Published on 08/05/2014
Firms delaying investments The prolonged political instability has eroded the confidence of local companies in making further investments despite their higher funding demands, says Kasikornbank.
The bank’s survey of 17,000 corporate clients found that 59% of respondents delayed investment decisions in the first quarter of the year, indicating a rapid decline in confidence. In the same period last year, only 27% delayed making investments. The sluggish economy along with the ongoing political turmoil have been cited as the main reason for the delays. Only 10% of respondents decided to make new investments in the first quarte, a 30% year-on-year decline, said executive the bank's vice-president Vasin Vanichvoranant. However, the respondents expect their funding requirements from the bank to remain strong, at 1.55 trillion baht this year compared with 1.3 trillion baht last year. The proceeds are expected to be used for outbound investment rather than internal expansion as a result of higher domestic risk factors and greater business opportunities abroad.
Demand for overseas investment by large local businesses increased significantly from 35% in the first quarter last year to 60% in the same period this year. In 2013, the survey respondents expected that 65% or 850 billion baht of funding demand would go for domestic investment with the rest going overseas. This year, 40% of funding needs are expected to be used at home while 60% will go on overseas. Some 90% of the demand for overseas investment will go on infrastructure projects worth around 50 billion baht for each project. Myanmar is the key destination for local business operators, and investment demand in the neighbouring country has increased five-fold. Entrepreneurs are focusing more on overseas investment, mostly in infrastructure-related sectors, service industries and consumer goods in order to tap Asean economic integration. Key four business sectors — food and beverage, commerce, service, and agriculture — account for the highest demand for Asean investment by Thai business operators (36%), followed by utilities and construction (22%), and petrochemicals (10%). However, the actual amount invested has been lower than expected due to the sluggish economy and ongoing political turmoil. Mr Vasin said the bank has continued to support corporate customers overseas expansion in accordance with trade finance business growth from 16% at the end of last year to 17% in the first quarter this year. With the positive expansion, the bank recorded first quarter fee income growth of 18%, higher than the 10% growth rate targeted for the full year. KBank, the country’s fourth largest lender by total assets, however, booked marginal loan growth for the first three months of the year at 1.5% in line with economic conditions. But it has retained its wholesale loan growth target of 5-7% for the year from corporate outstanding loans at 466 billion baht at the end of 2013.