Business

Thailand Facing Challenges of Managing the Soaring Thai Baht

The Thai Baht has roared more than 8 percent against the US dollar reaching a six-year high.

BANGKOK – The Thai baht has been the best performing currency in emerging Asia since 2018. The Thai Baht has roared more than 8 percent against the US dollar reaching a six-year high.

But according to news headlines and commentary, the strong currency has lowered the country’s competitiveness and worsened both goods exports and tourism. Two major drivers of Thailand’s economy.

A SAFE HAVEN CURRENCY

Currency appreciation is not unique to Thailand. Bank of Thailand (BOT) officials and currency analysts explain the strength of the baht by domestic factors. Thailand’s solid economic fundamentals — a current account surplus and substantial foreign reserves together with a hawkish central bank — lure capital inflows.

Many consider the baht a safe haven currency among other emerging market currencies due to its stability.

As a result, the baht is likely to retain or increase in value, attracting speculative capital inflows and placing upward pressure on the currency.

In early 2019, the BOT did not seem concerned about the Thai baht’s appreciation, as a strong currency can benefit Thai importers and those who have foreign currency debts. It can also help improve the country’s terms of trade.
Thailand Economy

But the baht’s persistent strength and its potential negative impacts on the export-driven Thai economy have since prompted concern. Exports contracted for a fourth straight month in June and the BOT revised its GDP growth forecast for 2019 downward, from 3.8 per cent to 3.3 per cent.

MEASURES TO CURB THAI BAHT

Measures have since been taken to reduce baht appreciation. In July 2019, the BOT lowered the cap on the outstanding balance of non-resident accounts by a third and cut its supply of three- and six-month bonds at auctions in July and August.

In addition, the BOT has signalled plans to further relax restrictions on outward portfolio investment by Thai investors, which can also help stem currency appreciation.

In August 2019, the BOT cut the policy rate by 25 basis points from 1.75 per cent to 1.5, a shift in the BOT policy stance since a raise by 25 basis points in December 2018.

Still, many believe that these measures are inadequate. There are three main further measures being discussed: Foreign exchange intervention aimed directly at the baht’s value, a policy rate cut and imposing capital controls to curb speculative inflows.

FOREIGN EXCHANGE INTERVENTION

The BOT regularly intervenes in the foreign exchange market, but with strong market expectations this can be costly and counter-effective.

By purchasing foreign reserves in exchange for Thai baht, the central bank in practice helps keep the baht cheap and less volatile. Increasing foreign reserves and the stability of the baht could further reinforce its character as a safe haven currency.

BOT intervention makes the baht an ideal speculative asset. This can create a spiral of bullish speculation — followed by more foreign exchange intervention — leaving the economy with high liquidity or high interest rates if the central bank mops up excess liquidity through open market sales.

The central bank also incurs costs when there are increases in the interest rate differentials between domestic and foreign assets and when the BOT fails to prevent baht appreciation.

The large amount of foreign exchange reserves (39.9 per cent of GDP and over 200 per cent of the IMF’s standard reserve adequacy metric in 2018) may put Thailand on the US watch list for currency manipulators.

Overall, bold intervention by the BOT is unlikely.

CONSIDERING THE USE OF CAPITAL CONTROLS

To tame offshore fund inflows causing a rapid appreciation of the baht, capital controls are effective at least in the short to medium term. But capital controls have long-lasting adverse consequences, affecting the country’s credibility and financial markets.
READ: Thailand extends visa fee waivers to boost tourism as growth slows

In 2006, the BOT imposed controls on capital inflows to stem a previous bout of strong baht appreciation.

The stock market plummeted and bond yields spiked, causing the central bank to lift some of the controls within a day. Thus capital controls are also unlikely given their long-term impact.

POLICY RATE CUTS TO CURB THAI BAHT

The most requested measure by the private sector is for the central bank to cut the policy rate. A common belief is that further rate cuts would make the Thai baht less attractive for foreign investors, reducing pressure on the baht.

Yet, if the funds flow into Thailand because of the safe haven currency perception, rather than for a high yield, it is unclear whether rate cuts will be effective.

More importantly, easing policy may worsen already elevated household debt, which is 78.6 per cent of GDP (among the highest in Asia), jeopardizing Thailand’s financial stability. But it may be Thailand’s only option given that a fragile political situation may thwart more fiscal stimulus.

