Gloomy outlook leads to cuts in MPI, industrial GDP

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The Office of Industrial Economics (OIE) is revising down the country's manufacturing production index (MPI) and industrial GDP as the global economic outlook remains poor, according to the OIE's director-general Verasak Supprasert.

Mr Verasak said the OIE would announce its new forecasts this month, when the MPI is expected to be revised down from the previous forecast of 2%-3% and industrial GDP would be cut from the earlier forecast of 2.5%-3.5%.

"We need to revise down the indices because the economic prospects on the domestic and global fronts remain poor and that has rendered our earlier forecasts unrealistic," he said.

In the first nine months of this year, the country's MPI rose 0.06% to 108.32, slightly up from 108.26 in the same period of last year.

The rise is well below the forecast of 2%-3%.

For the third quarter alone, the MPI dropped 0.5% from 106.57 in the same period of last year to 106.07.

"Several sectors have seen a decline in production. In some industries the production capacity has dropped significantly," said Mr Verasak, adding that the production capacity of the automotive industry fell by 9.54% in September as carmakers revised down their production plans to match the tepid economy.

In the third quarter alone, the production capacity of the automotive sector declined by 2.5% from the same period of last year to 483,356 units due to weaker demand from both the domestic and overseas markets.

Meanwhile, the production capacity of the garment and textile industry dropped by 8.28% due to weakened demand from major export markets such as Europe, Japan and the Middle East, where the economies are also facing a slowdown.

However, the OIE expects the garment and electronics sectors to play a bigger role in supporting the MPI for the full year.

"The Industry Ministry expects strong demand for black garments will continue to rise from now until the first and the second quarters of next year. This would help compensate for the fall in exports in the garment sector," he said, referring to the black clothes that Thais will wear for several months to mourn the passing of His Majesty the King.

Likewise, demand in the electronics sector is also expected to rise in the last quarter of this year, especially in Asean, the US and Europe.

Ittichai Yotsi, director of the Bureau of Industrial Economic Research, said he expected rising demand in the neighbouring countries of Cambodia, Laos, Myanmar and Vietnam would help boost the MPI in the last quarter of the year.

He said the government is pinning hopes on the policy to promote the Eastern Economic Corridor (EEC). The project spanning three eastern provinces is intended to form a new engine to drive economic growth.

Mr Ittichai said the EEC would not only help support the overall economy but ensure the MPI and industrial GDP would not fall too low.

Warehouse supply to fall on export lag

Infrastructure and occupancy changing

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New supply of warehouse space is expected to fall as Thai exports experience a downturn from the continued global slowdown, according to property consultant Knight Frank Thailand.

Marcus Burtenshaw, executive director and head of the commercial agency, said some rental warehouse developers have postponed their expansion on the new logistics parks.

However, occupancy rate trends to be stable as net take-up increases at the same rate as the influx of new supply.

Rental rate is forecast to remain constant due to the balance of new supply and new demand, putting pressure on price competition and preventing a price rise.

In addition, progress on infrastructure, including the Laem Chabang port expansion, and the road and rail network development, is still a key positive factor that drives private investment and logistics space demand.

New supply needs to be constrained in areas of falling occupancy. Despite this, the underlying fundamentals that originally established each of the major strategic distribution locations are the same.

Demand for warehousing space continues to grow, as e-commerce begins to assume an even bigger role in the retail landscape in Thailand.

According to the company's research, total warehouse supply at the end of the first half of 2016 was 3.73 million square metres, an increase of 4.1% from the same period last year.

The latest peak in addition of supply was still from 2014 when the country's largest developer completed its three largest projects. Since then, the market saw relatively incremental increases in supply to cope with a slowing growth in demand.

For the remainder of 2016 to 2017, approximately 300,000 sq m of warehouse supply is expected to enter the market. Of this space, up to 250,000 sq m will be in Samut Prakan as the location offers a healthy level of demand and high levels of occupancy.

