Fitch: Thai Growth Robust Despite Turbulence; Banks to Post Higher Profits

Fitch Ratings says Thailand’s economic performance has proved surprisingly robust to global and domestic turbulence in 2010, although longer-term trends in growth and in the public finances pose some concerns from a ratings perspective. Speaking at Fitch Ratings (Thailand) annual conference in Bangkok, Andrew Colquhoun, Fitch’s Director and Head of Asia-Pacific Sovereigns added that “Emerging Asia’s sovereign credit has generally outperformed other emerging-market regions through the global financial crisis, buoyed by fundamental economic improvements since the 1997-98 Asian crisis.” As for the global economy, Mr.Colquhoun says the recovery is likely to continue, but at a weaker pace in the rest of 2010 and into 2011, beset by ongoing adjustment and rebalancing in many large economies while fiscal stimulus fades, posing a potentially more challenging climate for sovereign credit globally. On Thai financial institutions, Vincent Milton, Fitch’s Managing Director of its Thai office and Senior Director, Financial Institutions, says stronger loan growth and lower provisioning costs will likely see Thai banks report higher net profits in 2010 and 2011, assuming the economic recovery remains on track. “Fitch expects the overall performance of the larger private banks - Bangkok Bank (Long-term Issuer Default rating (IDR): ‘BBB+’/Stable), Kasikornbank (‘BBB+’/Stable) and Siam Commercial Bank (‘BBB+’/Stable) - to continue to outperform the sector, with Bank of Ayudhya (‘BBB’/Stable) also emerging as a strong performer,” Mr Milton added. As for other banks in the Asia-Pacific region, Brett Hemsley, Fitch’s Managing Director and Head of Asia-Pacific Bank group says the agency sees risks building in banking systems across the region, particularly in China due to rapid asset growth -- even though Asian banking systems have generally proved resilient during the global financial crisis, and have in general continued to benefit from a relatively benign operating environment as a result of the robust performance of many Asian economies. Commenting on the Thai telecoms sector, Obboon Thirachit, Fitch’s Associate Director of Thai Corporates, says the agency remains concerned about the ongoing policy, legal and regulatory risks facing Thai telecom operators. “Although the issuance of 3G licences could prove a positive step towards industry restructuring, leverage could rise sharply, if the final auction price is significantly higher than expected,” says Mr. Thirachit. “However, Fitch anticipates that the largest two operators, Advanced Info Service (‘BBB+’/Stable) and Total Access Communication (‘BBB-’/Stable, should have the financial flexibility to absorb higher investment costs with growth in non-voice revenue boosting earnings in the medium term,” Mr. Thirachit adds. The conference was well attended by media and investors, with the Secretary-General of Securities and Exchange Commission Mr. Thirachai Phuvanatnaranubala kindly providing the opening keynote speech on the regulatory perspective on debt capital market development in Thailand. Contacts: Vincent Milton Bangkok +66 2 655 4759 Brett Hemsley Tokyo +81 3 3288 2656 Andrew Colquhoun Hong Kong +852 2263 9938 Obboon Thirachit Bangkok +662 655 4757

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