Business urged to spend carefully as liquidity tightens

Speaking at the seminar "How Thai Businesses Get Through The Global Credit Crunch", held by the University of the Thai Chamber of Commerce's School of Business, he said companies should carefully plan their budget spending because financial liquidity in the economic system is becoming tighter.

"Operators should control their spending and investment, together with exploring new financial sources. It is important for them to keep contact with bank officers to secure their access to loans," he said.

Although the Bank of Thailand has reported a Bt1.1-trillion surplus of financial liquidity, Pakorn warned that this would disappear very quickly.

"Blue-chip companies such as Siam Cement Group, PTT and Banpu will shift to mobilising funds from the domestic market instead of borrowing from foreign financial institutions, which are facing a liquidity problem and are offering high interest rates. However, the central bank is expected to release Bt700 billion to Bt800 billion worth of loans, which is the appropriate level for preventing risk for financial institutions," he said.

"Therefore, in a situation of tight financial liquidity, companies with high cash flow will have more opportunity to choose high-return investments with cheaper prices; for example, investment in top-50 listed companies."

Pakorn believes the political chaos will reduce next year's economic growth to 3 per cent in the best-case scenario, although the central bank has indicated the country's economy will grow by between 3.8 and 5 per cent.

"Suvarnabhumi Airport's closure has ruined the entire tourism sector, one of the country's most significant income sources, and created a negative image to the world. I'm not sure whether we can restore foreigners' confidence to visit or invest here in the next five years," he said.

He added that the daily trading value in the SET had also declined significantly, from Bt16 billion to less than Bt10 billion.

"I believe stock investment will remain in a downturn until the political situation has stabilised," he said.