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ฉ บั บ เ ดื อ น ธั น ว า ค ม 2 5 5 6 ปี ที่ 5 ฉ บั บ ที่ 15
HAPPYNEW YEARKASIKORNTHAIGROWTH SUSTAINABLEA KASIKORNBANK PUBLICATION
J U N E , 2 0 1 4 , 6th I S S U E 17
1Sh
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sletter 17
Political Strife and Slow Export Recovery Inhibit
Thai Economy during 1H14
" Prolonged sluggishness in private and public spending due to
political uncertainty in the country has steepened the risks confronting
many economic activities, thus leading KResearch to forecast that Thai
GDP growth during 1H14 may reach only 0.5 percent YoY. "
Thai Economic O
verview
2
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Political incidents that unfolded in early 2014, i.e., protracted anti-government protests and court rulings on critical political
cases, have affected economic mechanisms significantly. This, coupled with a slow export recovery resulted in listless economic
activities during 1Q14. As a result, the 1Q14 GDP contracted for the first time in a year at 2.1 percent QoQ, s.a., following 0.1
percent growth recorded for 4Q13. When compared to the same period over-year, the 1Q14 GDP contracted 0.6 percent, versus
0.6 percent YoY growth reported in 4Q13.
Thai Economy Hurt by Political Standoff in 1Q14
3Sh
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• Private consumption and investment during 1Q14
remained sluggish for three straight quarters, declining to
3.0 percent YoY and 7.3 percent YoY, respectively, from 4.1
percent YoY and 13.2 percent YoY recorded in 4Q13. This was
because households and businesses became more cautious
about their spending to cope with near-term uncertainty, lofty
debt burdens, plus eroding purchase power/liquidity.
• The unresolved political deadlock has diminished
public spending, especially investment, though regular public
spending has risen steadily. Public spending grew 2.9 percent
YoY in 1Q14, up slightly over the 0.8 percent YoY growth
reported for 4Q13. However, public investment during 1Q14
contracted 19.3 percent YoY, down for the third consecutive
quarter and the slowest rate in 13 years, compared to the 4.7
percent contraction reported for 4Q13
• The number of international tourist arrivals during 1Q14
dropped due to concern toward Thai political turmoil. As a
result, revenues earned by the service sector (especially from
tourism) shrank during 1Q14 for the first time in two years to
4.2 percent growth YoY, causing overall merchandise and
service exports to contract 0.4 percent YoY, as our key export
categories still have not fully recovered yet.
The gradual recovery seen in Thailand’s outward trade
during 1Q14 was supported somewhat by growth in key export
categories, e.g., automobiles, electrical appliances and
petrochemicals. As a result, there is hope that the overall
exports will begin to bounce back in 2Q14, thus helping offset
the decline in domestic consumption that has been plagued
by political turmoil. Given this, KResearch expects that 2Q14
GDP growth will remain low, but should be higher than the
contraction seen during 1Q14.
Economic Growth in 2Q14 Will Likely Depend on Export Performance
0.4
4.4 3.1
19.1
5.42.9 2.7
0.6-0.6
-5
0
5
10
15
20
25
1Q-12 2Q-12 3Q-12 4Q-12 1Q-13 2Q-13 3Q-13 4Q-13 1Q-14
% Contribution to GDP Growth (1988 Prices)
Net Exports Change in inventoriesGross Fixed Capital Formation Gov't Consumption ExpenditurePrivate Consumption Expenditure GDP growth %YoY
Source: NESDB
Source : NESDB
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As for the 1H14 economic outlook, KResearch is maintaining a negative view toward private/public consumption and
investment because we have assessed that any turning point in Thai politics between May and June 2014 may not help improve
domestic spending much over the short-term, but it may pave the way for the Thai economy to gradually resume growth during
2H14, especially if the ongoing political impasse is resolved without further violence, thus helping to quickly restore confidence
toward the Thai economy. Nevertheless, it must be conceded that key trade partners’ economies, e.g., China, ASEAN and other
emerging markets, remain worrisome, thus also inhibiting our export recovery. Given this, we expect that the Thai economy may
record low growth of at best 0.5 percent YoY during 2H14.
Since KResearch will have to assess the Thai political situation again in 2H14, we, therefore, maintain a conservative forecast
for 2014 GDP growth at 1.8 percent YoY, or somewhere within 1.3-2.4 percent, which would be almost on a par with the 1.5-2.5
percent growth forecast by the Office of the National Economic and Social Development Board (NESDB).
With regard to investments into the Thai financial market, near-term capital inflows into the Thai market will depend on
efforts to bolster foreign investor confidence toward Thailand, especially progress on the forming of a new government after the
important turning point late in May. The Fed Funds rate outlook is expected to influence US Dollar movements greatly, especially
during 2H14 when the Fed’s QE tapering will come to an end.
Disclaimer This research paper is arranged for public information, and has been obtained from sources believed to be reliable. KResearch does not warrant its
comprehensiveness, reliability or accuracy for commerce, nor any fitness for a particular purpose. The information contained herein may be subject to change at any time
without notice. Reliance upon any information contained herein shall be undertaken at a user’s own risk. KResearch shall not be liable to any user, nor other person or entity,
for any losses occurring from the use of any content herein. Nothing in this research paper should be construed as containing any advice, recommendation or opinion for
decision-making in business.
%YoY, excepted indicate otherwise 20132014 f*
Base Case Forecast Range
GDP growth 2.9 1.8 1.3-2.4
Private consumption 0.3 0.1 -0.2 to 0.6
Overall investment -2.0 -2.2 -2.7 to -1.5
Exports (US Dollar term ) -0.2 5.0 3.0-6.0
Imports (US Dollar term ) -0.4 0.5 -1.5 to 2.0
Current account balance ( Billions US Dollar term) -2.8 5.0 3.9-6.0
Source: KResearch forecasts as of March 31, 2014
Thai 2014 Economic Growth Forecast
5Sh
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Stock Market C
onditions
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Action recommendation • The SET touched this year’s peak so far at 1,426 points
during the second quarter. However, we recommend that
investors take a cautious stance over the remainder of 1H14
due to ebbing cash flows in light of listed firms’ unimpressive
operating results, as well as downtrends in economic data
amid the domestic political impasse. The SET at a range of
1,340-1,360 points, offers a good bargain, especially prior to
2H14. We expect to see new European Central Bank (ECB)
economic stimulus unveiled around June-July, which may
induce risk-inclined investors to enter the market, and thus
may lead to a return of capital flows into emerging markets
(EMs).
