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1 KBank on Econ / FX / Rates KBank on Econ / FX / Rates August 2011 August 2011 by by Kobsidthi Silpachai, CFA Kobsidthi Silpachai, CFA Capital Markets Research Capital Markets Research

Capital Market Business's event aug 2011.thai final

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Page 1: Capital Market Business's event aug 2011.thai final

1

KBank on Econ / FX / RatesKBank on Econ / FX / Rates

August 2011August 2011

byby

Kobsidthi Silpachai, CFAKobsidthi Silpachai, CFA

Capital Markets ResearchCapital Markets Research

Page 2: Capital Market Business's event aug 2011.thai final

2

���������� ��������� S&P ก���������ก��������� ����!�ก�� �����ก"��#$%���&��'����&����%�()*'+)'#'����� , �ก����& AAA �� .���ก��

���� , ��)'�/� "���(��0.�1��ก1�����%'�ก����� ���!ก����'�����'����'ก�&��!��!&!"����ก���2 2013 78*���!����% ��!������ก�90�9:��0��%'"�

� .���ก��!;���ก�"���'��0.�ก����%���!ก��#�7)�'9��.&���'0���1������ 78*�ก��)'ก���%'!�0��()*'���ก�&�� &����%��� �9)*'�<'�ก��"�%���'���=��'&1��#'�9��.&���#!�&�ก�� 7 % 1��#'��&���(%�!���)'��ก���0��กก'��;�ก���0�����%������@ 1�� �!'���� '�ก������ก������+��%'!;��� +8������A�"�"����*����ก����@$�!:��ก����� ��*"�%�(%�9�!�ก����@$�!:��ก���0�

� ����!��*�;� �� &�������ก����ก����&������������#'�����!ก� 90�9:��0�''ก��9)*'���$��%����#'��� 78*���!����%B����ก��%!BC�������ก +$ก�%�"�!��=$�(��BC����'�(�! 1�%�#�"��'!%�"� �� &�������ก90�9:��0�''ก� � �ก;���0���������ก��'!�$��%�� � .���ก����B$�0B��'�(�!#��;��กก�����*!�9��.&�����*+)'�����A��ก;���0�#'��� (�0����9!:�� FCY 1�������0��� LCY)� .���ก����B$�0B��'�(�!�$ ���!��0��;� � ��!�;� �����!BC�(��'�(�!�����A���'�(%�!�90*��;����1ก%.���ก��#'�9�ก�#

� ���ก���#'�B���@�C ก0�+�+'!"��ก��&�'�ก����� '���=��'&1��9��.&���#'�"�! "����ก����&'���ก�=��'&1������&�%����*���)'#'��2 �(%�.;�ก���7)�'�)���* 3.25% 1�%��)*'�;ก'!%�(�����#8�� ��0����0*�"��=��'&1���$� 1�������=(0 ���ก�&������! ��*���!ก��ก�&�2 2009 '�ก����� ��*��)'B����0�MN��������*9�O�1��� 1��'�����0��/<'������ก0����% ��)*' Fed / ECB 90�9:��0�''ก��ก#8��

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���������� ��������� '����*��0� QE3 "���ก0�#8���1��� QE1 1�� QE2 �)'��0���*��A�ก�!;�.: Vก�=��ก���W �(%�ก�=��ก�����0��ก.���ก��"��$%.���9X0(!:

QE3 ��A�ก�!;�.: Vก��8��$�W ����1�%�/�"����&���ก���%'���=��'&1����!����� ��"�%��ก�����*!�1���'!%���'!ก���ก����*��2 2013 78*���!����%.���9X0(!:���+ก$�!)���0�/�� ��)'����)*'�"#��'! ����&�� 2 �2#�����

� ��)*'��ก��0��'���:���� ��"�%"��'!$%������ '���0ก 1����"��"�!���0����9!:')*� Y 1�����%������@ ��!����������<��! USD / THB #'�����* 29.00 ����&�0���2 2011 1�� 28.00 ����&�0���2 2012 ก��90*�#8��#'����'�� ���ก;���0� USD ��A���*��&�'��%ก����������%��0�#'����� ,��!�������0��%'"�

� ��)*'��ก�����@"�!1�������@�ก0����%')*� Y ��1��������*���=(0 ก�&B����0��/<'�กก�%��0�MN� 1�������A���)*'��&ก��*��"��ก����0 ��0&�����@�C ก0���*��#8�� ��������8�����;%�����ก��%'�$�ก�&B����0��/<'�9)*'���&��;�ก���0&���@�C ก0� ... ��)*'��ก:

� `. GDP ��*1����0� = GDP ���c��;&��d '�����0��/<'

� +���!&!���������*������ GDP ���c��;&�� �90*�#8��"������#8�� 9��'�ก�&(%�!ก�ก���!�!"�� ��)*'���!&ก�&'�����0��/<' ����������*!��%'���"�%��&��������(%� �������''กก�� �����@ '�!0��: �$�0�7�! 7����!1�� �0�&�! GDP ���c��;&�� ��ก�()*'��!�ก�&����! ��#X���*'�����0��/<'��A��0*��*ก���&��!ก��

