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Investment Outlook amid Market

Volatility

Amonthep Chawla, Ph.D.

CIMB Thai Bank Public Company Limited

June 2022

FORWARD Wealth

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Global economy is experiencing triple whammy at this time

Repercussions from Fed’s pivot
High inflationary pressure from
rising energy and commodity
prices due to Russia-Ukraine
conflicts
Risk of another supply chain
disruptions from China’s
draconian lockdown to control
COVID outbreak
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Corporate and household debt have risen over the past decade
Composition of non-financial debt
350

300
Households and NPISHs
Corporate 61.8
250 61.6
General government 55.5
44.2 48.1 51.5
38.9
200 35.7
% of GDP

33.3
29.8
27.3 27.8
150 160.8 155.5
159.5 156.4 149.1 150.1
158.5
145.8
100 137.5
117.8 117 127.6

50
57.4 67.3 67.6
40.2 41.7 48.3 51.6 53.7
33.7 33.6 34.5 37.3
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
YEAR

Source: Bank International Settlement (BIS) and CEICData

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We explore a scenario in which continued supply chain disruption adds to near term inflationary pressure and prompts
rapid monetary tightening. With household real incomes heavily squeezed, consumer spending weakens. Investment
also declines markedly. The hit to demand is amplified by weakening financial markets. As a result, global growth slows
sharply during 2023, as advanced economies fall into recession.
%,qoq: annualized USA %,qoq Eurozone
10.0 6.9 10.0
6.3 6.7
4.1 4.7 5.0
3.0 5.0 3.1 2.2 2.6 2.8 2.7
5.0 2.3 1.8 2.4 1.7 1.4 1.7 2.0 1.3 1.7
-0.9
0.0
-1.4 0.0
2.3 1.2 1.4 1.2 0.8
1.0 0.6 0.4 0.1
-5.0 -1.8 -2.4 -1.4 -5.0

-10.0
-10.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2021 2022 2023
2021 2022 2023
Basecase Advanced economy recession
Basecase Advanced economy recession
%,yoy China
%,qoq: Japan
20.0 18.3
10.0
5.7
3.8 4.3 3.3 15.0
5.0 2.1 1.5 1.0 1.2 1.4
-1.3 -1.0 4.0 10.0 7.9 7.1
0.0 -2.9 2.7 5.1 5.2
4.9 4.0 4.8 4.6 4.9 4.1
-0.2 -1.1 -0.1 5.0
-5.0
-1.3 1.5
4.5 4.8 5.3
4.1
0.0 2.7 1.9
-10.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2023
2021 2022
2021 2022 2023
Basecase Advanced economy recession
Basecase Advanced economy recession

Source : Oxford Economics(May 23,2022), CIMB Thai 4

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Thailand macroeconomic highlights

Thailand’s economy would decelerate from the earlier forecast due to rising inflation and Russia-Ukraine conflict
7.7 Forecasted
4.5 4.1
1.8 2.2 2.3
GDP -0.2
-2.4

33.8 33.4 34.5 34.0

33.3 33.0
USD/THB 32.1
31.3

0.75
0.50 0.50 0.5 0.50 0.50 0.50 0.50
Interest
rates
2021: Q2 Q3 Q4 2022: Q2f Q3f Q4f
Q1 Q1

4.8 4.8 5.1

2.4 2.4 3.2
-0.5 0.5
Inflation
rate
2021: Q2 Q3 Q4 2022: Q2f Q3f Q4f
Q1 Q1

Note Q1/2022 is real value, except for GDP as forecast

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FX Outlook
USD/THB
35 • Thai baht is seen to weaken against the US dollar amid growing
concerns over
34 - Rising oil prices due to Russia-Ukraine war
- US rate hikes more aggressively in Q2, following remaining high
33
inflation

32
- Lack tourism revenue in Q2, leading to CAB deficit
• We projected a gradual appreciation of the THB against the USD
31 in H2 amid easing concerns over
- Stable oil prices
30
- Returning tourists
29 - Stronger economic growth, driving confidence
- Expectation for rate hike, driving capital flows to bonds

Source : Oxford Economics and CIMB Thai Research

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Interest Rate Outlook

BOT’s policy rate and inflation rate (%) • The Bank of Thailand would likely hold the policy rate at
6
5
Inflation 0.50% per year to accommodate economic recovery,
4 especially due to slow growth and lack tourism revenue
3
2 during the first half.
1
0
-1
-2
Policy rate
-3
-4
• Inflation concerns are growing in Q2 due to rising oil
prices; however, core inflation would likely remain low
due to soft demand
Crude Oil Prices (Brent): USD/Barrel
109
104.3 101.0
97.9 95.3
99 • The BOT would face a dilemma whether to hike the rate
89 79.7 in Q3 to curb inflation or allow easing money to stimulate
79 69.1 73.2
69 61.3 growth…we would wait for growth to mature so as to
59 50.8
49 43.3 45.3 accelerate recovery. Thailand’s GDP level is still lower
33.4
39 than pre-covid
29

Source : Bloomberg,Oxford Economics and CIMB Thai Research

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Recipe for rate hike…what could pressure the BOT?