Key investment points • ECB may be the major catalyst for a new round of
bullishness in global stocks. To tackle the rising Euro and
Eurozone slowdown, we believe that the ECB may adopt an
easing monetary stance around early June-July 2014 - a few
months before the end of the US’ quantitative easing. Such
move is expected to invigorate the Eurozone economy and
reduce unemployment, while boosting overall growth. A softer
Euro could induce cash flows into EMs and pare downside risks
in such markets, which would, in turn, be a boon to global
bourses.
• The Thai economy is still at risk but it may have bottomed
out in 1Q14. The slowing Chinese growth may be a threat to
the Thai economy given the high correlation between Thai
exports and Chinese counterparts. The Chinese GDP is widely
expected to come out lower than the government’s projection
at 7.5 percent, which would then imply decelerating ASEAN
economic growth. Domestically, the protracted political conflict
here has weighed on consumer spending, as evidenced by
the monthly Consumer Confidence Index (CCI) having fallen
to its lowest in 150 months. However, we are seeing light at the
end of the tunnel now that the Business Sentiment Index (BSI),
a leading indicator, has shown signs of recovery. We therefore
maintain our view that Thailand’s GDP may have bottomed out
in 1Q14 and will be on a recovery path from 2Q14 onward.
• Listed companies’ earnings remain under pressure.
Over the past month, earnings forecasts of only three
sectors were upgraded (Home and Office Products, Electronic
Components and Health Care Services). Insurance, Home and
Office Products and Health Care Services have all shown signs
of operating performance improvements. We believe
that stabilized earnings within the Food and Beverage,
Automotive and Property Development sectors indicate that
they may outperform the market during 2H14.
• Gradual purchases when the SET falls to 1,340-1,360
points are recommended. We maintain a SET upside target
at 1,450 points and hold the view that earnings downgrades
will negatively affect the market only short-term. The 12x
PER of the SET (1,344 points) represents a good bargain.
We recommend investors to adopt a “buy on dips” strategy as
the SET drops to 1,340-1,360 points in May before the market
resumes an upward trend on the expectation that the ECB will
unveil special economic stimuli around June-July.
• Top pick : Our May strategy focuses on stock that will
benefit from external factors and business turnarounds. Our
top picks include SPALI, AP, SPCG, KBS, KSL, TUF, CPF, PTTGC,
CFRESH, SAT and TTA.
Monthly strategy Short-term recess
7Sh
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0
5
10
15
20
25
30
35
40
0
2
4
6
8
10
12
14
16
18
Jan-
11
Apr
-11
Jul-
11
Oct
-11
Jan-
12
Apr
-12
Jul-
12
Oct
-12
Jan-
13
Apr
-13
Jul-
13
Oct
-13
Jan-
14
Apr
-14
%%France Ireland Italy Portugal Spain Greece (RHS)
Source : Bloomberg, KS Research
Taking a short breakGlobal economic improvement hinges on rebound in the West
We expect to see continuity in the global economic recovery, as evidenced by brighter economic indicators from the US and
Eurozone, despite the US 1Q14 GDP showing a mere 0.1 percent increase (preliminary estimate) due to extreme cold weather there
during that quarter. Nonetheless, the US labor market and manufacturing sector have been improving. We therefore believe that
the US economy may witness firmer growth over the remainder of this year.
As for the Eurozone, we believe that the Eurozone crisis is now over, given that bond yields are plunging below the pre-crisis
level, implying lower risks (Figure 1). Meanwhile, the Eurozone GDP is picking up (Figure 2), as proven by the exit of Ireland and
Portugal from bailout programs in December 2013 and May 2014, respectively.
Fig 1 The end of the eurozone crisis ... (bond yields)
8
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Source : Bloomberg, KS Research
Expectations toward stimulus efforts by the ECB and BOJ
We do not expect to see new economic stimuli from the
US Federal Reserve (FED) or the Bank of England (BOE) soon,
given that such move might increase price pressures in the US
and UK (Figure 3). On the other hand, we believe that the
ECB and the Bank of Japan (BOJ) may still have ample room
to adopt further easing since the inflation rates of both the
Eurozone and Japan are currently lower than their long-term
targets (Figure 4) amid an overriding deflationary threat. We
believe that further easing (via increases in the money supply)
would be indispensable because the ECB has to cope with a
strengthening Euro amid a growing GDP (Figure 5). Their rising
unemployment rate (Figure 6) may justify policymakers taking
drastic action to attract investment and create jobs.
We expect that a Eurozone quantitative easing program
will be unveiled by the ECB by June 5 or perhaps July 3;
otherwise deflationary risk will increase. The timing is right,
taking into account the US’ QE program that will soon end.
Such a move would likely prove a short-term plus since their
stock markets would gain greater liquidity flows into the
system, which would then support carry-trade transactions
and reduce risk premiums on stock and other risk assets. We
therefore expect that global markets will react positively to
any ECB stimuli.
Fig 2 Eurozone GDP is picking up
-8
-7
-6
-5
-4
-5
-4
-3
-2
-1
0
1
2
3
4
Mar
-11
May
-11
Jul-
11
Sep-
11
Nov
-11
Jan-
12
Mar
-12
May
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Jul-
12
Sep-
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Nov
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Jan-
13
Mar
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May
-13
Jul-
13
Sep-
13
Nov
-13
%% France Ireland Italy Portugal Spain Greece (RHS)
May
May
May
9Sh
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Source : KBank (CMB dept)
Source : KBank (CMB dept)
Fig 3 Inflation in the U.S. and U.K.