� �����% .��. ���90*�'���7)�'�)�9��.&����$��;�+8� 4% ��!�0���2��� �9)*'�<'�ก��ก���ก�X:��0��/<'��*'��0*�#8���%'"�'�ก

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current

2011e

GDP

2010

GDP

1mth ago 3mth ago 6mth ago current

2011e

CPI

2010 CPI 1mth ago 3mth ago 6mth ago

AUSTRALIA 2.0 3.4 2.8 2.9 3.5 3.6 2.9 3.3 3.3 3.0BRAZIL 4.0 7.5 4.0 4.1 4.5 6.2 5.0 6.2 5.5 5.0CHINA 9.3 9.7 9.5 9.5 9.5 5.2 3.3 4.9 4.7 4.6COLOMBIA 5.0 4.3 4.9 4.5 4.4 3.3 2.3 3.3 3.5 3.1EUROZONE 2.0 1.7 2.0 1.7 1.6 2.7 1.6 2.7 2.5 2.0FRANCE 2.0 1.5 2.2 1.9 1.7 2.1 1.7 2.2 2.3 1.9GERMANY 3.4 3.6 3.4 2.8 2.5 2.3 1.2 2.3 2.3 1.7GREECE -3.6 -4.0 -3.6 -2.9 -2.7 3.1 4.7 3.1 2.2 1.2HONG KONG 6.0 6.6 5.4 5.3 4.5 5.0 2.4 5.0 4.5 3.7HUNGARY 2.5 1.0 2.6 2.6 2.8 4.1 4.9 4.0 4.0 3.8INDONESIA 6.5 6.0 6.4 6.4 6.4 6.0 5.1 6.0 6.8 6.7IRELAND 0.5 -0.4 0.1 0.2 1.5 1.3 -1.6 1.3 1.2 0.9ISRAEL 4.6 4.1 4.5 4.5 3.6 3.6 2.7 4.3 4.3 3.2ITALY 0.8 1.1 0.9 1.1 1.1 2.6 1.6 2.5 2.4 2.1JAPAN -0.7 4.3 -0.6 1.3 1.4 0.4 -0.7 0.4 0.0 -0.3KUWAIT 4.4 2.8 4.4 4.5 3.9 4.5 4.1 4.5 4.7 4.2MALAYSIA 5.0 7.0 5.5 5.5 5.1 3.3 1.7 3.0 3.1 2.8MEXICO 4.2 5.2 4.2 4.1 3.7 3.6 4.2 3.7 3.7 3.9PHILIPPINES 5.4 7.0 5.4 5.0 5.0 5.1 3.8 4.9 4.0 4.0PORTUGAL -1.9 1.6 -1.4 -1.2 -1.0 3.4 1.4 3.7 3.4 2.0RUSSIA 4.6 4.0 4.6 4.6 4.2 9.0 6.9 9.1 9.1 9.0SAUDI ARABIA 5.6 3.8 5.6 5.7 4.3 5.5 6.0 5.5 5.6 5.2SINGAPORE 6.0 14.9 6.0 5.2 5.2 4.5 2.8 3.2 3.2 3.2SOUTH AFRICA 3.6 2.8 3.6 3.5 3.5 4.9 4.3 4.9 4.6 4.6SOUTH KOREA 4.4 6.1 4.5 4.5 4.3 4.2 3.5 4.4 4.4 3.5SPAIN 0.7 -0.2 0.8 0.7 0.6 3.1 2.1 3.1 2.8 2.1SWITZERLAND 2.4 2.7 2.4 2.0 1.7 0.9 0.7 0.9 0.8 0.8TAIWAN 5.3 10.4 5.2 4.7 N/A 2.0 1.0 2.1 2.1 N/ATHAILAND 4.1 7.9 4.1 4.5 4.5 3.8 3.3 3.8 3.8 3.4TURKEY 5.4 8.1 5.3 4.6 4.6 6.6 8.6 6.5 6.3 6.3BRITAIN 1.2 1.6 1.4 1.5 1.9 4.4 3.3 4.5 4.3 3.6UNITED STATES 1.7 2.9 2.5 2.7 3.2 3.0 1.6 3.0 3.0 1.8

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������ก��ก����� �������ก�������

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6

-15

-10

-5

0

5

10

15

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Private consumption Government Consumption Gross fixed capital formation

Inventory change Net exports GDP yoy

% yoy

ก�#!!��� 2.6% ��"����2 �

�ก:C= +1.5%G = +0.1%I= +0.9%

Inv = +0.2%X d M = +0.3%

����� ��ก�� ����������ก������������

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7

������ก��ก����� �������ก����

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������ก������ �����ก���� �!��� (�#$�%����ก�ก����)

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-15%

-10%

-5%

0%

5%

10%

15%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%6%

G7 lead indicators (left axis) G7 GDP (right axis)

G7 economies make about 50% of the world

economy

The G7 lead indicators have been negative for May and

June 2011

This suggest that reported GDP in 2H

are likely to be negative

'�($�(�)$��*��ก����� �������ก�+$������,�-$� G7

Page 10: Capital Market Business's event aug 2011.thai final

-15%

-10%

-5%

0%

5%

10%

15%

00 01 02 03 04 05 06 07 08 09 10 11

-10%

-5%

0%

5%

10%

15%

OECD lead indicator, % YoY, left axis TH GDP, % YoY, right axis

10

The lead indicators of the OECD countries (34 in

all) are nearly zero

Thaksinomics helped us to avoid the global slowdown in 2002 /

2003, can we hope for a repeat?