Total occupied space for the period was 2.9 million sq m or 78%, an 8.7% increase. Both supply and occupied space have been increasing at a similar rate, keeping an occupancy level relatively stable around 77.5 to 78.5%.

Warehouse occupancy rate as of the first half of 2016 was 78.0%, a small jump of 0.5% from last year's figure. The Eastern Seaboard saw the highest jump in occupancy whereas Greater Bangkok enjoyed the highest warehouse occupancy rate.

Pathum Thani and Ayutthaya still witnessed a continued reduction in occupancy rates since the great floods in 2011. The situation was made worse by the addition of new supply.

Warehouse rental rates remained relatively stagnant. As of the first half of 2016, the average warehouse rental rate was 156.9 baht per sq m per month.

Highest growth was seen in the Eastern Seaboard with a 0.5% increase from 148.9 baht to 149.6 per sq m per month.

Bangkok maintained its position as the most expensive area along with Pathum Thani, with the highest asking rent of 185 baht per sq m per month. Khon Kaen had the lowest asking price of 110 baht.

The current monthly rental rate was at maximum of 185 baht per sq m in Bangkok and Pathum Thani, followed by a maximum of 180 baht in Samut Prakan, Chonburi and Chachoengsao.

Warehouses command variable rents, depending on location, design, conditions and the age of the building. Modern logistics parks usually provide docks, raised floors, a floor loading capacity of up to 3 tonnes per sq m and ceiling heights of 10 m.

BoT: Robust exports to buoy Q3 growth

Goods are being loaded for shipment at Bangkok Port in Klong Toey. The economic outlook looks promising, thanks largely to a boost in exports.Krit Promsaka na Sakolnakorn

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The economy in the third quarter could expand at a level close to the previous quarter, thanks to the second straight month of export growth in September, says a senior Bank of Thailand official.

"The overall [Thai] economy in the third quarter might be close to that of the second quarter or slightly softer but still better than we expected," said Roong Mallikamas, senior director of the central bank's macroeconomic and monetary policy department.

According to the National Economic and Social Development Board (NESDB), Thailand's GDP rose by 3.5% year-on-year in the second quarter, up from 3.2% in the first quarter, putting first-half growth at 3.4%.

Mrs Roong said the promising economic outlook was largely attributed to exports, which showed better-than-expected results in the third quarter after growing for the second consecutive month in September.

Merchandise exports in September grew 3.5% year-on-year when excluding gold shipments and 3.9% when factoring them in. Exports were supported by several factors including recovering oil prices, low base effects from last year, the launch of new smartphone models boosting electronics demand, and rising demand of electrical appliances from Cambodia, Laos, Myanmar and Vietnam, as well as Europe and the US, the central bank's data showed. In August, exports of goods grew 2.7% from the same period last year.

"Exports of goods in September became more broadly-based as growth was seen in more sectors," said Mr Roong.

She said these factors supported growth in exports of electronics and optical appliances, electrical appliances, machinery and equipment.

"Factors supporting Thai exports in the third quarter are expected to be present during the fourth quarter as well," added Mr Roong.

She said merchandise imports in September grew by 1.7% year-on-year if including gold imports and 0.3% if excluding them. Imports of machinery and raw materials for electronics and electrical appliances industries also showed a better outlook.

She said that government spending remained robust in the third quarter, while regular expenditures and state investment had remained the main drivers of the economy during the period.

Private consumption during the July-to-September quarter, which slowed down less than expected, also lent support to the Thai economy, said Mrs Roong.

People, however, remained cautious on spending.

According to the Bank of Thailand's data, the Private Consumption Index in the third quarter rose by 3.1% year-on-year, compared with 3.9% in the second quarter.

In September, the overall economy grew more quickly than in the previous month, but private investment stayed flat.

Low salary growth slows savings rate

Potential investment fall not a big worry

Government Saving Bank gave away 550,000 commemorative piggy banks to customers yesterday. PATTANAPONG HIRUNARD

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Savings rate is expanding at a slower pace compared to previous years largely due to lower annual salary increments, the Government Savings Bank (GSB)'s chief says.