LIVE WITH FLUCTUATIONS FOR NOW

The strong baht may just be a product of global trends that are contracting exports, particularly sluggish global growth and trade tensions. Further, to weaken the baht is not easy when other countries are pursuing even more aggressive easing policies.

Still, many hope for at least another rate cut this year, even if it may increase household debt.

Amid this debate, let’s not forget that ultimately the central bank is there for stability. The central bank should not be expected to subsidies a cheap export sales strategy if it interferes with the BOT’s main priority of economic stability.

Exchange rate fluctuations are simply a fact of life under non-pegged regimes. Policy efforts are better aimed at helping exporters to sell products with higher added value, rather than competing on low prices.

By Phornchanok Cumperayot

Business

PepsiCo Reduces Revenue Projections As North American Snacks And Key International Markets Underperform.

(VOR News) – In the third quarter of this year, Pepsi’s net income was $2.93 billion, which is equivalent to $2.13 per share. This was attributed to the company.

This is in stark contrast to net income of $3.09 billion, which is equivalent to $2.24 per share, during the same period in the previous year. The company’s earnings per share were $2.31 when expenses were excluded.

Net sales decreased by 0.6%, totaling $23.32 billion. Organic sales increased by 1.3% during the quarter when the effects of acquisitions, divestitures, and currency changes are excluded.

Pepsi’s beverage sales fell this quarter.

The most recent report indicates that the beverage and food sectors of the organization experienced a 2% decline in volume. Consumers of all income levels are demonstrating a change in their purchasing habits, as indicated by CEOs’ statements from the previous quarter.

Pepsi’s entire volume was adversely affected by the lackluster demand they encountered in North America. An increasing number of Americans are becoming more frugal, reducing the number of snacks they ingest, and reducing the number of times they purchase at convenience stores.

Furthermore, Laguarta observed that the increase in sales was partially attributed to the election that occurred in Mexico during the month of June.

The most significant decrease in volume was experienced by Quaker Foods North America, which was 13%. In December, the company announced its initial recall in response to a potential salmonella infection.

Due to the probability of an illness, the recall was extended in January. Pepsi officially closed a plant that was implicated in the recalls in June, despite the fact that manufacturing had already been halted.

Jamie Caulfield, the Chief Financial Officer of Pepsi and Laguarta, has indicated that the recalls are beginning to have a lessening effect.

Frito-Lay experienced a 1.5% decline in volume in North America. The company has been striving to improve the value it offers to consumers and the accessibility of its snack line, which includes SunChips, Cheetos, and Stacy’s pita chips, in the retail establishments where it is sold.

Despite the fact that the category as a whole has slowed down in comparison to the results of previous years, the level of activity within the division is progressively increasing.

Pepsi executives issued a statement in which they stated that “Salty and savory snacks have underperformed year-to-date after outperforming packaged food categories in previous years.”

Pepsi will spend more on Doritos and Tostitos in the fall and winter before football season.

The company is currently promoting incentive packets for Tostitos and Ruffles, which contain twenty percent more chips than the standard package.

Pepsi is expanding its product line in order to more effectively target individuals who are health-conscious. The business announced its intention to acquire Siete Foods for a total of $1.2 billion approximately one week ago. The restaurant serves Mexican-American cuisine, which is typically modified to meet the dietary needs of a diverse clientele.

The beverage segment of Pepsi in North America experienced a three percent decrease in volume. Despite the fact that the demand for energy drinks, such as Pepsi’s Rockstar, has decreased as a result of consumers visiting convenience stores, the sales of well-known brands such as Gatorade and Pepsi have seen an increase throughout the quarter.

Laguarta expressed his opinion to the analysts during the company’s conference call, asserting, “I am of the opinion that it is a component of the economic cycle that we are currently experiencing, and that it will reverse itself in the future, once consumers feel better.”

Additionally, it has been noted that the food and beverage markets of South Asia, the Middle East, Latin America, and Africa have experienced a decline in sales volume. The company cut its forecast for organic revenue for the entire year on Tuesday due to the business’s second consecutive quarter of lower-than-anticipated sales.

