Thailand's rating downgraded

Thailand's rating downgraded

BANGKOK (Reuter): A downgrade of Thailand's short-term rating
by Moody's Investors Service was negative for the country and
could affect future prospects for its borrowers, financial
analysts said yesterday.

They were commenting on a report from London which said
Moody's had downgraded Thailand's short-term sovereign ceiling
ratings for bank deposits and other short-term obligations to
Prime 2 from Prime 1.

As a result, the short-term deposit ratings of Bangkok Bank
Plc, Siam Commercial Bank Plc and Thai Farmers Bank had been
downgraded to Prime 2 from Prime 1, Moody's said.

The short-term rating of the Kingdom of Thailand's commercial
paper program was also affected, it added.

"It (the news) does not come at a very good time. Any
downgrade that shows a deterioration in perception of risk in
sovereignty of Thailand will obviously have a negative effect,"
said George Morgan, country manager for HG Asia in Thailand.

Thailand has recently been hit by sluggish exports growth and
a slowdown in its formerly robust economy. The baht came under
attack in July following rumors of a devaluation which was denied
by the central bank.

Several analysts have scaled down their projections for
Thailand's gross domestic product (GDP) growth in 1996 to below
seven percent from 8.6 percent recorded in 1995.

Central bank worries have also emerged about a high level of
foreign borrowing by the Thai private and public sectors.

The Thai stock market has been clouded by anxiety over the
future of the six-party coalition government of Prime Minister
Banharn Silpa-archa and an upcoming no-confidence debate against
the premier in parliament set for September 18.

"There is not much positive news in the Moody's report. It is
going to make foreign borrowing for Thai names more expensive as
lenders could seek a premium to lend," said the treasury manager
at a foreign bank who declined to be identified.

"It also erodes substantially the ability of Thai names to
borrow long term funds from abroad," he added. "Thailand has had
it quite good for a long time now and this (downgrade) could
bring it back to reality."

He said the Thai baht was quite stable currently but if more
negative news like this Moody's downgrade affected Thailand's
credibility, foreign investors would move out from the currency.

Morgan said the downgrade could affect the top 200 Thai
companies that can borrow in U.S. dollars, directly or through
the Bangkok International Banking Facility.

Graham Catterwell, head of Deutsche Morgan Grenfell, said if
Thailand's long term debt ratings were downgraded then it would
present a more serious scenario for the country.

"We are all sitting on the edge of our chairs waiting to see
what Moody's does about long term rates," he said.

Moody's said in its report: "The downgrade reflects the
country's increased vulnerability to a financial shock through
the balance of payments as a result of the very rapid and recent
accumulation of short-term external debt."