However, the decline in savings growth rate, which could lead to a dearth of savings for investment, is not a big concern as the savings-to-gross domestic product (GDP) ratio remains higher than investment-to-GDP ratio, GSB's president Chatchai Payuhanaveechai said.

Gross savings are growing at 11% per annum, down from 16% annually during 2009-10, he said, without providing the latest figures.

The country's savings-to-GDP ratio at 33% still surpasses the investment-to-GDP proportion.

According to Kasikorn Research Centre's notes on financial liquidity of commercial banks for September, deposits at commercial banks grew at a slower pace of 1.15% over the same period last year to 11.2 trillion baht. Commercial banks' financial liquidity in September tightened the most since the end of 2007, as seen by the fact that loan-to-deposit plus borrowing ratio increased to 92.1% from 90.8% in August.

For savings at GSB, Mr Chatchai said the total deposits amounted to 2 trillion baht at the end of September, with 27 million deposit accounts and 20 million holders.

He forecast that the bank's total deposits will rise by 1.5-2% at the end of this year.

To meet demand in search for yield, the state-backed savings bank launched special savings certificates at face value of 100 baht with a five-year maturity. The savings certificate will give returns of five baht per unit of certificate.

He said the bank estimates it will raise 50 billion baht from the new special savings certificate.

The GSB also offered piggy banks produced to celebrate both His Majesty King Bhumibol Adulyadej's 70th anniversary of accession to the throne, as well as National Savings Day for depositors who park at least 200 baht at the bank's branches.

The bank's loans outstanding at the end of September totalled 1.85 trillion baht.

SAIC Motor-CP breaks ground on 2nd plant

MG cars park at the construction site for SAIC Motor-CP's second assembly plant in Chon Buri province. The company says the new facility will use the most advanced technology.

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Despite gloomy economic conditions, Chinese-Thai joint venture SAIC Motor-CP Co has begun construction of its second assembly plant at Hemaraj Eastern Seaboard Industrial Estate 2 in Chon Buri province.

Shi Guoyong, the newly-appointed president of SAIC Motor-CP, said the new facility will use the most advanced technology to ensure the highest quality of MG cars.

It will also help stimulate Thailand's economy, he said.

SAIC Motor-CP bought 438 rai of land for an undisclosed sum from SET-listed Hemaraj Land and Development Plc last November. It announced in May this year plans to build a second 700,000-square-metre facility, which would handle MG vehicle production processes such as body assembly, vehicle assembly and painting under one roof.

The investment cost for the second facility has not been disclosed, but it is estimated that 30-40 billion baht will be needed.

Founded in 2012, SAIC Motor-CP is a joint venture of SAIC Motor and Thai agrobusiness conglomerate Charoen Pokphand Group. The Chinese company owns 51% of the venture.

The carmaker's first 9-billion-baht factory, with total production capacity of 50,000 units, was built in the Hemaraj Eastern Seaboard Industrial Estate in Rayong and began operations in June 2014.

Chen Zhixin, president of the Chinese carmaker Shanghai Automotive Industry Corporation (SAIC Motor), earlier said that Thailand is set to become a production hub for right-hand drive vehicles and SAIC Motor aims to make 300,000 units a year in the near future.

SAIC Motor-CP is one of 10 car firms that applied for phase two of the government eco-car scheme. It was granted Board of Investment privileges in November 2014 to make 110,000 eco-cars a year worth 7.6 billion baht.

The company says it is likely to come up with a clear production plan for its eco-car project by 2018.

Meanwhile, SAIC Motor-CP reported its MG sales rose 215% to 5,959 cars from January to September from four Thai-made models --MG3, MG5, MG6 and MG GS.

It aims to achieve sales of 10,000 vehicle sales in 2016 compared with 3,779 units sold in 2015 and only 300 units in 2014.

In a move to support its customers and resale prices, in August the company kicked off its certified used-car campaign.

