Wednesday, September 17, 2008

Thai banks suffer Bt3 billion losses over Lehman collapse

BANGKOK, Sept 16 (TNA) - Thai commercial banks are expected to suffer an estimated loss of Bt3 billion from total exposures of Bt4.3 billion in their investments with leading US investment bank Lehman Brothers which declared bankruptcy, Nattapol Chavalitcheevin, president of Thai Bond Market Association, said Tuesday.

Investment by foreign investors in the Thai bond market is not much, said Mr. Nattapol, adding that foreign investment in the market declined about Bt7 billion since the beginning of 2008.

He said the US sub-prime mortgage problem will more negatively impact the US and European economies than Asian countries which had much lower investment.

Troubled US financial institutions are expected to force the Federal Reserve to lower its rate by at least  25 basis points which will pressure the Bank of Thailand's Monetary Policy Committee (MPC) to follow suit and reduce its rate to the same level from the current 3.75 per cent, Mr. Nattapol said.

Mr. Nattapol said he is confident that the MPC would have no choice but to lower its rate because local inflation is no longer a major problem as oil prices have retreated sharply while the global economy, including that of Thailand, is expected to slow down.

Thawatchai Yongkittikul, secretary-general of Thai Bankers Association, admitted that financial problems in the US were more serious than he had said earlier.

Tight liquidity may occur in Thailand later because parent firms in the US may transfer money from Thailand to help rescue their financial ailing situation, Mr. Thawatchai indicated.

Direct impact on Thai financial institutions following the Lehman Brothers-initiated trouble is expected to be minimal because their combined investment of Bt4.3 billion represented less than two per cent of their investment overseas, he said.

Pornsilp Patcharintanakul, deputy secretary-general of the Thai Chamber of Commerce, urged Thai exporters to explore new markets as the US is a key importer of Thai goods. He said Thai luxurious goods, jewellery and ornamental goods, and electrical appliances import by the US would be affected.

Although the Thai stock market plunged Tuesday by 17.83 points to close at 624.56 on investor worries over Lehman collapse, the Securities Exchange Commission (SEC) said the problem would not have a direct impact on Thai business sector. The SEC  said it had coordinated with related agencies to closely monitor whether the demise of top US investment bank would cause any impact on listed firms on the Thai bourse. 
As insurer American International Group (AIG) in the US had reportedly asked the Fed for a lifeline, the AIA office in Thailand said its liquidity is still sufficient. Its total assets during the first seven months this year totaled Bt380 billion while accumulative profits stood at over Bt70 billion. (TNA)

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