The company’s performance during the quarter was adversely affected by the Quaker Foods North America recalls, the decrease in demand in the United States, and the interruptions that occurred in specific international markets, as per the statements made by Chief Executive Officer Ramon Laguarta.

Pepsi has revised its forecast for organic sales in 2024, shifting from a 4% growth rate to a low single-digit growth rate. The company reiterated its expectation that the core constant currency profitability per share will increase by a minimum of 8% in comparison to the previous year.

The company’s shares declined by less than one percent during premarket trading. The following discrepancies between the company’s report and the projections of Wall Street were identified by LSEG in a survey of analysts:

SOURCE: CNBC

Business

Old National Bank And Infosys Broaden Their Strategic Partnership.

(VOR News) – Old National Bank, a commercial bank with its headquarters in the Midwest, and Infosys, a firm that specializes in information technology, have recently entered into a strategic expansion of their link, which has been in place for the past four years.

This expansion is more likely to take place sooner rather than later, with the likelihood being higher.

For the purpose of making it possible for Old National Bank to make use of the services, solutions, and platforms that are offered by Infosys, the objective of this expansion is to make it possible for the bank to transform its operations and processes through the application of automation and GenAI, as well as to change significant business areas.

This lets the bank leverage Infosys’ services, solutions, and platforms.

Old National Bank Chairman and CEO Jim Ryan said, “At Old National, we are committed to creating exceptional experiences for both our customers and our fellow employees.”

This statement is applicable to Old National Bank. Infosys is carefully managing the business process innovations that it is putting us through, putting a strong emphasis on efficiency and value growth throughout the process to ensure that it is carried out efficiently.

This is a routine occurrence throughout the entire operation. Because of Infosys’ dedication to our development and success, we are incredibly appreciative of the assistance they have provided.

Old National has been receiving assistance from Infosys in the process of updating its digital environment since the year 2020, according to the aforementioned company.

Ever since that time, the company has been providing assistance. The provision of this assistance has been accomplished through the utilization of a model that is not only powerful but also capable of functioning on its own power.

Infosys currently ranks Old National thirty-first out of the top thirty US banks.

This ranking is based on the fact that Old National is the nation’s largest banking corporation.

It is estimated that the total value of the company’s assets is approximately fifty-three billion dollars, while the assets that are currently being managed by the organization are valued at thirty billion dollars.

Dennis Gada, the Executive Vice President and Global Head of Banking and Financial Services, stated that “Old National Bank and Infosys possess a robust cultural and strategic alignment in the development, management, and enhancement of enterprise-scale solutions to transform the bank’s operations and facilitate growth.”

This remark referenced the exceptional cultural and strategic synergy between the two organizations. Dennis Gada is the one who asserted this claim. This was articulated explicitly concerning the exceptional cultural congruence and strategy alignment of the two organizations.

We are pleased to announce that the implementation of Infosys Topaz will substantially expedite the transformation of Old National Bank’s business processes and customer service protocols. We are exceedingly enthusiastic about this matter. We are quite thrilled about this specific component of the scenario.

Medium-sized banks operating regionally will continue to benefit from our substantial expertise in the sector, technology, and operations. This specific market segment of Infosys will persist in benefiting from our extensive experience. This phenomenon will enable this market sector to sustain substantial growth and efficiency benefits.

SOURCE: THBL

Business

American Water, The Largest Water Utility In US, Is Targeted By A Cyberattack

The largest regulated water and wastewater utility company in the United States stated Monday that it had been the target of a cyberattack, forcing the company to halt invoicing to consumers.

American Water, The Largest Water Utility In US, Is Targeted By A Cyberattack

American Water, based in New Jersey and serving over 14 million people in 14 states and 18 military facilities, said it learned of the unauthorized activity on Thursday and quickly took precautions, including shutting down certain systems. The business does not believe the attack had an impact on its facilities or operations and said employees were working “around the clock” to determine the origin and scale of the attack.

water

The corporation stated that it has alerted legal enforcement and is cooperating with them. It also stated that consumers will not be charged late fees while its systems are unavailable.

According to their website, American Water operates over 500 water and wastewater systems in around 1,700 communities across California, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Maryland, Missouri, New Jersey, Pennsylvania, Tennessee, Virginia, and West Virginia.

SOURCE | AP