'�($�(�)$�� �������ก�������,�-$� (OECD) *�������ก����

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11

'�($�(�)$�� �������ก�������

Page 12: Capital Market Business's event aug 2011.thai final

y = 141.07x - 1395.6

R2 = 0.9725

3000

5000

7000

9000

11000

13000

15000

30 40 50 60 70 80 90 100 110

OECD lead indicators for US, index

US real GDP, 2005 dollars, bn

12

OECD lead indicator explains 97% of

historical moves in US GDP

y = f(x), '�($�(�)$��(6���7��������ก�������

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13

�����ก�!���89$���'��#6+$:����6�$*�

Page 14: Capital Market Business's event aug 2011.thai final

14

'#���;�$�6������ก��8���ก������'��

Page 15: Capital Market Business's event aug 2011.thai final

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'�($�(�)$�� �������ก������$� �����+ก�< 0.0%

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16

�6�$'�($�(�)$�� �������ก�������@������� �����'��

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17

�(6$�'���ก�$ก�������ก�����

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18

80

90

100

110

120

130

140

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

External sector/GDP, %

�����ก������� �,A��,������ก�$�ก������+$��'������#�

Page 19: Capital Market Business's event aug 2011.thai final

19

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

01 02 03 04 05 06 07 08 09 10 11

-30%

-20%

-10%

0%

10%

20%

30%

40%

OECD lead indicator (left axis) Thai export volume, 3mth average, push back 6mths

'�($�(�)$�� �������ก�������,�-$� (OECD) *�������ก���6���ก �����

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20

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

01 02 03 04 05 06 07 08 09 10 11

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

OECD lead indicator (left axis) Thai import volume (right axis)

'�($�(�)$�� �������ก�������,�-$� (OECD) *�������ก��$��� <� �����

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21

����'B$�<�$:

�D!���$�)���������$ก ก��������'8� 6���$ (currency debasement)

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22

����)'���C!� 2011 S&P ��)'��%`.� ��"��!)�!��'����&����0�#'��� &����� ,"����* '+ AAA/A-1o

� �@�C ก0�#'����� ��*�����!)��!;%��$�1���������ก��! ��!&!ก���0���*������0�.0B9"�����&��;����0 ��0&����ก�=�0� ��#X���*���+��1��ก������0��/<' 1�����9'���%'�%��0��'���:���� �กก�%�ก;���0�')*� Y �������"��(%�!��������@���B9��%'�B!�'ก�����@��A�'!%���

� ��)*'����!&���!&ก�&�����@��*��'����&����%�()*'+)'��* 'AAAo��%���� , ���� ,!����&�%��ก�#��;��&����X 1��������#'��� &��90*�#8���$��ก '�ก����1������ก�1ก��c ����%����ก�!��"�%(����� �%�=���������&�;��'���ก������0�'����&����!�!� �ก����+�!�B9"��$%�(0��&

� ���()*'�%��������*!���*=$�ก�����!&!#'����� '���"�%���+&���;#�'�ก���ก�*!�ก�&�0.�ก����ก��&����X��!�ก�� 1����!�!�B!���2 2013 +��ก��ก��"�%"�� 1��#�ก����0���'!%���0���� ���;��'�#'��� (���%���� ,��9)�� ���ก�������'!ก�% �����@')*���*��'����&����%�()*'+)' 'AAA' '!%�����!���

Page 23: Capital Market Business's event aug 2011.thai final

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+$��;��$�กก����;��������ก�$*�$ก��*ก<�D!�������ก��6��ก�$

Page 24: Capital Market Business's event aug 2011.thai final

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��$'�� ���$6��(;��Q;�+$ ��������Q(�����$�)�A�<��Q#ก�����'

Page 25: Capital Market Business's event aug 2011.thai final

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`���'��ก`.� ��"�����&��'����&����%�()*'+)'��!�!�#'��� &������@���� '���0ก ���$%����&'AA +'�ก'AAA'1��!)�!����*����

'����&����0� 'A-1+' ����&ก������0�'����&��!����� ��"��!ก��0ก'����&�(0��&��������!�����1����!�!��ก CreditWatch

� ก����&��'����&����'�����0�#'����% 1=�ก���'��'�����%��B�'��ก�� 1��Mw!&�0����*"���ก��ก����)*'���� Y ��� ���;��'�#'���#�ก���&�;��$1�1������ก�����*!�1���#'�����B��� ����!�ก��

� ก����&������%�()*'+)'����'���������% ����0�.0B9 ��+�!�B9 1��ก���ก�X:"�� #'��+&����ก���)'� 1����!&! "��������(%�������*=%�� �%�ก��������!��ก����� 1�����@�C ก0�'!%��%'��)*'� ������&��*�กก�% ��*����"�� ��)*'��ก����;��'��(0��&�%'ก������0�'����&�������* 18 ��C!� 2011

� ����1�%����� ��"������*!�1����;��'�#'��� �ก���!;%�!ก��ก��()*'��!�����%�9���ก���)'��%�Y �����!&!ก����� 78*��������'���1�%�&+8�������+#'��� �B 1��Mw!&�0�� ��������+&���;#�'�ก���%��ก��"���������:��� �9)*'1ก��c �����#'��� "�����������

� 1������ก������0�'����&����!�!���A��(0��& �����+��*����'����&ก������0�����!�!����*���$%����&'AA'B!���'��2+��"�"�� +��ก�������%ก�����&����Xก��(��%!��'!ก�%��*�ก��"�� '����'ก�&��!��*�$�#8�� 1��ก������ก��������%�=��%'1������������!�!� ��*�กก�%��*����"��

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��ก�$���ก��$'�����%...����������;�ก�;�$��;���6 ?

Page 27: Capital Market Business's event aug 2011.thai final

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000United

States

China

Japa

n

German

y

Franc

e

United

Kingd

om

Brazil

Italy

Can

ada

India

GDP, USD bn

27

�����ก������������ $�'+�!6��$'�� 1 ����ก

Page 28: Capital Market Business's event aug 2011.thai final

28

0

5

10

15

20

25

30

US CH JP UK HK CA FR BR IN GR AU SW SK TW

share of world market equity cap, %

�#� 6���'�8<$�������� $�'+�!6��$'�� 1 �(6$�'���ก�$

Page 29: Capital Market Business's event aug 2011.thai final

29

��',�$7����� $�'+�!6��T$��$'�� 2 �����ก!���89$*����'<������

Page 30: Capital Market Business's event aug 2011.thai final

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������+$:#�:� ���(����� ��$���+�<������ก#<��$6�

Page 31: Capital Market Business's event aug 2011.thai final

300

400

500

600

700

800

900

1000

00 01 02 03 04 05 06 07 08 09 10 11

-900

-800

-700

-600

-500

-400

-300

-200

-100

0

JP UST holdings, left, USD bn cumulative trade deficit, right, inverted, USD bn

31

If we start from Jan 2000, the US has a

cumulative trade deficit with Japan of nearly

USD 800 bn

…and Japan holds about USD 912bn in

USTs

!���89$$����$��กก���ก$'8�ก�� <�ก���������6�$+�!6���8$+$,�$7���������������6�

Page 32: Capital Market Business's event aug 2011.thai final

0

200

400

600

800

1000

1200

1400

00 01 02 03 04 05 06 07 08 09 10 11

-2400-2200-2000-1800-1600-1400-1200-1000-800-600-400-2000

CH UST holdings, left, USD bn cumulative trade deficit, right, inverted, USD bn

32

If we start from Jan 2000, the US has a

cumulative trade deficit with China of nearly

USD 2.1 trn

…and China holds about USD 1.159 trn in

USTs

��$$����$��กก���ก$'8�ก�� <�ก�������������� �A���$A�� ���8$+$,�$7����������������(6$ก�$

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33

Japan

20.2%

Others

35.2%

UK

7.7%

China

25.7%

Taiwan

3.4%

Germany

1.4%

OPEC

5.1%

Thailand

1.3%

UST holdings

��������<��$�) �����������Q;�,�$7�����������<��ก

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34

ก����Aก�� V !���89$���� S&P �����'��$ ���$6��(;��Q;���

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35

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

Jan-

01

Feb-

01

Mar-

01

Apr-

01

May-

01

Jun-

01

Jul-

01

Aug-

01

Sep-

01

Oct-

01

Nov-

01

Dec-

01

BOJ policy rate, % 3mth JGBs, % 10yr JGB, %

S&P downgrades Japan's AAA to AA+ on Feb 2001

…but yields goes down…..

'<����8+' ����Z���*�$,�$7���������!���89$�A��'������ก�� downgrade?

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36

230

240

250

260

270

280

290

Jan-

01

Feb-

01

Mar-

01

Apr-

01

May-

01

Jun-

01

Jul-01 Aug-

01

Sep-

01

Oct-

01

Nov-

01

Dec-

01

Japan M1 money supply, JPY trn

BOJ pumps more JPY into the system, post downgrade

7$� ��ก���!���89$ก��8<$�����ก��'�ก��� <� ;̂)�,�$7���������+$��'

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37

Japan M1 money supply, JPY trn

0

100

200

300

400

500

600

57 60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11

Japan M1 money supply, JPY trn

...*����� �'���$$ก��6��$;���

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38

Debt monetization V �':����$�)����'���6<���'�������� ...*����$:���:��� �����������$ก���#6���(��

