20-10-2023 (BANGKOK) Analysts are optimistic that the Thai economy and stock market could experience a boost from China’s stronger-than-expected economic performance in the third quarter. They hope that Beijing will unveil further stimulus measures later this year.
Koraphat Vorachet, Head of Research at Krungsri Capital Securities, highlighted China’s GDP growth of 4.9% in the third quarter, surpassing the market estimate of 4.5%. This suggests that government policies have effectively rejuvenated the Chinese economy. He noted that in the first nine months of 2023, China’s economy expanded by 5.2%, remaining on track to achieve its full-year target of 5%.
Mr. Koraphat stated, “A Chinese rebound would positively impact economies across Asia, including Thailand. As manufacturing activities on the mainland rebound, bulk carriers and petrochemical companies on the stock market should benefit.” He anticipates that more stimulus measures will be announced by the Chinese government in the coming months.
Following the release of China’s third-quarter GDP data by the National Bureau of Statistics, several financial institutions upgraded their growth estimates for the world’s second-largest economy. JP Morgan raised its growth projection for this year to 5.2% from 5%, while Citigroup and UBS also adjusted their forecasts upward. Nomura, a Japan-based financial services group, increased China’s growth forecast for this year to 5.1% from 4.8%.
However, the International Monetary Fund revised its outlook for China’s GDP growth, lowering it from 5.2% to 5% for this year and from 4.5% to 4.2% for 2024. This adjustment was made in response to weaknesses observed in the property sector.
Kasikorn Research Center (K-Research) attributed the better-than-expected third-quarter GDP performance to stimulus policies, including interest rate reductions to boost the consumption of goods and services, along with tax incentives for the purchase of electric vehicles and new homes.
Retail sales surpassed the target of 5.5% year-on-year growth, and car sales increased by 2.8% during the same period. K-Research noted that following the reopening, China’s service sector expanded by 6% on an annualized basis in the first nine months. Catering and accommodation experienced a surge of 14.4% year-on-year, while retail sales rose by 6.8% over the same period, indicating a recovery in domestic consumption.
However, K-Research also acknowledged that the Chinese economy still faces challenges in the latter part of 2023 to achieve the government’s 5% growth target for the year. Domestic consumption has not fully recovered, and property firms are grappling with high levels of debt.
In response to these challenges, Beijing is expected to introduce additional stimulus measures, particularly fiscal policies and further initiatives to revitalize the property sector. This might include extending the loan repayment period for real estate companies.
K-Research also suggested that the 20th National Congress of the Chinese Communist Party is likely to increase the budget deficit, currently set at 3% of GDP. This increase would support the issuance of 1 trillion yuan worth of government bonds to fund infrastructure projects.
