August 2008
Markets & Economic Overview
The SET Index fell by more than 11% in sterling terms in July, on heightened domestic political
uncertainties, inflationary concerns and persistently weak US economic and corporate data.
Economic indicators were mixed: despite healthy external trade in June, consumer confidence
fell to a record low. In July, inflation rose to a fresh decade-high of 9.2%. In response, the
Bank of Thailand raised interest rates to 3.50%, while it lowered its forecast for GDP growth
to 5.8%. The government also cut fuel prices and will subsidise transport costs and certain
utilities for the next six months in a widely-criticised inflation-relief package worth 46bn baht.
Meanwhile, the political temperature continued to rise with the conviction of former house
speaker Yongyuth Tiyapairath for vote-buying, court cases against several cabinet ministers and
ongoing anti-government protests, as well as border problems with Cambodia.
Portfolio news
In July, there were no major changes to the portfolio.
In corporate news, second-quarter profits were generally solid: PTT Exploration and
Production's profits grew 82% year-on-year, supported by higher selling prices and growing
volumes, while Kasikornbank and Siam Commercial Bank were aided by healthy interest and fee
income business. Conversely, Siam Cement was hurt by cost inflation.
Strategy and outlook
Local equities are likely to continue to be affected by domestic economic pressures and
ongoing political tussles. Political uncertainty has weighed heavily on the baht, which was
among the worst performing regional currencies over the past three months, despite central
bank's intervention. Nevertheless, valuations in the equity market have fallen to attractive
levels and we will look to add to our holdings opportunistically.
Source: Monthly Factsheet Aberdeen Asset Managers Limited