrel range due to slowing US consumption.

Gold and other precious metals, meanwhile, have become the gain¬ers due to the dollar weakness, ris¬ing inflation and current global geopolitical tensions.

A stagnant or even declining out¬put of gold and precious metals coupled with stronger investment and jewellery demand has made these commodities relatively cheap when compared to oil.

Several central banks have also increased their gold purchases, with China being among the biggest players as gold currently accounts for just 1.2 per cent of total reserves.

If China adds 1 per cent of its total reserves in gold, that would be an equivalent of 400 tonnes or 10 per cent of annual global demand.

On the sector basis, global agri¬culture appears to benefit from the contracting US economy. The sup¬plydemand balance is now tight.

Demandwise, economic and pop¬ulation growth have been key driv¬ers, coupled with the rise of biofuels in the wake of record crude oil prices.

Supplywise, there has been a decline in farmland, desertification, water shortages and a lack of infra¬structure due to decades of underinvestment.

In addition, inventories of the farm sector have been at multiyear lows.

On global infrastructure, the report estimates that infrastructure investment in emerging markets will total US$2.25 trillion over the next three years due to underinvest¬ment over the past decades.

China, the Middle East and Russia are among the biggest potential investors, with energy, transporta¬tion, logistics, construction, water and sewerage being the priority sectors for new investment.

Rising urbanisation will also lead to an increased domestic demand for services.

As for Asia, the region's leading indicators suggest that a modest economic slowdown is under way.

The report also noted that nega¬tive real interest rates are unsus¬tainable, with most central banks staying behind the curve. As a result, there will likely be more tightening of monetary policy in the near future.

The outlook for equities is posi¬tive in Hong Kong, Indonesia and Thailand due to muted inflation plus a favourable growth outlook.

However, equities in China, Korea and the Philippines are rather nega¬tive due to rising inflation plus eco¬nomic growth slowdown.

As for currencies, the outlook is positive for those of China, Korea and Singapore due to inflation cou¬pled with proactive central banks.