Page 39: Capital Market Business's event aug 2011.thai final

39

�8�*^�ก�������<$��ก

Page 40: Capital Market Business's event aug 2011.thai final

y = 0.0808x + 695.84

R2 = 0.9522

1000

1200

1400

1600

1800

2000

2200

4000 6000 8000 10000 12000 14000 16000

USD M1, USD bn

US national debt, USD bn

40

This is evidence of debt monetization (converting it to money). The more

the US government borrows, the more the Fed has to print money

y = f(x), ��;�����������$�)��ก A)$ กB�,���������$ (M1) �,;��+(<�$�)��ก A)$

Page 41: Capital Market Business's event aug 2011.thai final

y = 0.106x + 44.462

R2 = 0.9397

50

100

150

200

250

300

400 600 800 1000 1200 1400 1600 1800 2000 2200

US CPI index

US M1, USD bn

41

y = f(x), ��;�����������$'�����%��ก A)$ (M1) <�� ��กB*,� A)$

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42

bZ�,����กก��� <� ;̂)�,�$7��������� ���c'*��������$�cd�����#� A)$ = ����Z���*�$'�� Z#<ก#<�'<�����($% Z#<���/$�ก���8$���������($%

-3

-2

-1

0

1

2

3

4

5

6

7

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

10yr UST yield less inflation, %

Page 43: Capital Market Business's event aug 2011.thai final

43

-12

-10

-8

-6

-4

-2

0

2

4

6

8

00 01 02 03 04 05 06 07 08 09 10 11

FX return, CNY basis, % UST 10yr UST, % sum of yield and FX return

����Z���*�$'�� + ก��������$*��� 6���$ = ก�����������$ Z#<ก#<�'<�����($% (�����) $�ก���8$���������($% (��$)

Page 44: Capital Market Business's event aug 2011.thai final

44

�กh����ก����$�8���

Page 45: Capital Market Business's event aug 2011.thai final

0

200

400

600

800

1,000

Portugal Ireland Italy Greece Spain

France Germany UK US Other

USD bn

45

PIIGS’ debt held by banks in other countries

�Q���$ก����$+$�8�����ก��Q;� ���,�$7��� ��������+$ EU ��ก

Page 46: Capital Market Business's event aug 2011.thai final

46

��'����6��Q���$ก����$+$�8����� ����������,�� A)$��;���j

Page 47: Capital Market Business's event aug 2011.thai final

47

Price to book ratio: SET Bank index, TH

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

96 97 98 99 00

Thai SET Bank index, price to book ratio

Page 48: Capital Market Business's event aug 2011.thai final

48

Price to book ratio: KBW Bank index, US

0.00

0.50

1.00

1.50

2.00

2.50

07 08 09 10 11

KBW Bank index, price to book ratio

Page 49: Capital Market Business's event aug 2011.thai final

49

Price to book ratio: Euro Stoxx Bank Index

0.00

0.50

1.00

1.50

2.00

2.50

98 99 00 01 02 03 04 05 06 07 08 09 10

Euro Stoxx Bank index, price to book ratio

Page 50: Capital Market Business's event aug 2011.thai final

0

1

2

3

4

5

6

7

8

Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

Italy Spain Germany 7% line%

50

The ECB is lending money to Italy and Spain by buying its

bonds…or…it is recapitalizing the EU banks

7$� ��ก����8���(6����6+�<<$�8$ก��ก#<�;� �����$*�������#��ก$ 7 %

Page 51: Capital Market Business's event aug 2011.thai final

-

500

1,000

1,500

2,000

2,500

3,000

02 03 04 05 06 07 08 09 10

Fed's balance sheet, USD bn ECB balance sheet, EUR bn

51

QE 1

QE 2

��'8� ���c'*��7$� ��ก����8������,�� A)$��;���j��กก��� <� ;̂)�,�$7���������*��ก��,�,%��$��ก��

Page 52: Capital Market Business's event aug 2011.thai final

52

Currency mismatch is the main culprit…FCY

asset….LCY liabilities

This is reflects the transfer of burden from the tax

payer in the US / EU to us

�����*ก<�D!�� ���8$'����6����?

Page 53: Capital Market Business's event aug 2011.thai final

53

Z#<���� ��B$ ����%$�$�ก<b���������ก�ก����$��ก��;���6?