Fig 4 Policymakers have room for stimulus packages.
10
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Source : Bloomberg, KS Research
Source : Bloomberg, KS Research
Fig 5 Euro strength reflects improving GDP
Fig 6 Eurozone’s unemployment rate still high...
11Sh
areh
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Our domestic political impasse and China’s slower growth hurt the Thai GDP We view that slowing Chinese growth may become a major threat to the Thai economy. According to Bloomberg, several
research reports show that China’s GDP may fall short of their 7.5 percent growth target (Figure 7). This signals that leading ASEAN
economies may witness faltering growth in tandem. Undoubtedly, Thailand’s exports are closely correlated with economic health.
(Figure 8) depicts the correlation between China’s exports, their Purchasing Manager Index (PMI) and Thai exports. Chinese risks will
be detrimental to Thai exports, our sole economic engine this year.
The lingering political strife has also eroded consumer confidence and consumption, as evidenced by sluggish spending on
durable goods (e.g., houses, autos) and consumer goods during 4M14 as well as the Consumer Confidence Index (CCI) falling to the
lowest level in 150 months. However, an improving Business Sentiment Index (BSI) may be a prelude to a CCI recovery in the near
future (Figure 9). We believe that Thai economic momentum will gradually improve, so we maintain our view that Thailand’s GDP
may have bottomed out in 1Q14 and will be getting out of the woods from 2Q14 onward (Figure 10).
Even though there seems to be negative momentum in the earnings of TRANS (especially aviation shares), Petrochemicals and
Chemicals (PETRO), Energy and Utilities (ENERG) as well as Commerce (COMM), so we believe that further downgrades are unlikely
in these sectors given their relatively low PER. In our view, any pullback in prices within these sectors will offer a golden opportunity
to gradually accumulate them for medium to long-term investment.
Source : Bloomberg and KS Research
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Fig 7 Risk of Chinese economic slowdown
12
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Fig 8 High relation between TH and CN export data
Source: Bloomberg and KS Research
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!"#$$#!"#$%&'()!"#*+,'#-')./012 3%$+#'$$)1'#4+&'#4).5012
Source : Bloomberg, KS Research
Fig 9 Thailand - Expect BSI to lead CCU recovery
13Sh
areh
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Earnings forecasts were further downgraded In line with the cuts in Thai economic data projections, the earnings per share (EPS) forecasts of many Thai listed firms were
downgraded due to lower-than-expected economic growth and the protracted political stalemate. Over the past one month
(Figure 11), EPS forecasts of only three sectors, i.e., Home & Office Products (HOME), Electronic Components (ETRON) and Health
Care Services (HELTH) were upgraded; eight other sectors saw their EPS estimates downgraded, while those of the remaining nine
sectors were almost unchanged (+/-0.5%). The Transportation & Logistics sector (TRANS) suffered the biggest downgrade given
the cuts in the EPS forecasts of aviation shares (THAI, AAV and NOK), which suffered direct blows from the political turmoil.
Given the upgrades in earnings forecasts of transport-and infrastructure-related shares such as AOT and BECL as well as
shipping companies, i.e., TTA and PSL, we therefore maintain an optimistic view toward shipping firms under Transportation and
Logistics (TRANS). Our most-favored stock is TTA, thanks to its brightening earnings outlook for 2014.
In Figures 13-14, we have classified industry groups into three categories: strong, so-so and weak outlooks, based on changes
in their earnings forecasts over the past year. It was found that Insurance (Insur), Home and Office Products (HOME) and Health
Care Services (HELTH) had seen solid upgrades in earnings estimates, while those of Food & Beverage (FOOD), Automotive (AUTO)
and Property Development (PROP) were quite stable, implying that upgrades may be seen in the future. Thus, we believe that
these three sectors will outperform the market during 2H14.
Even though there seems to be negative momentum in the earnings of TRANS (especially aviation shares), Petrochemical
and Chemicals (PETRO), Energy and Utilities (ENERG) as well as Commerce (COMM), so we believe that further downgrades are
unlikely in these sectors given their relatively low PER. In on view, any pullback in prices within these sectors will offer a golden
opportunity to gradually accumulate them for medium to long-term investment.
-4
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Source: KS Research
Fig 10 Expect Thailand GDP to bottom out in 1Q14
14
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Source : Bloomberg and KS Research
Source : Bloomberg and KS Research
Fig 11 Changes in earnings forecasts by sector
Fig 12 Transportation has a mixed outlook
15Sh
areh
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Source : Bloomberg and KS Research
Source : Bloomberg and KS Research
Fig 13 Changes in earnings forecasts (a year ago)
Strong outlook
Weak outlook
"So-so" outlook
Fig 14 Changes in earnings forecast (a year ago) (cont.)
May
-13
May
-13
May
-14
May
-14
Jun-
13Ju
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16
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Source : Bloomberg and KS Research
Source : Bloomberg and KS Research
Fig 15 Largest earnings upgrades since 1M ago
Fig 16 Largest earnings downgrades since 1M ago
17Sh
areh
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Short-term volatility ignited by capital outflows Capital inflows totaling USD31 billion had driven up Thai stocks during March-April. Movements of the SET from May-June and beyond
will thus hinge mainly on this factor. We adopt a cautious stance toward the Thai market amid short-term volatility and lower purchases
in EMs by foreign investors, including the Thai bourse, especially given the sell-offs seen in early May.
We set our downsides for an implied SET Index target based on three scenarios. First, the costs of foreign investors stood at 1,385-1,390
points, whereby they started to buy Thai equities in March-April. In this case, the target downside of the SET Index would be 1,320-1,350
points, implying that most foreign investors can tolerate a loss of 3-5 percent. Second, in the worst-case, the SET Index downside would
be 1,275 points. Third, the 12x PER of the SET Index’s previous trough implies that 1,344 points would be the strong support level.