Alcoa: Thousands of Victorian jobs in the balance as Portland smelter power deal expires

Thousands of regional jobs hang in the balance with the expiry of a lucrative power subsidy between the Victorian Government and global aluminium producer Alcoa.

A subsidised power contract with the State Electricity Commission of Victoria, which is said to have cost taxpayers more than $100 million a year on some occasions, will expire at the end of today.

Enacted in the late 1980s, the subsidy was designed to provide electricity to both the Portland smelter and the now-defunct Point Henry smelter at a price linked to the world price of aluminium.

Its expiry threatens to undo the western Victorian community of Portland, where Alcoa is deeply entrenched in the regional economy.

Providing more than 2,000 indirect jobs — almost a quarter of Portland's total population — the company is the region's largest employer and biggest taxpayer.

Grattan Institute energy director Tony Wood said the company would face 'significant' challenges in moving to spot market priced power.

"The original deal, as often is the case with these subsidies, tried to kickstart an industry that was seen to create economic benefit for Victoria," he said.

"Unfortunately, the history of these sort of subsidies is they don't just create an injection of short-term funding which then can be stopped — they tend to be a permanent drip-line. And that's what has happened in this case."

The Portland smelter's foray into an already volatile power market is exacerbated by the expected closure of Australia's largest coal-fired power generator, Hazelwood.

The Victorian Government has ruled out offering financial incentives to electricity multinational ENGIE to stave off the threat, amid mounting speculation Hazelwood could permanently shut as early as March.

ENGIE insists it has not made a decision about the future of the coal-fired plant, which generates up to a quarter of Victoria's electricity.

Mr Wood said the future of the facility would trigger an impact on Alcoa.

"One of the inevitable consequences of withdrawing that much capacity from the market would be an upward movement in price," he said.

"That could be the straw that breaks the camel's back for the Portland smelter."

'They should see it coming'

The uncertainty lingering over the Portland smelter is symptomatic of the aluminium industry's global decline.

In the United States, eight smelters have either closed or curtailed since 2015, meaning only two smelters remain fully operational today — the lowest level of production since World War II.

Alcoa curtailed its Wenatchee Works in north-west Washington state last year, resulting in more than 400 redundancies.

Long-time journalist for the Wenatchee World newspaper, Christine Pratt, said decades-long uncertainty over the future of the smelter had prepared the regional community for the "inevitable".

"People had been predicting it as the price of aluminium on the world market continued to fall, [so] the state mobilised to try and get these workers involved in job retraining and other education."

She said it was imperative communities like Portland were prepared for the worst.

"They should see it coming, you know? Aluminium smelting is just not the strong industry that it once was," she said.

"The ongoing relationship with Alcoa over the decades has taught the city that it is economically hazardous to become dependent on a single employer."

Victoria's Treasurer Tim Pallas said the Government was doing "all it could" to support the community, and was working alongside Alcoa to ensure it remained in the region.

In a statement, Alcoa said it would continue to find and implement cost saving measures for its Portland smelter, but that its future would ultimately be decided by its ability to remain internationally competitive.

ANZ sells Asian retail bank to Singapore's DBS

ANZ is selling its retail banking operations in five Asian nations to Singapore's DBS Bank, and will book a $265 million net loss on the deal.

The Australian bank has been looking to back away from the Asian strategy instituted by former chief executive Mike Smith since new boss Shayne Elliott took over at the end of last year.

Both banks say the sale price is around $110 million above the book value of ANZ's retail banking and wealth management businesses in Singapore, Hong Kong, China, Taiwan and Indonesia.

However, ANZ has confirmed it will book a loss of approximately $265 million in its accounts from the sale, including write-downs for software, goodwill and fixed assets, as well as various transaction costs.

On the plus side, the sale will free up funds within ANZ, increasing its key CET tier one capital ratio by 15-20 basis points, which should help it meet tougher new regulatory requirements from the Australian banking watchdog APRA.

"Our strategic priority is to create a simpler, better capitalised, better balanced bank focussed on attractive areas where we can carve out winning positions," said Mr Elliott in a statement.