Page 54: Capital Market Business's event aug 2011.thai final

54

QE3 ��;��<$*�<� �,���*6�����6�#<��6�$�)$���� QE1 ��A�ก�(%�!���ก���%'!ก$�����%�.������0�ก�"�� ��*��)'ก�!;�.0xก�=��ก��� ����B9��%'��ก.���

ก�� �$%.���9X0(!: 1���+&��ก���0�

� QE2 ��A����9!!���*�������B9��%'��ก�+&��ก���0��$%B��@�C ก0���*1����0� ��*��)'ก�!;�.0xก�=��ก���'�ก����B� ��*��ก�B9��%'��ก.���ก�� �$%.���9X0(!: 1���+&��ก���0�

� ��)*'��ก.���"�%!'���%'!ก$� �ก��*����"���%����0�����'��$��ก �8������%ก�!;�.0x���"�%�%�=���Y

� ������� ก�ก���'����'ก�&��!������&�*"�'�ก +8��2 2013 �)' QE3 ��)' ก�!;�.0xก��8��$� �กก���*��������;�ก�ก$�!)���0���*+$ก"�'�ก 2 �2

� �(�"�%����*��0���*+$ก90�9:''ก����� "�%"��'!$%������ ,

� ������������&ก�X:���!�2 2009 �กก����%#'���0��'���:���� , ������%��0� ก���&�;�ก�"�����!�#'���0� ��0��/<'�������@�����''ก/��0�MN'�������@������ก

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55

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

00 01 02 03 04 05 06 07 08 09 10 11

US excess reserves, USD mn

�8$�������6�$�ก$ ���Q���$ก����$+$������

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56

9.2

y = -0.0494x3 + 1.3823x

2 - 12.661x + 38.166

R2 = 0.9348

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

4.00 4.50 5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50 9.00 9.50 10.00

unemployment rate,%

Fed Funds rate, %

The reverse path Fed Funds as a

function of unemployment rate

7% looks to be

the thresehold

before a

credible

reversal of

rising Fed

Funds

0.25

7.00

�c'�����6���� A)$����'�ก���)���ก����ก���6����$����#��ก$ 7 %

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57

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2011 2012 2013

Unemployment - Fed Unemployment - Consensus

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2011 2012 2013

Real GDP - Fed Real GDP - Consensus

ก�� �'ก���% ����'�ก����ก��ก������ A)$����'�ก���)� ���c'

Page 58: Capital Market Business's event aug 2011.thai final

58

y = -0.0193x + 66.055

R2 = 0.9464

28

30

32

34

36

38

40

42

44

46

48

1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100

without Sept 2006 to Dec 2008 period

USD/THB

USD M1, bn

y = f(x), ��;�����������$'�����%��ก A)$ (M1) 6���$���กB* B� 6� A)$

Page 59: Capital Market Business's event aug 2011.thai final

59

y = 1.5239x - 1477.7

R2 = 0.9022

0

200

400

600

800

1000

1200

1400

1600

1800

2000

1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100

USD M1 money supply, bn

USD / troy oz

y = f(x), ��;�����������$'�����%��ก A)$ (M1) �� ���� ��กB�#� A)$

Page 60: Capital Market Business's event aug 2011.thai final

60

0

1000

2000

3000

4000

5000

6000

7000

8000

59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11

0

200

400

600

800

1000

1200

1400

1600

1800

US M1 / US gold holding, USD per troy oz, left actual gold price, right

�� ���� ������#6�����6�+' ��ก���ก������#6ก��Z#ก 6���$(6�� Gold standard

Page 61: Capital Market Business's event aug 2011.thai final

28

30

32

34

36

38

40

42

44

46

48

01 02 03 04 05 06 07 08 09 10 11 12

actual model

KBank USD/THB model

61

KBank USD/THB model

We still hold onto our YE

target of 29.00

Page 62: Capital Market Business's event aug 2011.thai final

62

������'<��B$��$'�����%�86$+��6��;���6 ?