Strategically speaking, we view that a SET Index below 1,350 points offers a good bargain. Figures 21 and 22 demonstrate that the
SET Index remains relatively attractive in PER and dividend yields compared to global stocks. With a listless market (sideways) amid the
current economic slowdown, a reasonable buy-on-dips play is thus recommended.
-2%
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0%
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4%
5%
6%
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ay
Unrealized Profit
Avg Price
Avg Foreign Cost with FX adjustment
Index (pts) % Unrealized
Source : Bloomberg, KS Research
Fig 17 Foreign cost at 1,385-1,390
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Source : Bloomberg, KS Research
Fig 18 Downside of implied SET Index target at 1,275
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Source : Bloomberg, KS Research
Fig 19 Outperform / Underperform sectors (YTD)
19Sh
areh
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7
8
9
10
11
12
13
14
15
16
17
18
19
Jan-
09M
ar-0
9M
ay-0
9Ju
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3M
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l-13
Sep-
13N
ov-1
3Ja
n-14
Mar
-14
May
-14
12m Forward PER (x)
Non-Liquidity Premium: PER 11-13x
Long-Term PER 12.94X
Liquidity Premium: PER 13-15x
19.1
16.5 16.0 15.9 15.4 15.4 15.3 14.9 14.6 14.3 14.0 13.6 13.3 13.3 12.410.1
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nam
Hon
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PER (x)
Source : Bloomberg, KS Research
Source : Bloomberg and KS Research
Fig 20 SET Index - 12x PER implied support at 1,344 pts
Fig 21 SET Index - PER
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Source : Bloomberg and KS Research
Source : Bloomberg and KS Research
Fig 22 SET Index - Dividend yield
Fig 23 Trade-off between valuation and growth by PEG
Sectors PEG2013E 2014E 2013E 2014E 2013E 2014E 2013E 2014E 2014E
Residential 5.9 0.0 10.6 10.6 4.3 4.4 20.5 18.8 -554.01Electronics 25.0 -1.0 11.8 11.9 4.2 4.1 16.9 17.5 -12.04Auto 52.1 -1.1 9.7 9.8 3.4 3.9 16.8 14.6 -8.62Tourism 23.0 -7.1 22.7 24.4 1.6 1.4 15.7 14.0 -3.44ICT 61.9 -13.8 17.5 20.3 4.9 4.9 43.1 43.1 -1.46Personal Products & Pharmaceuticals -20.5 -30.0 15.6 22.3 2.5 1.8 22.2 19.5 -0.74Contractor 202.0 -60.0 8.7 21.7 2.3 3.1 10.5 9.7 -0.36Insurance 995.9 109.6 30.7 14.6 2.8 2.1 9.0 17.5 0.13MAI Industry 112.7 269.4 157.3 42.6 0.0 0.4 6.1 18.8 0.16Agribusiness & Food -53.6 77.1 23.9 13.5 2.3 3.9 3.1 13.1 0.18Transportation -85.9 95.8 39.6 20.2 3.4 3.1 4.4 4.1 0.21Shipping 10.0 127.1 n.m. 35.9 1.0 1.6 -1.5 3.1 0.28Commercial 52.3 31.9 14.8 11.2 3.5 4.6 24.3 27.8 0.35Energy -9.5 17.5 10.5 9.0 4.0 4.4 12.9 14.1 0.51Petrochemical -12.7 16.3 12.4 10.7 3.9 3.7 9.6 11.9 0.66Industrial Estate 41.2 9.0 10.3 9.4 10.6 4.0 16.7 24.5 1.04Property Fund -39.0 32.5 46.8 35.3 2.2 2.3 8.1 10.5 1.09Construction Materials 50.6 5.5 14.2 13.5 3.8 4.0 24.2 23.3 2.47Media -7.6 6.0 18.1 17.1 4.3 4.6 31.9 29.2 2.83Health Care -18.8 9.6 35.1 32.0 1.5 1.5 17.9 17.8 3.34Utilities -2.8 3.1 11.5 11.2 4.4 4.5 14.5 14.5 3.57Commerce 3.2 6.1 29.1 27.4 2.1 1.7 25.5 25.3 4.53Home & Office Products -10.1 0.8 12.9 12.8 4.8 4.3 10.9 10.1 16.88Banking 24.4 0.3 10.3 10.2 3.4 3.5 15.7 14.2 37.77
EPS Growth (%) PER (x) Dividend Yield (%) ROE (%)
4.4
3.9 3.7 3.6 3.63.3 3.2 3.1 2.9 2.8
2.62.2 2.1 2.0 1.8 1.7
1.3
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Chin
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Thai
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Sing
apor
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Taiw
an
Mal
aysi
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Ger
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y
Viet
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Wor
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Phili
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es US
Indo
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Japa
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Indi
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a
Div. Yield %
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Investment Strategies • Sell in May, but don’t leave the market. Looking back, the Thai market fell mostly during May. This time, however, we believe
that the local bourse will benefit from the launch of a Eurozone quantitative easing program likely in early June-July this year. It is
our belief that the downside risk toward Thai stocks will be moderate and short-lived. A correction would provide a good
opportunity to buy before the market picks up. Our recommendation is “Don’t leave the market. Sell-off/sell partially to minimize
risk and wait for the right time to buy on dips.”
• For speculators, the mantra is to sell outperformers and buy laggards. We take a cautious view toward shares that have
outperformed the market since 2013 (including Electronic Components, Banking, ICT and Property Development) which are poised
to encounter short-term profit-taking. We recommend speculators to sell-off/sell partially to minimize risk and buy laggards (Food
and Beverage, Automotive and Petrochemicals and Chemicals) instead.
• Best value is the name of the game. The Thai political situation is too complex and fairly hard to predict. Practically
speaking, our experience tells us that investors should consider “reasonable prices” rather than the “direction” of the market
before making any decision to buy.
