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NEWS UPDATES Asean Affairs        30  May 2011

Thailand draws investment

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With so much focus on Indonesia as a vibrant banking market, a presence in Thailand does initially seem like just planting a foothold to complete the regional puzzle.

Many who are not keeping tab on the latest economic developments in Thailand, would regard it as among the more stable countries in the region, representing “the last frontier'' to be explored. But there are fundamental reasons for Thailand to become a more attractive market for banks.

“Thailand is the second largest economy in the region after Indonesia and in terms of per capita income, comes in third after Singapore and Malaysia. It is a market of 60 million consumers just too big to ignore,'' said Subhak Siwaraksa, president and CEO of CIMB Thai Bank.

“Insurance penetration and mutual fund sales as well as stock market activities indicate that there is still room for investments.''

It is a diversified economy with many growth engines and strong foreign reserves of US$185.4 billion.

Last year, 14 million tourists visited Thailand which is also a major commodities exporter. It is home to the leading car manufacturers in Asia, producing 1.5 million cars per year as well as leading auto parts manufacturers.

Despite the political violence last year, the economy grew 7.8 percent and the forecast this year is 4.5 percent. “Following these political troubles, the Thais will usually step back for a while. They do not just charge ahead,'' Subhak observed.

Hwang DBS Vickers Research expects Thai bank earnings growth at 21.4 percent this year compared to 19.8 percent last year, supported by strong loans growth of 10.7 percent; net interest margin to be 5 basis points (bps) wider from interest rate hikes; higher fee income by 13 percent and lower credit cost of 60 bps of total loans.

Comparatively, Thai banks' earnings growth appeared to be the most resilient among Asean banks, with increasing contribution from non-interest income while expenses and provisions gradually tapered down, said Hwang DBS in a recent report.

There are two broad categories of banks in Thailand about 15 locally incorporated commercial banks that can have an unlimited number of branches, and two local retail banks and 20 foreign banks that are limited with one or two branches.

According to Subhak, CIMB Thai itself is expanding with a further 10-15 branches opening in places like Koh Samui and Phuket. It currently has 151 branches in Bangkok and key provincial cities.

“We leverage on our regional presence but innovate to suit the local market,'' said Subhak, referring to the launch of the first Thai structured deposit; AirAsia savings account and preferred banking service model for the mid to upper income segments.

CIMB Thai, which has 2 percent market share in Thailand, is also developing its corporate and investment banking to leverage on the group's achievements, especially in Malaysia, and its technical record.

When it was listed on the Thai Stock Exchange two years ago, CIMB Thai shares were worth only 40 satang (100 satang is one baht) but are currently trading at three baht.

CIMB Thai Bank and its subsidiaries registered a total operating income of 1.5 billion baht (RM163mil) with net profit of 282 million baht (RM30.6mil) for its unreviewed operating results for the first quarter ended March 31.

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This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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