Thai businesses across several sectors are witnessing improved earnings, although leverage remains high due to large investments, according to Fitch Ratings.
The view was among those expressed at the firm's recent 2024 Bangkok briefing on the global financial market and Thailand's corporate credit outlook. Participants also explored asset allocation strategies and the framework for credit investing.
Obboon Thirachit, senior director of corporate ratings at Fitch Ratings (Thailand), noted in his presentation that a steady tourism recovery and a resumption of government spending should support continued earnings growth at Fitch-rated corporates in the aviation, hospitality and building material sectors.
Lower fuel costs should also buoy earnings in the power and utility sectors, although already-high leverage at utilities could be made worse by high renewables investment, he said.
Fitch expects earnings at oil and gas companies to moderate from a high base along with an expected softening in oil and gas prices, although earnings should stay strong. However, weak demand from the deterioration in the global economy and new supply is hindering an earnings improvement in the petrochemical sector.
Fitch-rated Thai corporate issuers demonstrated prudent cash flow management during the Covid-19 pandemic, with cautious investment and lower dividend payouts. Nevertheless, investment and acquisitions have increased, particularly at oil and gas companies, to address the long-term changes driven by the climate transition and business and technology transformation. Fitch expects this to keep financial leverage elevated and thus constrain rating upgrades.
Arsa Indaravijaya, deputy secretary-general of the Government Pension Fund, discussed the fund's asset allocation framework, including setting capital market assumptions, risk/return objectives, benchmarking and currency management, as well as the fund's credit investing approach.
The fund uses tactical asset allocation during economic regime changes or volatility from monetary policy shifts in the shorter time horizon, he said.
