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."