Baht lift unlikely for Thai firms in '99

Business Asia, April 5, 1999 by Vithoon Amorn

Heavily indebted Thai companies should not expect another windfall from the country's currency this year as analysts expect the baht to remain steady after strengthening during 1998.

The rally in the country's currency has run out of steam while Thailand's 20-month recession was expected to bite deeper, they added.

The baht firmed to 36.96 to the United States dollar by the end of December from 47.56 the same month a year earlier. Its 10.67 baht appreciation for each dollar last year offered gains for Thai companies struggling to service or restructure foreign loan exposure.

The forex gains far outweighed any adverse effects of the strengthening Thai baht on exports.

TISCO Securities estimated that listed firms notched about 220 billion baht (US$5.95 billion) of combined foreign exchange gains in 1998, a reversal from 1997 when they lost a massive 350 billion baht because of the currency's steep plunge.

The baht, devalued in July 1997, stood at 47.56 to the dollar at the end of that year against 25.66 at the end of 1996.

"Thai business cannot count on windfall forex gains this year as the baht would likely be steady. Although it is too early to forecast, we expect the baht to end 1999 at around 38 (to the dollar)," said a Capital Nomura Securities analyst.

Thanks to a stronger baht since September, about 233 firms, or 58 per cent, of 403 companies listed in non-bank sectors in the Thai stock exchange posted profits last year.

The figure was a big improvement on 1997 when only 129 companies, or 31 per cent of listed stocks, made profits.

Excluding forex items, however, only 175 listed non-bank firms, or 43 per cent of the total, achieved operating profits in 1998, down from 242 companies, or 58 per cent, in 1997.

Thailand's largest industrial conglomerate, Siam Cement, reported a 24.38 billion baht forex gain in 1998 against a 56.30 billion baht loss a year earlier. Analysts said the firm still carried about US$4.2 billion of mostly unhedged foreign debt.

Thai Petrochemical Industry (TPI), with about US$3.2 billion of foreign exposure, also posted a 24.52 billion baht forex gain in 1998 against a 54.09 billion baht loss a year earlier.

State-owned Thai Airways International, estimated by analysts to carry a US$2.8 billion foreign debt, made a 3.89 billion baht forex gain in the October-December quarter against a 27.03 billion baht currency loss a year ago.