Published on June 27, 2005

Forum bringing together local and foreign brokers will also discuss the effect of infrastructure mega-projects on the nation’s expanding current-account deficit

The severe water shortage in the eastern area of the country will be at the top of the agenda at a seminar called “Thailand Focus 2005-Strategists 2005” to be held today.

JP Morgan Securities (Thailand) president Marco Sucharitkul said the water crisis was hurting hundreds of industrial plants, particularly in the petrochemical sector.

“No one knows exactly the extent of the water shortage. However some companies have decided to buy water from other areas, and their costs will certainly rise,” he said.

PTT on Thursday said in a filing with the Stock Exchange of Thailand that it had a short-term plan to maintain current production capacity by buying water and shipping it in by boat.

The Map Ta Put Industrial Estate has postponed its plan to cut water supplies to industrial plants by 40 per cent from todayfollowing an assurance by Deputy Prime Minister Somkid Jatusripitak of sufficient capacity in the area.

ABN Amro Asia Securities managing director Krisada Sawamipak said his firm’s economist would participate in the seminar.

Fifty eight economists and strategists from 12 foreign brokerage houses – comprising ABN Amro, Bear Stearns, Citigroup-Solomon Smith Barney, CLSA Securities, Credit Suisse First Boston Securities, DBS Bank Ltd, Goldman Sachs, JP Morgan Securities, Macquarie Securities, Merril Lynch, Morgan Stanley and UBS Securities – will attend the one-day event. The 58 economists cover 800 fund managers across the world who manage US$1 trillion (Bt41 trillion) in assets.

Krisada said the government’s infrastructure mega-projects were to be raised in the forum.

“We want to know how the government will finance the projects and which ones can be slowed down. Now the situation is changed to a current-account deficit. How can the government restrict spending on these projects [to prevent a greater deficit, as infrastructure projects typically involve huge imports]?” he asked.

Krisada said the drought was another issue to be raised with the government, as it is one of the main concerns of foreign investors.

“If rain does not fall until the middle of next month, what will be happening by then and what solutions will the government and companies in the area have? It will have an impact on economic growth, so we would like to know both the best- and the worst-case scenarios,” he said.

An analyst at Kiatnakin Securities said current share prices of petrochemical firms have already factored in the problems, because investors are nervous that some industries in the area may have to temporarily shut down.

The broker is retaining its SET index target this year at 750 points, representing a price-to-equity ratio of 9.95. The target is based on corporate earning growth of 10 per cent this year.

Meanwhile, Capital Nomura Securities Plc’s head of research, Satit Wannasilpin, believes the situation in the eastern region will begin to return to normal in August if water levels begin to increase.

If petrochemical producers in the area cut their production capacity by 20 per cent for one quarter, it would shave a mere 0.4 per cent off the country’s gross domestic product (GDP), he estimated.

There are around 22 listed firms with businesses in the eastern area.

The broker still maintains its SET index target at 734 points for this year.

Siriporn Chanjindamanee

The Nation

Post your comment to this story here