• A SET Index at 1,320-1,360 points is considered safe. We peg our downside target at 1,344 points wherein the PER would
equal 12x; we therefore view that the SET Index at 1,320-1,360 points would offer a golden buying opportunity.
2014 Investment Concept Our investment concept for this year is to achieve a “good balance”, meaning that we would like to capitalize on the
global economic recovery and, at the same time, seize any opportunity in domestic stocks where prices are lower than their
fundamentals.
This month, rather than taking a view by sector, we are focusing on individual shares with attractive prices and good
fundamentals. Any pullback will be an ideal buying opportunity for “turnaround” shares in the Automotive and Food and
Beverage sectors.
Top picksAttractive PER play SPALI AP SPCG KBS KSL TUF CPF PTTGC
Turnaround shares CFRESH SAT TTA
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General Disclaimer This document is prepared by Kasikorn Securities Public Company Limited (“KS”). This document has been prepared for individual clients of KS only and must not, either in whole or in part, be copied, photocopied or duplicated in any form or by any means or distributed to any other person. If you are not the intended recipient you must not use or disclose the information in this research in any way. If you received it in error, please immediately notify KS by return e-mail and delete the document. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them by any other person. This document, including information, data, statements, forecasts, analysis and projections contained herein, including any expression of opinion, is based on public available information or information obtained from sources believed to be reliable, but KS does not make any representation or warranty on, assumes no responsibilities for nor guarantees the accuracy, completeness, correctness or timeliness of such information KS accepts no obligation to correct or update the information or opinions in it. The statements or expressions of opinion herein were arrived at after due and careful consideration and they were based upon such information or sources then, and in our opinion are fair and reasonable in the circumstances prevailing at the time. The information or expressions of opinion contained herein are subject to change without notice. This document may refer to research or information obtained or derived from research prepared by Macquarie Securities (Thailand) Limited (“MSTL”) and/or any entity within Macquarie Group (“Macquarie”). MSTL and/or Macquarie does not warrant nor guarantee the accuracy or completeness of its research materials. MSTL and/or Macquarie reserves copyright and other proprietary rights in the information reproduced in this document. Macquarie is under no obligation to inform KS if the views or information referred to or reproduced in this document are changed. Nothing in this document shall be construed as an offer or a solicitation of an offer to buy or sell any securities or products, or to engage in or refrain from engaging in any transaction. In preparing this document, KS did not take into account your specific investment objectives, financial situation or particular needs. This document is for your information only and is not to be taken in substitution for the exercise of your judgment. KS salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions which are contrary to the opinions expressed in this document. Before making an investment decision on the basis of this document, you should obtain independent financial, legal or other advice and consider the appropriateness of investment in light of your particular investment needs, objectives and financial circumstances. There are risks involved in the investment in securities. KS accepts no liability whatsoever for any direct, indirect, consequential or other loss (including claim for loss of profit) arising from any use of or reliance upon this document and/or further communication given in relation to this document. Any valuations, opinions, estimates, forecasts, projections, ratings or risk assessments herein constitute a judgment as of the date of this document, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, projections, ratings or risk assessments. Any valuations, opinions, estimates, forecasts, projections, ratings or risk assessments described in this document were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties or contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, projections, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, projections, ratings or risk assessments described herein is not to be relied upon as a representation and/or warranty by KS (i) that such valuations, opinions, estimates, forecasts, projections, ratings or risk assessments or their underlying assumptions will be achieved, or (ii) that there is an assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, projections, ratings or risk assessments stated therein. KS along with its affiliates and/or persons associated with it may from time to time have interests in the securities mentioned in this document. KS and its associates, their directors and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking, advisory and other securities services for companies mentioned in this document. KS and MSTL have entered into an exclusive strategic alliance agreement to broaden and deepen the scope of services provided to each parties respective clients. The strategic alliance does not constitute a joint venture.
Corporate Governance Report Disclaimer The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of companies listed on the Stock Exchange of Thailand and the Market of Alternative Investment disclosed to the public and able to be accessed by a general public investor at http://www.thai-iod.com/en/publications-detail.asp?id=170 . The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the data appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. KS does not confirm nor certify the accuracy of such survey result. Structured Notes and Derivative Warrant s DisclaimerKS may be the issuer of structured notes on these securities.KS acts as market maker and issuer of Derivative Warrants (“DWs”) on the underlying stocks listed below. Investors should carefully read the details of the DWs in the prospectus before making any investment decisions.DWs Underlying Stocks : CPF, IVL, KTB, PTTGC, QH, SCB, THCOM, TRUE, TUF, TTA, ADVANC, AOT, BTS, CK, CPALL, CPN, JAS, PTT, PTTEP, SCC,TMB, AAV, BANPU, BBL, INTUCH, CENTEL, GLOBAL, SAMART, STEC and TOP
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Investment C
hanels
BondBank Deposit
Fund
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Thai stocks : Despite a murky picture so far this year, stocks in Thailand have already risen more than 8 percent
year-to-date, bucking the trend of the domestic economic slowdown as well as prolonged political instability. The rallies were
apparently driven by funds from local investors, while foreigners have continued to sell Thai shares, of more than 6
billion Baht. Apart from stock speculation, local buyers’ positive views were supported by their
confidence that domestic political unrest will eventually subside, and that the economy will
turn around in the second half of this year due to export recovery. Nevertheless, risk factors
for the Thai economy still exist, while current stock prices remain quite expensive. This has
made short-term investment quite risky. However, in addition to the political settlement
expected next year, the ASEAN Economic Community (AEC) inception is likely to help support
the Thai bourse over the long term.
Four months on : Winners and losers? Global financial markets have faced high volatility over the first four months of 2014,
namely capital outflows from emerging markets, political turmoil in Ukraine which
resulted in a boycott against Russia, and the US’ QE tapering which impacted
investments worldwide. Therefore, it is interesting to review winners and losers of
investments over this period of fluctuation.