He said the move is not an abandonment of Asia, but a switch away from retail customers to a greater focus on large business banking and trade finance.

"This transaction simplifies our business while allowing us to continue to benefit from higher levels of growth in the region through a focus on our largest, most successful business in Asia - banking large corporate and institutional clients driven by trade and capital flows particularly with Australia and New Zealand," Mr Elliott added.

Pending various regulatory approvals, the sale of the different businesses to DBS is expected to start completing mid-next year, with both banks hoping to finalise the transfer in all markets by early-2018.

ANZ investors were lukewarm on the deal, with the bank's shares down 0.9 per cent to $27.38 by 11:11am (AEDT), a bigger fall than its big four rivals on a flat morning for the market overall.

Interest rate cut at long odds but some economists back the roughy

Shortly before they are off and running in Melbourne for the Cup, the Reserve Bank board will be considering interest rates, contemplating something else that's off and running - the east coast housing market.

While new governor Philip Lowe has been quick to point out that all property markets are not equal - some are losing ground, such as Perth and Darwin - there is considerable heat in the major population centres of Sydney and Melbourne, the current source of Australia's economic growth and jobs.

"The Reserve Bank mentioned it explicitly in its financial stability review a couple of weeks ago, the risks around the apartment market and very high household debt," observed Stephen Walters, the chief economist at the Institute of Company Directors.

"When the central bank's talking about that in public, it's clearly a pretty large blip on their radar screen."

Fellow economist Carol Austin is looking beyond household balance sheets to the rising tide of resentment and anger reflected in the political process around the world.

Overcommitted property owners vulnerable to an economic shock or higher interest rates are not the only threat to stability, the RBA also needs to consider those locked out of the property market.

"If housing affordability causes social unrest, causes a lack of confidence in our system, it will impair the ability of the RBA to do its job properly going forward," she said.

This is not worrying Citi's chief economist Paul Brennan, one of only a few tipping a rate cut.

He has faith in the banking regulator's efforts aimed at keeping a lid on the property market through tighter lending restrictions.

Other factors raised by Dr Lowe are a bigger concern, such as the jobs market which is in weaker shape than it looks because the official unemployment rate does not capture record amounts of underemployment.

"There does seem to be a lot of people who want to work longer hours than what they're currently working, a lot of people working part time that want to work full-time," Mr Brennan observed.

Inflation likely to rise on commodity rebound

Right now, most market players are buying the Reserve Bank's line that inflation will gradually pick up because business confidence is stronger, a recovery in wages growth is just around the corner and, most significantly, the deterioration in mining has almost run its course.

"Inflation is a backward looking measure," countered Ms Austin.

"We're seeing stronger commodity prices, which will feed into inflation further down the track.

"We're seeing a better tone coming into the resources sector, which will contribute to more jobs, it'll contribute to higher prices in areas that have been really squeezed because of the decline in commodity prices."

Much will hinge on the commodity price outlook.

Citi is predicting the recent commodity recovery, so helpful to the Australian economy, will be short-lived because supply is ramping up again in response to the higher prices.

It suggested the task of lifting inflation back to the target zone will be difficult.

"Given that inflation is so far below the bottom of the target ... looking ahead growth in the economy might sort of slow a bit from the 3.25 per cent that we've been running at," said Mr Brennan.

"So I think that another 25 [basis points of interest rate reduction] now might mean that next year they don't need to do say another two lots of 25 that we've seen in the last two years."

Shoot now or save rate ammo for economic crisis?

Others argue that Philip Lowe needs to preserve his precious interest rate ammunition for a crisis, but not Stephen Walters.

"I don't buy into that argument that they want to preserve their ammo," Mr Walters argued.

"Why? They've got the currency to move. They can actually hope the Fed raises interest rates and therefore the Aussie dollar will come down, so I think they're waiting to see that that happens first."

But the RBA might need to use some of that precious ammo sooner than people think.

"A Trump victory, for instance, may have a great impact on financial markets," Ms Austin said.