Page 63: Capital Market Business's event aug 2011.thai final

63

y = 0.0375x + 41.396

R2 = 0.9496

80

85

90

95

100

105

110

115

120

1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000

TH CPI index

USD M1, bn

without Sept 2006 to Dec 2008 period

y = f(x), ��;�����������$'�����%��ก A)$ (M1) ��'���� �+$���������กB�#� A)$

Page 64: Capital Market Business's event aug 2011.thai final

y = 0.0004x + 76.46

R2 = 0.9437

80

85

90

95

100

105

110

115

120

20000 30000 40000 50000 60000 70000 80000 90000 100000 110000

CH nominal GDP, CNY bn

TH CPI index

64

More exports to China � more money in Thailand � higher inflation

Or less supply in Thailand � higher inflation

��$�cd� ����� Z#กก��ก�� ����� �������ก���$��ก A)$

Page 65: Capital Market Business's event aug 2011.thai final

65

�#$�%����ก�ก��������6�������$,;)$��$����ก���#� A)$�ก$ 3.0%

Page 66: Capital Market Business's event aug 2011.thai final

66

Ranges: % 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13

>3 45.0 60.0 63.0 29.0 32.0 24.0 16.0 22.0

2.5 3.0 35.0 22.0 20.0 19.0 19.0 17.0 13.0 14.0

2 2.5 18.0 13.0 12.0 22.0 21.0 21.0 17.0 17.0

1.5 2.0 2.0 4.0 4.0 19.0 17.0 20.0 20.0 18.0

1 1.5 - 1.0 1.0 9.0 8.0 12.0 18.0 15.0

0.5 1.0 - - - 3.0 2.0 4.0 11.0 9.0

0 <0.5 - - - - - 1.0 6.0 5.0

����0 ��%���#����*#'� .��.!��'!$%��*215 &�+8��0���2���

1���y��*! 240 &��2���

7��.������ก���6���$,;)$��$����ก$ก�����d�������� 3.0%+$����� 4/54*��1/55

Page 67: Capital Market Business's event aug 2011.thai final

67

�����6�'<+(<�� � WTI ��;� Brent *6���+(< Dubai

60

70

80

90

100

110

120

130

140

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11

WTI Brent Dubai

Page 68: Capital Market Business's event aug 2011.thai final

68

�� ��<����$)����$����� ���%����#���#6

10

30

50

70

90

110

130

150

170

190

00 01 02 03 04 05 06 07 08 09 10 11

10

15

20

25

30

35

40

45

50

Sing Gasoil, left Thai diesel, right

intervention, subsidies

Page 69: Capital Market Business's event aug 2011.thai final

69

�� �������#� A)$ �6�Z�+�<��$�cd���6� A)$

-40

-20

0

20

40

60

80

02 03 04 05 06 07 08 09 10 11

-6

-4

-2

0

2

4

6

8

10UN FAO food index, left axis

TH CPI index, right axis (pushed back 4mths)

% YoY % YoY

Page 70: Capital Market Business's event aug 2011.thai final

70

7��. ��*$��$<������ A)$���� ;̂)� ;$Z���*�$,�$7��� 3.50% ... *����*$��$<�����#� A)$ ...

0.00.51.01.52.02.53.03.54.04.55.05.5

01 02 03 04 05 06 07 08 09 10 11 12 13

actual model

%

Page 71: Capital Market Business's event aug 2011.thai final

71

����'B$���@�ก��<+$��$$�)� S&P ก���������ก��������� ����!�ก�� �����ก"��#$%���&��'����&����%�()*'+)'#'����� , �ก����& AAA �� .���ก��

���� , ��)'�/� "���(��0.�1��ก1�����%'�ก����� ���!ก����'�����'����'ก�&��!��!&!"����ก���2 2013 78*���!����% ��!������ก�90�9:��0��%'"�

� .���ก��!;���ก�"���'��0.�ก����%���!ก��#�7)�'9��.&���'0���1������ 78*�ก��)'ก���%'!�0��()*'���ก�&�� &����%��� �9)*'�<'�ก��"�%���'���=��'&1��#'�9��.&���#!�&�ก�� 7 % 1��#'��&���(%�!���)'��ก���0��กก'��;�ก���0�����%������@ 1�� �!'���� '�ก������ก������+��%'!;��� +8������A�"�"����*����ก����@$�!:��ก����� ��*"�%�(%�9�!�ก����@$�!:��ก���0�

� ����!��*�;� �� &�������ก����ก����&������������#'�����!ก� 90�9:��0�''ก��9)*'���$��%����#'��� 78*���!����%B����ก��%!BC�������ก +$ก�%�"�!��=$�(��BC����'�(�! 1�%�#�"��'!%�"� �� &�������ก90�9:��0�''ก� � �ก;���0���������ก��'!�$��%�� � .���ก����B$�0B��'�(�!#��;��กก�����*!�9��.&�����*+)'�����A��ก;���0�#'��� (�0����9!:�� FCY 1�������0��� LCY)� .���ก����B$�0B��'�(�!�$ ���!��0��;� � ��!�;� �����!BC�(��'�(�!�����A���'�(%�!�90*��;����1ก%.���ก��#'�9�ก�#

� ���ก���#'�B���@�C ก0�+�+'!"��ก��&�'�ก����� '���=��'&1��9��.&���#'�"�! "����ก����&'���ก�=��'&1������&�%����*���)'#'��2 �(%�.;�ก���7)�'�)���* 3.25% 1�%��)*'�;ก'!%�(�����#8�� ��0����0*�"��=��'&1���$� 1�������=(0 ���ก�&������! ��*���!ก��ก�&�2 2009 '�ก����� ��*��)'B����0�MN��������*9�O�1��� 1��'�����0��/<'������ก0����% ��)*' Fed / ECB 90�9:��0�''ก��ก#8��

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72

����'B$���@�ก��<+$��$$�)� '����*��0� QE3 "���ก0�#8���1��� QE1 1�� QE2 �)'��0���*��A�ก�!;�.: Vก�=��ก���W �(%�ก�=��ก�����0��ก.���ก��"��$%.���9X0(!:

QE3 ��A�ก�!;�.: Vก��8��$�W ����1�%�/�"����&���ก���%'���=��'&1����!����� ��"�%��ก�����*!�1���'!%���'!ก���ก����*��2 2013 78*���!����%.���9X0(!:���+ก$�!)���0�/�� ��)'����)*'�"#��'! ����&�� 2 �2#�����

� ��)*'��ก��0��'���:���� ��"�%"��'!$%������ '���0ก 1����"��"�!���0����9!:')*� Y 1�����%������@ ��!����������<��! USD / THB #'�����* 29.00 ����&�0���2 2011 1�� 28.00 ����&�0���2 2012 ก��90*�#8��#'����'�� ���ก;���0� USD ��A���*��&�'��%ก����������%��0�#'����� ,��!�������0��%'"�

� ��)*'��ก�����@"�!1�������@�ก0����%')*� Y ��1��������*���=(0 ก�&B����0��/<'�กก�%��0�MN� 1�������A���)*'��&ก��*��"��ก����0 ��0&�����@�C ก0���*��#8�� ��������8�����;%�����ก��%'�$�ก�&B����0��/<'�9)*'���&��;�ก���0&���@�C ก0� ... ��)*'��ก:

� `. GDP ��*1����0� = GDP ���c��;&��d '�����0��/<'

� +���!&!���������*������ GDP ���c��;&�� �90*�#8��"������#8�� 9��'�ก�&(%�!ก�ก���!�!"�� ��)*'���!&ก�&'�����0��/<' ����������*!��%'���"�%��&��������(%� �������''กก�� �����@ '�!0��: �$�0�7�! 7����!1�� �0�&�! GDP ���c��;&�� ��ก�()*'��!�ก�&����! ��#X���*'�����0��/<'��A��0*��*ก���&��!ก��

� �����% .��. ���90*�'���7)�'�)�9��.&����$��;�+8� 4% ��!�0���2��� �9)*'�<'�ก��ก���ก�X:��0��/<'��*'��0*�#8���%'"�'�ก

Page 73: Capital Market Business's event aug 2011.thai final

73

Page 74: Capital Market Business's event aug 2011.thai final

74

Supply & Demand 101, Supply & Demand 101,

our FX forecasting methodologyour FX forecasting methodology

Page 75: Capital Market Business's event aug 2011.thai final

75

Money is the most basic commodity� What is interest rates? It is the price (appreciation rate) of local money versus time

� What is exchange rates? It is the price of local money versus foreign money

� What is inflation? It is the depreciation rate of money…opposite of interest rates

� What determines the price of commodities…..local / foreign money?

� What determines the supply of local / foreign money

� What determines the demand of local / foreign money?

� How do we estimate the target of the exchange rate?

Page 76: Capital Market Business's event aug 2011.thai final

Supply and Demand: Basics of Economics

Quantity of USD

Price of USD

Demand curve

Supply curve

P1

Q1

�This is the basics of the pricing of any commodity

�It is based on supply and demand

�If you have the given supply and demand, the price of USD will be priced at P1 for a quantity of Q1

76

Page 77: Capital Market Business's event aug 2011.thai final

Supply and Demand: Basics of Economics

Quantity of USD

Price of USD

Demand curve

Supply curve

P1

Q1

�If the supply curve shifts…what happens?

P2

Q2

�The price is changed from P1 to P2 but the quantity increases from Q1 to Q2

�This is the case for the USD

�If the Fed cuts interest rates / trying to keep rates low, it is trying to increase the USD money supply

�…But why would the US Fed want to cut interest rates or keep interest rates low?

77

Page 78: Capital Market Business's event aug 2011.thai final

Supply and Demand: Basics of Economics

Quantity of USD

Price of USD

Demand curve

Supply curve

P1

Q1

�Not only that, demand for USD is weaker and the demand curve is to shift to the left

P2

Q2

�The USD will then be re-priced at P3 and Q3

�Why is the demand for USD dollar falling?

�US import more than it exports…

�…therefore the US will demand more foreign currency to pay for its imports

�…and other countries demand for USD is less since US import more than it exports

P3

Q3

78

Page 79: Capital Market Business's event aug 2011.thai final

79

Trade Balance+

Service Account=

Current account balance

Balance of Payments Company CashflowsCashflow from Operations

+Cashflow from Investing

=Free cashflow

Private capital flows+

Public capital flows=

Capital inflows / outflows

Change in debt +

Dividends / new equity=

Cashflow from Financing

Balance of Payments Net cash flow

Forex reserves Cash equivalents

Page 80: Capital Market Business's event aug 2011.thai final

80

Our methodology for USD/THB forecasting

y = -7.6484Ln(x) + 69.957

R2 = 0.8665

26

28

30

32

34

36

38

40

42

44

46

48

25 75 125 175 225

FX reserves to USD/THB mapping

current

2011 forecast

USD/THB

FX reserv es,

USD bn

y = 27.698Ln(x) - 86.288

R2 = 0.7563

25

30

35

40

45

50

70 80 90 100 110 120 130

DXY to USD/THB mapping current

USD/THB

DXY

since

2001

Page 81: Capital Market Business's event aug 2011.thai final

81

Cumulative current account & USD/THB

-30000

-20000

-10000

0

10000

20000

30000

40000

01 02 03 04 05 06 07 08 09 10

29

31

33

35

37

39

41

43

45

TH current account cumulative, Jan 91 = base, USD mn, left

axis

USD/THB, right axis, inverted

y = -0.0003x + 37.314

R2 = 0.7087

28

30

32

34

36

38

40

42

44

46

48

-40000 -20000 0 20000 40000

latest data point

USD/THB

cumulativ e current account balance, Jan 91 = base, USD mn

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