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US stocks : Over the past year, US stocks have soared 30 percent, repeatedly
reaching new highs in tandem with the country’s economic recovery trend. However, shares
have recently hovered in a narrow band, registering an increase of only 1.6 percent over
the past four months. Looking forward, the US economic recovery will continue and positively
impact the equity bourse. But there were already significant rallies last year without a firm
consolidation. Also, better-than-expected corporate earnings over the first quarter were mostly
caused by cost reduction rather than rising sales. A number of large corporations, including
Google and Amazon, have recently posted weaker-than-anticipated operating results. We,
therefore, project that the US stock outlook over the short term will see a limited rally, less
substantial than those of 2013, despite a positive long-term outlook.
Japanese stocks : Jumping at least 50 percent over the past year, Japanese
shares have seen profit-taking by foreign investors since early this year, with a total of
USD23 billion in net selling. Total returns of the country’s equity market have declined by
12 percent year-to-date, causing concern among investors accordingly. Nevertheless,
its economic growth has remained positive, while the current inflation rate is lower than
targeted as new tax measures have been introduced, including a consumption tax hike
in April. It is worth monitoring whether Japanese authorities are able to maintain growth
momentum going forward, and the impact of the tax increase on consumer spending.
Despite rallies over the past two years, average prices are still relatively lower than in
the past. The recent consolidation, therefore, is interesting, although the aforementioned
factors remain as market risks.
European stocks : Although the region witnessed rather satisfactory equity returns of
more than 15 percent over the past year, its stocks increased only 2 percent over the first four
months of 2014. The rallies were pressured by the recent Ukraine crisis, which led to a boycott
against Russia. Nevertheless, most market watchers believe overall instability in the region will not
escalate. Its economic recovery signs have been apparent since last year, although the growth
is not expected to be strong. Moreover, European share prices remain relatively inexpensive
compared to previous records. We, therefore, have a positive view of European shares, which
are expected to be outstanding, should the Ukraine crisis not intensify.
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Chinese stocks : Although many have reacted positively to the Chinese
government’s promising economic reform package announced last year, its stock markets
have not performed as well as expected. Since early this year, the Mainland’s shares have
fallen by 6 percent in line with the country’s economic slowdown. Still, KAsset maintains our
positive view of the country’s economic reform and its impacts on sustainable stability. China’s
economic growth at 7-7.50 percent is relatively high compared to peers, while its stock prices
have remained at relatively low levels for several years. This has made us confident in
Chinese stock investments for at least three to five years going forward. However, the potential
for weaker-than-expected economic indicators may remain a risk pressuring China’s stock
market over the short term.
Oil : Crude oil has risen approximately 3 percent since the beginning of this year
to stay above the USD100/barrel threshold, driven mostly by the Ukraine crisis and a
boycott of Russia by Western nations. In addition, satisfactory US economic indicators
have boosted oil prices somewhat. However, any further rise in oil prices is likely to be
limited due to lower pressure on crude oil supplies following rising crude reserves of the
US, as well as the greater role of its shale gas used to extract crude. Therefore, we predict
a crude price band of USD90-100 a barrel this year.
Disclaimer : Investments contain risk. Investors should study the prospectus before making
a decision to invest.
Data as of April 30, 2014, according to Mr. Arthit Thongcharoen, Head of Unit, Product
Strategy Department, KAsset
Gold : Contracting almost 30 percent over the past year, gold has recently recovered
by 7 percent. However, the recent recovery was mainly driven by investors’ concerns over the
Ukraine crisis boosting demand and prices in safe havens like gold. Over the long term, gold
prices are not driven by any strong supporting factor. Therefore, we predict this year’s gold price
band at USD1,150-1,350 an ounce. We recommend a series of short-term profit-takings rather
than long-term holding for gold.
สุขภาพดีวันละนิดจิตแจ่มใส
Good Health, G
ood Mind
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A Serious Illness in Rainy Season
Pneumonia is an infection that inflames the air sacs
in one or both lungs. The air sacs may be filled with fluid
or pus, causing breathing difficulty that can be fatal. As
pneumonia symptoms can develop very fast, it is deemed
one of the most serious illnesses contracted by human
beings.
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Causes
1. Bacteria - the most commonly found type being
pneumococcus, while other rare and very fatal bacteria include
staphylococcus and klebsiella.
2. Viruses - e.g., influenza, measles, varicella-zoster or SARS.
3. Microplasma pneumonia - causing atypical pneumonia,
usually without distinct symptom of labored breathing.
4. Other causes - such as chemical substances,
pneumocystic carinii which is commonly found in those who
have contracted HIV/AIDS, or a fungus that is rare, but fatal.
Contagions
The germs that cause pneumonia can be found in
patients’ saliva and phlegm, and thus can be spread by
coughing, sneezing or simply exhaling. Pneumonia can
also be caused by choking on chemical pathogens or
some foods into the lung, or can spread into the blood via
injection, IV or inflammation of other organs.
Symptoms
Patients’ symptoms may vary, depending on the cause,
the patient’s age and severity of illness. The symptoms can
be classified into two groups, i.e.:
1. Clear symptoms : The symptoms may be evident within 1-2
days and will aggravate rapidly with fever, chills, coughing and
expectoration of green or yellowish phlegm or phlegm with
blood, plus shortness of breath or difficulty in breathing,
as well as chest pains when coughing or inhaling/exhaling deeply.
2. Vague symptoms : These symptoms develop slowly
wherein pneumonia is only evident after 1-2 weeks. Some
patients have symptoms similar to the common cold,
with/without low fever, headache, body or joint pain,
sometimes stomach ache, weariness.
Symptoms are more severe in patients with congenital
diseases, such as diabetes, or those with immune deficiencies
- particularly HIV-infections - as well as persons undergoing
organ transplants, those suffering from asthma, as well as young
children and elderly people.