"The Reserve Bank would want to be able to respond in the event that we saw great turbulence in our market."

In the meantime, Australians will be left to enjoy the national distraction that is the Melbourne Cup as the Reserve Bank sits on its hands.

Mortgage repayments could be lifted by major banks

Australia's big banks could be about to increase your mortgage repayments.

The reason is something you may never have heard of - the net stable funding ratio.

It is an international regulation which Australian banks need to comply with.

The rule is part of a broad program to make banks safer and boost the amount they hold in deposits.

However, it is a move that is likely to hurt borrowers just at the point where debt levels are at record highs.

Forager Funds chief investment officer Steve Johnson told the ABC he had heard a lot of people say to him there is no way in the world they would be able to afford to pay their mortgage if interest rates rose meaningfully from here.

He said a meaningful lift in interest rates would be around 2 per cent.

Velocity Trade banking analyst Brett Le Mesurier said there was a possibility banks would need to reduce the discount they offer some loan customers by close to that amount.

"So the banks have a standard variable rate, and then when customers go for a mortgage, they will be offered some level of discount," he explained.

"The discount can be anywhere up to 1.5 per cent or more.

"It may be manifested by a reduction in the rate of discount that's being offered."

It is all related to what is called the net stable funding ratio, a part of the Basel III accord.

Basically, international banking regulators have told Australian banks to start relying more on Australian customer deposits to fund loans, rather than overseas money markets.

At the moment, Australian banks rely heavily on those overseas markets to fund home loans because they are often considerably cheaper than paying interest on deposits.

Mortgage rates set to rise or discounts fall

So the banks now have two options: To cover the added cost, they can increase interest rates, or reduce the discount you're expecting to receive on your variable rate next year.

A third option is that the banks could take the hit in their bottom lines, but fund manager Steve Johnson thinks that is very unlikely.

Mr Johnson warned that the banks will have to pass on the increased cost of funding home loans.

"Well I think it's pretty clear, one way or another, they're going to need more capital," he said.

"The question is who's going to pay for that?

"Because our banking sector is so concentrated, you're going to see a lot of the cost of that increased capital passed onto customers of the banks."

Banking analyst Brett Le Mesurier warned it will ultimately lead to higher mortgage repayments for borrowers as early as next year.

"Ultimately, banks are trying to maintain their margins," he said.

"So if they're paying more for their funding, to maintain the margin necessarily means that mortgage rates go up."

National Australia Bank and Macquarie have just shown their hand.

NAB reported last week that an increase in deposit costs was hurting its profit.

The latest public statement from Macquarie Group also showed the bank was working hard to increase its deposit base.

Ultimately the banks will shift the sources of their loans to maximise their profits.

Real estate fallout from interest rate rises

The big question of course is, will this end up affecting the property market?

"Yeah of course it will," Mr Le Mesurier said.

"The property market is a function of two things: rates that people are paying on their mortgages and unemployment.

"If you've got stable unemployment but effectively rates on housing go up, that means that the price of houses fall.

"Now the extent of any fall will obviously depend on the extent of any additional interest rates that have to paid."

Funds manager Steve Johnson said it places greater pressure on the Reserve Bank to cushion the financial blow to borrowers.

But he added that the bank had limited scope to provide that support.

"So I think the real challenge here is how much flexibility has the RBA lost because of the levels of leverage [debt] in the economy," he argued.

Bankers, brokers and number-crunchers will no doubt be looking closely at the Reserve Bank's commentary on Melbourne Cup Day to see if there is any response to this risk for borrowers.

S&P cuts credit rating outlook for raft of smaller banks due to housing market worries

Australia's banking sector is at risk of a mass credit rating downgrade as Standard & Poor's warns surging debt and home prices are creating potential economic imbalances.

S&P has put 25 Australian financial institutions on a negative credit outlook, largely due to growing risks from the housing sector.

The negative outlook ranges from larger institutions - such as AMP Bank, Macquarie, Bendigo and Adelaide, and Bank of Queensland - through to smaller credit unions, building societies and mutual banks.

