The Thai central bank held its key interest rate at close to a record low, despite International Monetary Fund recommendations that the country ease monetary policy, reports Bloomberg. Committee members left the one-day bond repurchase rate at 1.5%.A statement from the central bank revised the GDP growth forecast to 3.4%, up from 3.2%, on an expected 2.2% rise in exports.

The statement also indicated that a strong baht may pose challenges to the economy as Thailand works to boost exports.

However, it’s highly likely that the MPC will increase the policy rate in the latter half of this year, given estimated higher inflation. We expect headline inflation at 1.98 per cent in 2017. The Thai economic recovery will likely be more certain after consistent fiscal stimulus.We believe that this interestrate direction will not lead to significant revision of listed companies’ estimated earnings, as their debt level (excluding financial institutions) remains low with a relatively high proportion of fixedrate debt. Commercial banks could gain from the upward interestrate trend.

The listed companies’ estimated net profit is Bt991 billion or Bt101.36 per share this year, reflecting the 2017 SET Index target at 1,620 points. On the other front, given the upward interestrate trend, capital that will come in to drive the Stock Exchange of Thailand may be thinner after expected higher bond yields followฌing the interestrate trend, and the market earnฌing yield gap may be narrower. This means the SET will become less attractive for investment.

Source:Asia Time