Thai Stock Decline Stokes Exporter Opposition to Yingluck Wage Policy

The biggest drop in Thailand’s main stock index since 2008 prompted brokerages, fund managers and the bourse to call on Prime Minister Yingluck Shinawatra’s two- month-old government to alter plans to raise the minimum wage.The Federation of Thai Capital Market Organizations, a six- member grouping that includes the Stock Exchange of Thailand and Association of Investment Management Companies, urged policy makers to review any measures that would hurt exporters. The SET Index fell the most among Asian benchmark gauges yesterday, declining 5.7 percent, the biggest drop since Oct. 27, 2008.The sell-off “might bring some more common sense into the equation,” said Terry Weir, chief financial officer of Hana Microelectronics Pcl (HANA), Thailand’s biggest publicly traded semiconductor packager, which fell 6.1 percent. “If the minimum wage goes up far quicker than the productivity increase, then of course that will have a negative impact on our profits and on our competitiveness.”Concern that Europe’s debt crisis and a weakening U.S. recovery will slow exports, which account for about 60 percent of the economy, have contributed to a sell-off in Thailand’s equities and currency this month. Government plans to boost the minimum wage and purchase rice at guaranteed prices have added to investor uncertainty, said Kongkiat Opaswongkarn, chief executive officer of Asia Plus Securities Pcl. Reserve Ammunition“The government should reserve some ammunition for some hard times going forward,” said Kongkiat, who heads Thailand’s third-biggest brokerage. “They have been spending and spending and I’m afraid they probably never realized how long the global slowdown is going to last.”In 2009, the year after Lehman Brothers Holdings Inc. collapsed, Thailand’s economy contracted 2.3 percent as overseas sales shrunk 14 percent. Last year growth reached 7.8 percent, the fastest pace since 1995, as exports climbed 19 percent. The central bank expects gross domestic product to increase 4.1 percent in 2011 and 4.2 percent next year.“With the global economic slowdown, Thai exports will be affected,” the Federation of Thai Market Organizations said in a statement yesterday. “We would like to urge the government to review any policies that will affect production costs. That includes attempts to raise minimum wages. The hike in wages during this economic slowdown may accelerate layoffs by manufacturers.” Growth OutlookGovernor Prasarn Trairatvorakul said in a Sept. 24 interview that the Bank of Thailand may cut its economic growth projections as the global recovery falters, signaling there may be less scope for interest rates to rise further. The central bank raised its key rate for a seventh straight meeting last month, citing inflation risks posed by the government’s plan to raise wages and support rice prices.The minimum wage policy “is not exactly a fiscal boost” and “looks more like a transfer from one sector to another,” Santitarn Sathirathai, a Singapore-based analyst at Credit Suisse Group AG, said by phone. The government “might see this policy backfire because it actually hinders growth and may cause social problems as well because people are getting laid off.”Deputy Prime Minister Kittiratt Na-Ranong, who oversees economic policy, said the government would proceed with policies to strengthen domestic demand because the country has already “wasted much time” attempting to reduce its reliance on exports. Higher wages will “create more spending” and “increase productivity,” he said. Shift in Demand“Export-related businesses may face a difficult time because they rely on global markets,” Kittiratt, who is also commerce minister, told reporters in Bangkok yesterday. “When our policies are effective, many businesses that rely on local demand will have a good chance to benefit from stronger purchasing power because the balance is changing.”The government expects to spend as much as 400 billion baht ($13 billion) on the rice-price guarantee program, which will run from Oct. 7 until Feb. 29, deputy government spokeswoman Anuttama Amornvivat said Sept 13. Funding for the rice program isn’t included in the government’s budget deficit estimate of 350 billion baht for the fiscal year starting Oct. 1, Kittiratt said in a Sept. 12 interview.In July elections, Yingluck’s Pheu Thai party won 153 of 195 seats in the north and northeast, where incomes are about a third of those in Bangkok. That helped her to win a parliamentary majority for the first time since her brother Thaksin Shinawatra was ousted in a 2006 military coup.“Fears have overwhelmed the Thai stock market,” Petcharat Powattanasatien, the head of Kasikorn Asset Management Co., the nation’s largest money manager, with $22 billion of assets, said yesterday. “Fundamental analysis is unlikely to be justified as long as the problem in Europe and the U.S. remains unresolved.”