Diagnosis
Diagnosis should include review of the patient’s medical
history and doing a physical exam, sometimes with a chest
X-ray, sputum test to pinpoint the type of infection or blood test
to confirm the presence of an infection and to identify the type
of organism causing the infection.
Complications
Complications of pneumonia can include atelectasis, lung
abscess, meningitis, pericarditis, acute arthritis, sepsis, and
most seriously, hypoxemia and dehydration that are common
in infants and elderly people, and which may rapidly cause
death.
Treatment
1. At an early stage where difficulty in breathing has not
become apparent yet, patients should drink a lot of
water, be given tepid sponging to reduce their fever and take
antibiotic drugs. If the symptoms become better in three days,
patients should take the antibiotics for one more week. But if
they worsen, or patients have labored breathing, they should
consult a physician.
2. If there is shortness of breath or any other complication,
patients should be taken to a hospital immediately. Otherwise,
this illness can be fatal.
Pneumonia
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Preventative Measures
1. Get enough rest and try to always stay healthy.
2. Eat healthy meals and take proper quantities of health supplementary foods.
3. Do not smoke and stay away from areas with poor air circulation or significant airborne pollutants.
4. Small infants should be closely watched to detect and prevent them from choking. Small pieces of toys should not
be around as they may put them in their mouths and swallow them.
5. Colds, the flu, measles or chickenpox should be treated as soon as possible. If patients do not get better soon,
immediate consultation with specialized physician is recommended.
Although pneumonia is a severe illness, it can be cured. It is very important to consult a physician when you
suspect that you may have contracted it. However, a healthy physical and mental condition can be maintained with
adequate rest, regular exercise and a properly nutritional diet, which would help guard against any illness.
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HRH Princess Maha Chakri Sirindhorn presides over the
opening of “Rak Pa Nan” seminar
Her Royal Highness Princess Maha Chakri Sirindhorn presided
over the opening of “Rak Pa Nan” (Care for Nan Forest) seminar
at the Center of Learning and Knowledge Service, Chulalongkorn
University, Nan Campus, and later gave a lecture on “Raising
Awareness of Nature Conservation among Youth”. KBank
Chairman and Chief Executive Officer also gave a lecture on
“The Context and Strategy of Forest Conservation” to members of
various agencies in the province. This program was organized to
help address forest denudation in Nan in a sustainable manner.
KBank and TRF organize national research paper
presentation competition under the Cultivation
of Wisdom Project
KBank and the Thailand Research Fund (TRF) organized
the national research paper presentation competition and
presented awards to the winners under “The Cultivation of
Wisdom Project: For Flourishing Wisdom of Teachers and
Students”. The event was aimed at providing encouragement
to the participants and benefitting the reform of project
preparation in the basic education, with focus on using
research as a tool to create wisdom among youth. Wat Don
Manora School (Rangsiyanukul), Samut Songkhram, won two
awards, namely best research-based learning presentation
and special award for teacher involving in cultivating national
wisdom.
KBank presents awards to employees with distinguished
performance
KBank held the “You are K Heroes: Toward Excellence”
event to present awards to employees of KBank and
K Companies with distinguished performance in 2013. There
were two award categories, namely the K Heroes Team
Award, which was presented to 29 teams engaged in projects
that created maximum benefits for the Bank, and the K Heroes
Individual Award, which was presented to 603 employees that
helped their divisions or companies achieve the established
targets. The atmosphere at the event was full of smiles as the
winners were delighted and honored to be recognized for
their outstanding performance. แวดวงกสิกรไทย
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KBank and SMC sign Baht 10 billion purchase of housing
loan portfolio
KBank and Secondary Mortgage Corporation (SMC) continue
their collaboration with a purchase agreement of a Baht 10 billion
housing loan portfolio, offering long-term fixed and floating rates
for borrowers to choose from. Other benefits from the K Home
Smiles Club include a complete advisory service for housing
matters, as well as loans for purchases of new and pre-owned
houses, plus refinancing. Amid strong demand for housing in major
regional cities, KBank plans to extend at least Baht 52 billion in
housing loans this year.
KBank wins two awards from The Asian Banker
KBank was awarded “Best Retail Bank in Thailand 2013”
for the fifth consecutive year, in recognition for KBank’s solid
per formance, wi th cons i s tent sys tem and product
enhancement. The second award given to KBank was
“Best Social Media Project” to recognize the Bank’s digital
banking leadership, achieved through social media utilization
for efficient customer access. The Asian Banker is a reputable
and world-class financial magazine.
KBank introduces “Tomorrow Comes Today” to reinforce
its leadership in the digital banking industry
The Bank has set a three-year goal for business strategies
under the “Tomorrow Comes Today” mission statement, which is
expected to bring about a new digital banking standard and offer
advanced services that respond to daily and business lifestyles of
the customers with the application of maximum security measures.
These features will enable KBank to become the “Main
Operating Bank”, the bank that is the most used by customers
to service every financial lifestyle. At the end of 2013, KBank’s
market share in the digital banking was ranked number one at 28
percent, with the number of new customers rising by 51 percent
over 2012.
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KBank New
s Update
KBank News Update
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Tax credit = (Dividend x Corporate income tax rate)
(100 - Corporate income tax rate)
Investors who put their money in stocks usually aim for capital gains and dividends. Some may not know that in addition to
typical dividends received from listed companies, they can add to their profits with a dividend tax credit.
First off, let us review what a dividend is. A dividend is a payment made to shareholders by a company as a distribution of its
profits. This means that dividends are distributions made from corporate after-tax profits, or what we call net profits. Listed
companies are subject to different corporate tax rates which vary from 30 percent, to 25 percent, to 20 percent. Some companies
are qualified for tax exemption, e.g., those under the Board of Investment’s incentive schemes, or those sustaining cumulative losses.
Customarily, dividend income is taxed at 10 percent, except for that paid by companies under the BOI’s incentive programs.
