Banks' flood assistance takes many forms

Individuals and businesses affected by flooding have been looking to banks for extra help in terms of loans and eased conditions as they try to get back on their feet. 

But banks have also been actively offering non-financial assistance in many forms, with the enthusiastic involvement of their staff.

Bangkok Bank last week provided a space in front of its headquarters on Silom Road for an "Emergency Shopping Fair" flea market offering essential goods at special prices.

In partnership with more than 30 manufacturing customers and business allies, the market offered goods including bottled drinking water, eggs, canned sardines, rice, instant noodles, processed and frozen foods and medical supplies.

The bank plans to set up similar markets at other branches to help people obtain hard-to-find goods conveniently.

Benyapa Selanont, 45, a secretary with a private company, said she welcomed the chance to stock up, especially on canned foods. Her house in Lam Luk Ka in Pathum Thani has been submerged for a month.

Siam Commercial Bank, meanwhile, set up a kitchen in mid-October to cook food for flood victims. Earlier, the bank was using the meeting hall at its Ratchayothin head office as a large kitchen, but it had to be relocated to the evacuation centre at the Government Complex in Nonthaburi province after the flooding reached Ratchayothin.

The bank's kitchen prepares food for around 10,000 people per day, mainly Thai fast food. It also orders some meals from restaurants to be delivered to people in some locations. SCB expects to keep the kitchen going until mid-December and staff are encouraged to volunteer, said executive vice-president Ongorn Abhakorn na Ayutthaya.

Anpawee Laoritsayaporn, an SCB employee working in the kitchen, said it was a good opportunity to help others in a crisis. Her own house has been inundated but she says she is better off than many people because the bank has provided temporary accommodation for some of its staff affected by floods.

"Besides having an opportunity to help people who have the same fate, it makes me love the bank more because of how it takes care of its staff," she added.

The flooding has led to other shortages besides essential consumer goods, and blood is one critical need. Kiatnakin Bank has worked with the Red Cross Society and Srinakharinwirot University (SWU) to stage blood donations at the bank's headquarters on Asok Road. 

The drive received a good response from its staff and people working in the area, said KK president Tawatchai Suktikipisan.

Prin Chaiwisuthakul, 45, an SWU professor, said he decided to take part after hearing an announcement about the bank's campaign at the university.

Kiatnakin employee Orathai Saejia, 26, said she wanted to donate blood but her weight was below the requirement. However, she said she intended to participate in other voluntary activities to help other people affected by the floods.

Floods affect interest rates but the baht holds up for now

Floodwater may breach dykes, overwhelm homes and inconvenience millions, but financial markets must move on, particularly after a month as volatile as October.

It is still impossible to predict the ultimate extent of the floods. But one thing is certain - over the past month, estimates of the potential damage have been revised up almost continually, as almost every day another industrial estate, town or district goes under water.

This is having a big impact on interest rate expectations. At its monetary policy meeting in late August, the Bank of Thailand hiked its overnight benchmark interest rate by 0.25 per cent to 3.50 per cent, amidst inflation worries. Consensus was for the rate to rise to 4 per cent by mid-2012.

By the latest policy meeting in mid-October, the atmosphere had shifted. Worries over growth dominated the agenda, and the central bank kept its benchmark rate unchanged. 

There are also growing calls to reduce interest rates, to help support recovery.

Bond yields have been falling, and are now below the overnight rate for tenors up to 10 years. This is partly due to low bond supply, but in any case, a one-year yield at 3.30 per cent indicates that investors are pricing in future rate cuts.

So far, the floods have had less of an impact on baht exchange rates. The currency market is being driven by two global issues - Europe's debt problems and US recession risks.

Both those issues seemed to improve over the last month, boosting risk appetite. As a result, Asian currencies, including the baht, have strengthened versus the dollar.

Europe's debt crisis remains a mess, but things are a bit better than a month ago. The summit meeting in late October showed some progress on restructuring Greek debts, recapitalising banks and increasing the European rescue fund. 

Greece temporarily shocked everyone by proposing a public referendum on Europe, but then shelved the plans after a big outcry. Nevertheless, it is worrying how politics (in any one of many countries) can easily affect sentiment on European prospects.

Meanwhile, fears on whether the United States is entering a recession have abated somewhat. Key economic figures (such as change in payrolls, retail sales and manufacturing activity) have been better than expected

Recent corporate earnings reports have also been generally sound. That helped revive risk appetite. The S&P 500 stock index increased by 10.8 per cent in October, its best monthly performance since December 1991.

In any case, there are downside risks ahead for the baht. The situations in Europe and the US improved last month, but both remain fragile. It is easy to envisage bad news that could cause sentiment to shift.

Also, the floods may yet have a negative impact on the baht. The disruptions to industrial activity should cause Thai exports to fall significantly in the fourth quarter. 

Reconstruction efforts could lead to greater import requirements. Continued flooding in Bangkok might also hit tourist arrivals, just as the peak season begins in December. All these would lead to lower demand for baht in currency markets.

Parson Singha is chief markets strategist in the Global Markets Department of HSBC Thailand.