Govt Doubled Spending / Exports Jumped / Imbalances Feared

Hello, lots of salient items today…
Written on Feb 28, 2013

Government to boost infrastructure spending to THB4 tn:
The government will double its budget for infrastructure plans over the next seven years to THB4 trillion, with the aim of achieving three main national strategies – a shift of a multi-modal transport system; connectivity; and mobility. The addition THB2 trillion would come from the regular fiscal budget and will not have to be borrowed, whereas the first THB2 trillion financed by borrowing won’t make public debt over 50% of GDP, FM Kittiratt insisted. The infrastructure projects would magnify GDP by 1%, create 500,000 jobs, and increase inflation by 0.16% annually, Transport Minister Chadchat concluded.

Exports jumped on industrial recovery:  
Thai exports have returned to normal as factories stepped up their output after recovering from the floods of 2011. The 16.1% surge in Jan was due partly to Japan’s weak yen policy, particularly for Japanese automotive products that are manufactured here. Meanwhile, imports skyrocketed 40.9% yoy, resulting in a trade deficit of USD5.48 billion, the biggest gap since 1991, as robust economic growth at home stimulated demand for foreign capital goods, fuel – mainly processed oil and natural gas – and gold.

Imbalances feared as credit rises:
Thailand’s sharp loan growth since 2011 has worried S&P as the country’s private-sector leverage is already high compared with normally low income levels. “We did not view such rapid credit growth as a risk until now owing to several years of muted growth prior to 2010,” S&P said in a report. “The risk [of economic imbalances] exists especially for Thailand for the next 12 months, if banking-system growth continues to significantly outpace the rise in the country’s nominal GDP”.  

Market view: The SET is expected to spring back today in sync with regional peers, with investors keying into comments from the captain of the Fed that emphasized an ongoing commitment to monetary stimulus. Moreover, last night’s successful bond auction in Italy also helped soothe investor confidence, which was dealt a blow earlier this week by fears of political deadlock following elections. Note that if you’re a student of Dow Theory, it’s telling you to buy now.