If a taxpayer includes received dividend payment in his/her income tax calculation, he/she is making double tax payment - in
this case, corporate tax and personal income tax - and thus is eligible for a corporate tax return. Even so, there are eligible and
ineligible dividends. Your dividend is ineligible if :
1. It is paid by a company exempt from corporate income tax under BOI’s incentive program.
2. It is exempt from being added to corporate assessable income calculation.
3. It is paid by a company with cumulative losses.
4. It is incurred from realized profit based on the equity method.
Credit calculation can be done as follows :
How much tax credit is received is subject to the corporate tax rate that the company pays, as well as personal income
tax. You may study the below examples to get an idea.
Example 1: Mr. Kasikorn receives dividend payments from two companies - A and B. Company A pays 30 percent or Baht
10,000, while Company B pays 20 percent or Baht 10,000, for their income tax. Mr. Kasikorn receives dividend tax credit from
both companies. In detail :
Here, Mr. Kasikorn receives a total tax credit of Baht 6,785.71 (4,285.71 + 2,500). The above example shows us that the higher the
tax rate that the company pays, the higher the dividend tax credit that the shareholder gets.
Tax credit from Company A = (10,000 x 30%) = 4,285.71 Baht
(100% - 30%)
Tax credit from Company B = (10,000 x 20%) = 2,500 Baht
(100% - 20%)
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Example 2 : Mr. Khongthai and Mr. Tony get Baht 10,000 dividend payments from Company A, which pays 30%
corporate tax. Mr. Kongthai has an annual income of Baht 1,000,000 (excluding dividends), whereas Mr. Tony earns Baht 500,000
a year without dividends. Both wish to include dividends in their assessable income for dividend tax credit benefits and receive
the additional credit as detailed below :
Mr. Khongthai’s Case
With an annual income of Baht 1,000,000 , Mr. Khongthai - after deduction of personal expenses and allowance of Baht 90,000 -
is taxed :
Therefore, Mr. Khongthai is obligated to pay an estimated tax of Baht 97,000. In case he adds the received Baht 10,000
dividend and Baht 4,285.71 tax credit to his income tax calculation, his total earnings would be Baht 1,014,285.71. After deduction
of personal expenses and allowance, his estimated tax would be as follows :
Then, deduct dividend tax credit (Baht 4,285.71) and dividend tax less withholding tax (Baht 1,000) from estimated tax, making
tax for Mr. Khongthai a total of Baht 94,571.43 (99,857.14 - 4,285.71 - 1,000). By this calculation, he would save on his taxes and
even get a tax rebate of Baht 2,428.57 (97,000 - 94,571.43).
Income bracket (THB) Assessable income (THB) Tax Rate (%) Tax (THB)
1 - 150,000 150,000 0 0
150,001 - 300,000 150,000 5 7,500
350,001 - 500,000 200,000 10 20,000
500,001 - 750,000 250,000 15 37,500
750,001 - 1,000,000 160,000 20 32,000
Total 910,000 97,000
Income bracket (THB) Assessable income (THB) Tax Rate (%) Tax (THB)
1 - 150,000 150,000.00 0 0.00
150,001 - 300,000 150,000.00 5 7,500.00
300,001 - 500,000 200,000.00 10 20,000.00
500,001 - 750,000 250,000.00 15 37,500.00
750,001 - 1,000,000 174,285.71 20 34,857.14
Total 924,285.71 99,857.14
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Mr. Tony’s Case
With a total annual income of Baht 500,000 and deduction of personal expenses and allowance of Baht 90,000, Mr. Tony would be
obligated to pay the following taxes :
Hence, estimated tax for Mr. Tony would be Baht 18,500. In case he adds the paid dividend of Baht 10,000 and dividend
tax credit of Baht 4,285.71 to his income tax calculation, his total earnings would then be Baht 514,285.71. After deduction of
personal expenses and allowance, Mr. Tony’s estimated tax would be as follows :
Next, deduct dividend tax credit (Baht 4,285.71) and dividend tax less withholding tax (Baht 1,000) from estimated tax; thereby
the total tax for Mr. Tony would be Baht 14,642.86 (19,428.57 - 4,285.71 - 1,000 = 14,642.86). With this calculation, he would save
on his taxes and even get a tax rebate of Baht 3,857.14 (18,500.00 - 14,642.86).
As exemplified above, Mr. Tony, whose highest tax base is 10 percent, would benefit from the dividend tax credit more than
Mr. Khongthai, whose highest tax base is 20 percent. In this way, individuals with lower income tax will capitalize more on the
dividend tax credit than those with higher income tax. That is not all - a taxpayer with the highest tax base of 30 or 35 percent
will get zero from the dividend tax credit, since his/her tax base is as high as or even higher than corporate income tax.
Once investors decide to add dividends to their assessable income, they should remember to include dividends paid from
stocks purchased from every listed company (except those exploiting privileges from the BOI; the shareholder can decide if he/
she wishes to do so), regardless of the fact that these companies may not qualify for a dividend tax credit. To claim a dividend
tax credit, simply fill in your received dividends and tax credit in a Personal Income Tax Return Form (P.N.D. 90) under income
Section 40(4). Now that you are aware of what you can get from the dividend tax credit, make sure to keep all dividend payment
notifications sent during the tax year from Thailand Securities Depository (TSD), for tax filing use. However, if you misplace some of
the notification documents, the TSD is willing to issue you a new copy. So don’t forget to reward yourself with higher returns…
it’s a cakewalk!
Income bracket (THB) Assessable income (THB) Tax rate (%) Tax (THB)
1 - 150,000 150,000 0 0
150,001 - 300,000 150,000 5 7,500
300,001 - 500,000 110,000 10 11,000
Total 410,000 18,500
Income bracket (THB) Assessable income (THB) Tax rate (%) Tax (THB)
1 - 150,000 150,000.00 0 0.00
150,001 - 300,000 150,000.00 5 7,500.00
300,001 - 500,000 124,285.71 10 12,428.57
Total 424,285.71 19,428.57
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