Bloomberg News

Thai Prices at 32-Month High ‘Must be Free,’ Yingluck Says

June 09, 2011

(Updates markets in sixth paragraph.)

June 9 (Bloomberg) -- Thailand’s opposition Pheu Thai party, leading in polls before a July 3 election, favors letting prices of consumer goods move freely as the country faces inflation at a 32-month high, according to its leader Yingluck Shinawatra.

The party isn’t “afraid of the pricing inflation,” Yingluck, the sister of fugitive ex-leader Thaksin Shinawatra, said in an interview as she campaigned in Bangkok yesterday. “The price must be free and the price must not be monopolized by anyone.”

Consumer prices may jump as much as one percentage point once the government removes oil subsidies, Bank of Thailand Governor Prasarn Trairatvorakul said April 12. Thailand’s central bank has raised interest rates seven times in the past year to counter accelerating inflation.

“If they go in one shot obviously it hurts the pockets of consumers and we might see some short term adjustment,” Wellian Wiranto, a Singapore-based economist at HSBC Holdings Plc., said of removing the controls by phone today. “The underlying thing is if they have strong growth and strong income growth, then that should cancel out.”

Prime Minister Abhisit Vejjajiva has capped diesel tariffs and applied price controls to items such as eggs and cooking oil to shield Thailand’s 67 million people from inflation, which surged to 4.19 percent in May.

Stocks Fall

Thai stocks fell 1.1 percent as of the mid-day break, putting the benchmark SET Index on pace to extend its longest- losing streak in more than a year following downgrades on concerns about the election. About 100 people have been killed following disputes over the last election in 2007 won by Thaksin’s allies.

The Pheu Thai party aims to reassess the value chain and eliminate monopolies to ensure prices move according to supply and demand, prompting them to fall, Yingluck said. It plans to “help a little bit” to reduce oil prices by adjusting the excise tax in times of economic duress, she said.

“If in the future the economy is getting better, we have to adjust back to normal so we don’t interfere and cap the price,” she said, without specifying whether she would lift any other price controls.

‘Remove Subsidies’

“It doesn’t seem to be realistic to remove subsidies in Thailand at this stage,” Hideki Hayashi, a global economist at Mizuho Securities Co. in Tokyo, said by phone. “With such political instability, the country was able to grow because it’s a society where poor people can still afford to buy food, drinks and other necessities quite cheaply.”

Yingluck would become Thailand’s first-ever female leader if Pheu Thai forms a government. She resigned as chief executive officer of property developer SC Asset Corp. last month to participate in the election and was formerly president of Advanced Info Service Pcl, a mobile-phone company founded by Thaksin that is now Thailand’s biggest.

Thailand is “really behind in terms of infrastructure and technology,” Yingluck said, calling for bidding on third- generation mobile-phone licenses to take place quickly after the establishment of a telecommunications regulator.

Pheu Thai

Pheu Thai is the latest incarnation of parties loyal to Thaksin that have won the past four elections, with the last three results being overturned by court rulings and the 2006 coup that toppled Thaksin from power. He has directed party affairs from overseas since fleeing a 2008 jail sentence for abuse of power.

Abhisit has promised to raise the minimum wage by 25 percent, give cash to the elderly and guarantee farmers’ incomes to appeal to voters loyal to Thaksin. Yingluck’s party also plans variations of the same policies.

“The first thing I would do is help people in terms of economics,” she said. “People are suffering, especially in terms of finding sources of income.”

Pheu Thai would win 43 percent of the vote if elections were held now, compared with 37 percent for the Democrat party, according to a Dusit Poll that surveyed 4,694 people from May 23 to May 28.

‘Necessary Action’

The central bank raised the benchmark rate to 3 percent last week and said it “stands ready to take necessary action” against inflationary pressures. Thailand’s gross domestic product climbed 2 percent in the first quarter from the previous three months, the fastest pace in a year. Growth in 2011 may exceed the central bank’s 4.1 percent forecast, the central bank’s Assistant Governor Paiboon Kittisrikangwan said last week.

Credit Suisse and Goldman Sachs Group Inc. downgraded the nation’s equities this week on concern over the election, inflation and increased valuations. Overseas investors yesterday sold 6.31 billion baht ($207.8 million) more of Thai stocks than they bought, a fifth straight day of withdrawals that boosted the total outflow in June to 13.9 billion baht, according to data from the Stock Exchange of Thailand.

“That’s that fear of ‘Oh God, what could happen?’” Andrew Stotz, a strategist at Kim Eng Securities (Thailand) Pcl, the nation’s largest stock brokerage, said in an interview today. “You’ve got to be careful not to get too caught up in that fear. The fundamentals of Thailand are not bad.”

--With assistance from Yumi Teso in Bangkok, Karolina Miziolek in Hong Kong and Patrick Harrington in Tokyo. Editors: Tony Jordan, Patrick Harrington

To contact the reporters on this story: Daniel Ten Kate in Singapore at dtenkate@bloomberg.net; Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net -0- Jun/09/2011 06:00 GMT


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