December 2008
Markets & Economic Overview
Domestic equities ended flat in sterling terms in November, as a rebound towards the end of
the month made up for earlier losses, the latter a result of the drop in commodity prices and
increased concerns of a deepening global recession.
On the economic front, third-quarter GDP slowed to a three-year low of 4% year-on-year.
November inflation continued to trend downwards as political protests dented domestic
demand and a deceleration in growth worldwide has led the price of food and raw materials
to slump. These events caused October consumer confidence to fall to a one-year low. Export
growth also slowed, owing in part to lower demand for textiles and electronics.
The ongoing political crisis saw anti-government protestors boldly occupy Bangkok’s two major
airports for eight days, forcing operations to shut down and putting the country into further
chaos. However, prime minister Somchai refused to resign.
Portfolio news
There were no major changes to the portfolio in November.
In corporate news, third-quarter earnings were generally within expectations with steady
performances by Advanced Info Service, Big C Supercenter and Siam Makro. Underlying profits
of Hana Microelectrics were satisfactory despite high bad debt provisions, while healthy
underwriting business offset weak investments for Thai Reinsurance and Bangkok Insurance.
Conversely, Siam City Cement’s earnings weakened from sluggish cement sales, while Serm
Suk, Haad Thip, MFC Asset Management and Goodyear were hurt by the unfavourable
operating environment.
Strategy and outlook
Market declines have eased but we remain cautious, as investors have become increasingly risk
averse. In politics, the Constitutional Court found the People Power Party guilty of electoral
fraud and banned both it and executive members from politics for five years. As a result, the
prime minister was forced to step down. Meanwhile, the People’s Alliance for Democracy has
lifted its airport blockade but the damage to tourism and exports may be considerable. As it
is, domestic economic growth is likely to slow in line with global economies, and may be flat
next year according to the finance minister. In a clear sign of deterioration, the central bank cut
interest rates by a greater-than-expected 1% to 2.75% on 3 December.
Source: Monthly Factsheet Aberdeen Asset Managers Limited