Sustained growth

Demand pull inflation

Rapid capital outflows

Financial instability

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Impacts of Thai baht depreciation on businesses/industries

Low import content,
high competition (low margin) Block Rubber Rubber Gloves

Positive Low import content and moderate

(Medium-High) pricing power (moderate-high margin) Cassava Products Food Flavoring and Canned and Processed Polymers
Sauces Vegetable/Fruit Juices

Relatively high-tech products,

high qualities and high import content Printed Circuit Boards Integrated Circuits Hard Disk Drive

Labor-intensive,
high competition (low margin)
Positive Frozen Food Leather & Garment Products
Furniture/toys Footwear
(low-end market)
Impacts from (Slight)
High import content and moderate
Baht Depreciation pricing power (moderate-high margin)
Canned Seafood(tuna)-
Jewelry
exporters

High import content and

mainly on the domestic market
Steel Products Chemical Fertilizers Medical
Negative Industrial Machinery
and Pesticide Devices

Higher service cost due to baht depreciation

and mainly on the domestic market Transport
Oil Station
Services
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Impacts of rising interest rate on businesses/industries

Winners
Businesses with earn higher
returns/profits
Losers(low-medium impacts) Losers(severe impacts)
Businesses with high debt loads , sensitive to
Businesses that are likely to be affected but higher
economic conditions and consumer confidence as
demand for products/services and has the potential to
compete Palm Oil well as being affected by household debt
problems and high cost of living

Rubber Products Packaging Discount Stores

Construction
Insurance Hire Purchase
Materials
Private
Construction

AstraZeneca
Food and Department Consumer Movie Transportation
Financial Importers Beverages
Products
Store(large size) Goods Theatre ( land, sea and air)
Media
Institutions

Car Dealer(non- Oil Stations Real Estate

leading brands)
Electrical Warehouse Private Car Dealer
Appliances Rental in Hospital (leading brands)
Sellers Eastern area
Energy Department Store(small size)
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Impact on businesses from US and Chinese economies slowdown

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Exports of intermediate good to China are projected to affect by China economic slowdown
Thai's Export Value to China Impacts on Thai Exports by Products
Million USD %YOY
40,000 33.2 Export value %chg 40
35,000 35
24.0 24.8 30
30,000 22.2
25
25,000 20
20,000 15
15,000 2.4 2.7
10 Fresh, frozen and Tapioca Products Wood Products
1.4 0.3 2.2 0.9
10,000
5 dried fruit (81.9%) (68.0%) (42.1%)
-5.4 -3.8 0
5,000 -7.9
-5
- -10
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 4M2022
Source : MOC

Growth Rate of Export Value to China by Products

%YOY Rubber (30.7%) Rubber Products Plastic Resin
2020 2021 4M2022
80 (22.0%) (28.5%)
75
60 70
65
53 56
40 44
39 39
20 29
23
18 10 14 15 14 17 4 16 19 16
0
-8 0 -14 -10 -12 -6 -5 -15 -5 Chemical Products Computer and
-21
-20 (17.8%) equipment(16.9%)
-40 Value of export have decreased Value of export have increased in
Tapioca Polymers of Computer Rubber Fresh, frozen Chemical Rubber Woods Copper Other
products ethylene and products and dried products industrial in 4M2022 (YoY) 4M2022 (YoY)
equipment fruit products
Note : (..%) is The proportion of Thai’s exports to the China market compared with world market
Remark: Products with export value more than 500 million USD in 2021 and higher than 300 million USD in 4M2022
in 4M2022
Source : MOC Source : MOC
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What Businesses Benefit From REOPENING?

Department Store Home Appliance Shop Restaurant & Bar Movie Theater Media
Retail & Wholesale

Event Hospital Hotel Spa Fitness/Sport Activities

Airline Taxi Service Land Transportation Industrial Estate Energy such as Oil/Gas
& Logistics Station

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 Recovery Trend of Major Industries/Businesses in 2022
Recovered Q2,22 Q3,22 Q4,22

Rubber Products Steel Products Horizontal Housing in Movie Tutoring school Spa in foreign Amusement Park
Processed Chicken Cassava products Cement Textiles
(for construction) Bangkok Theater tourist destinations
(large enterprises)

Paper & Printing

Materials IT Products Tourist Agency
Electronic Car Hire Purchase Advertising Machinery and parts Second Hand Pub & Bar
Auto Parts Office building Airline
Products Housing

Metal Can Fresh market Used Car Energy such as

Industrial Passenger
(Large Enterprise) Oil/Gas Station
Estate Horizontal transport
Plastic Products Gem and Sea Transport
Housing in Souvenir Shop
Jewelry
Chon Buri

Restaurant Discount Stores

(stand alone/delivery) (Leading brands) Hospital Fitness
Mobile Networks Warehouse (focusing on Condominium
medical in Chiang Mai
Car rental
tourists)

Electricity Condominiums
Medical Devices Motorcycle Apartment in/ near Events
Generating (5-10 MB in 4-star Hotels and
dealers Industrial estate above (major
Car Dealers Bangkok and its
vicinity area, only destinations such as
(Leading Brand) Condominium in Chon 3-star Hotel (major
leading brands Phuket, Samui, destinations such as
Buri (leading brands)
and near mass Krabi, Bangkok and Phuket, Samui, Krabi,
Department Store Chained budget transit line ) Pattaya) Bangkok and Pattaya)
Land Transportation Private Hospitals (Leading brands in hotel/Boutique hotel
(high-medium market and
Construction
& Logistics Bangkok) Construction (leading brands in major 14
focus Thai patients) (private)
Materials Shop destinations)
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Thank you
Q&A Session

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