TEXT-Fitch: Thailand Still Resilient But Growing Caution

(The following was released by the rating agency)

BANGKOK/SINGAPORE, October 10 (Fitch) Fitch Ratings (Thailand)Limited says Thailand's economic performance has continued toshow resilience to global shocks but slower regional growth andincreasing leverage in the corporate and bank sectors willconstrain ratings.

This was the key message at Fitch Ratings' annual conferencein Bangkok on Wednesday 10 October 2012.

H.E. Kittirat Na Ranong, Deputy Prime Minister and Ministerof Finance was the conference's guest of honor and provided theopening address.

David Riley, Managing Director, Sovereigns, Global Head ofSovereigns and Supranationals from Fitch's London head office,commented that the current juncture is an especially uncertainone for the global economy and for Thailand. There are threemajor risks looming over the global and Thai economy: the USfiscal cliff that would tip the US into recession; the ongoingeurozone crisis; and a potential hard-landing for the Chineseeconomy.

Mr Riley also said that the US fiscal cliff represents thesingle biggest near-term external threat to the global economy.While not Fitch's base-case, if political agreement inWashington cannot be reached before year-end, some USD600bn intax increases and spending cuts would come into effect at thebeginning of 2013 which, if permanent, would tip the US andpossibly the global economy into recession. Despite Thailand'ssolid economic fundamentals and resilience, it would not beimmune to such a shock.

"On Europe, Fitch analysis suggests that Thailand is wellplaced to navigate the global spillover from a furtherintensification of the eurozone financial crisis," ," Mr Rileyadded, "Thailand's financial exposure to Europe is limited andless than many other economies in the region, while its banks,backed by the fire-power of the Bank of Thailand, have soundcapital and liquidity buffers to absorb turbulence in globalfinancial markets."

Over the medium-term, China's economy is expected to becomeless reliant on investment and exports. This createsopportunities and challenges for China's trading partners,including Thailand, to re-orientate their exports towardsconsumption in China.

Mark Young, Managing Director, Financial Institutions andHead of Bank Group Asia Pacific from Fitch's Singapore regionaloffice, said that emerging Asia, and in particular, greaterChina has seen rapidly rising leverage which, together withgreater economic exposure to China, means the region is moresensitive to the risks originating out of China. As aprogressively weaker operating environment in Asia Pacificexposes potential structural weaknesses, this is leading togreater caution in the region and rating pressure on banks, inparticular, China and India. "Thai banks would not be immune tothese risks, but credit fundamentals look more stable for theirexisting rating levels. Non-performing loans are at nearhistorical lows and comfortable absorption features exist. Briskcredit growth and tighter funding indicators are areas tomonitor," Mr Young noted.

Lertchai Kochareonrattanakul, Senior Director, Corporates,Head of Corporates, Fitch Ratings (Thailand) Limited said thatThai and regional oil and gas companies have been more active inacquisitions and investments to cope with robust demand.However, the impact on the ratings has so far been limited, dueto their solid balance sheets and close rating linkage withsovereigns. Although large acquisition and high capex havepressured PTT's standalone credit profile, PTT's ratings remainintact, supported by a one-notch rating uplift for implicitstate support.

A roundtable discussion by Dr Pailin Chuchottaworn,President and CEO, PTT Public Company Limited; Mr ChartsiriSophonpanich, President, Bangkok Bank Public Company Limited andMr Win Phromphaet, Head of Global & Real Estate Investment,Social Security Office of Thailand, moderated by Vincent Milton,Managing Director of Fitch Ratings (Thailand), addressed keyregional opportunities and risks facing investors.

The conference was well attended by over 350 seniorexecutives and officials across the investor, regulatory,financial and corporate sectors.