It follows S&P's move several months ago to lower the credit outlook for Australia's major banks when it lowered the outlook for the Federal Government to negative.

While S&P maintained a benign "base case" outlook on Australia's economy and financial outlook, it warned that there is a one-in-three chance that continued strong property price rises in Sydney and Melbourne could set the nation up for a crash.

The ratings agency pointed to a rise in Australia's private sector debt-to-GDP ratio from 118 per cent in 2012 to 139 per cent in June 2016 as a key concern, especially since inflation-adjusted home prices have risen at 5.3 per cent per annum.

"Consequently, we believe the risks of a sharp correction in property prices could increase and, if that were to occur, credit losses incurred by all financial institutions operating in Australia are likely to be significantly greater; with about two-thirds of banks' lending assets secured by residential home loans," S&P warned in the report.

"The impact of such a scenario on financial institutions would be amplified by the Australian economy's external weaknesses, in particular its persistent current account deficits and high level of external debt."

Sydney, Melbourne property bust would sink nation

S&P said a "sharp fall in property prices remains unlikely in the next two years" and is a "stress-case scenario".

It remains of the view that growing imbalances in the economy caused by the latest east coast residential property boom will "unwind in an orderly manner, as has generally been the case over past property cycles."

However, if prices and debt continue to grow strongly, S&P warned that Australia's economy and financial system have "external weaknesses" that could "amplify the impact".

"We expect that the cost of external borrowings would rise, domestic credit conditions would tighten, the currency may depreciate sharply (damaging confidence and potentially limiting monetary policy flexibility), and economic growth would slow," the ratings agency cautioned.

"This would ultimately result in lower income levels.

"In such a scenario, financial stresses would be widespread across the country, including the corporate, small-to-midsize enterprises, and household sectors.

"We believe that this would significantly increase defaults by borrowers and losses on such defaults."

The __news is no better outside the potential bubble markets of Sydney and Melbourne, if S&P's worst case scenario came to pass.

"If a sharp fall in house prices in Melbourne or Sydney were to occur, we believe that most financial institutions in Australia would be adversely affected even when they do not have significant direct exposure to these properties," the ratings agency warned.

"This is because we believe that a sharp drop in house prices in these two cities would likely be accompanied by weakening in other macroeconomic factors, including GDP, employment, business and consumer sentiment, and consequently, could also precipitate a property price crash in the rest of the country."

While the risks in a worst-case scenario are enormous, S&P rates the chance of crash as being low and Australia's banks as being relatively well placed to ride out a financial storm.

"Notwithstanding increasing economic risks, we believe that Australia remains among the lower-risk banking systems by global standards," S&P concluded.

In its negative scenario, S&P foresees cutting the ratings of most Australian banks by a notch, including the big four.

Seven financial institutions escaped being put on a negative watch, mostly subsidiaries of large foreign banks which would be able to financially support them in the event of an Australian economic crisis.

Salmon farmer says Tasmanian Government ignored warning on overstocking danger in Macquarie Harbour

There are warnings of a looming disaster in Macquarie Harbour on Tasmania's west coast, where the state's three leading producers intensively farm salmon next to a world heritage wilderness area.

Salmon farming is currently worth more than $700 million and the Tasmanian Government has committed to making it a $1 billion industry by 2030.

Tonight on Four Corners, Frances Bender, the co-founder of Tasmania's second largest salmon farming company Huon Aquaculture, has broken industry ranks to warn about what she says are the dangers of farming salmon in the state's pristine waters.

"My comments will be controversial because they'll be taken that I'm being critical of other players in the industry and I'm being critical of the Government," Ms Bender told Four Corners.

"But the simple fact of the matter is we can't help that. The facts speak for themselves. The science is speaking for itself. And there is no way that I can sit here and lie."

"This is not the politically correct thing to say and this is not the corporate thing to say, but it's me saying it and quite frankly we're just sick of it."

Government received confidential briefings on dangers

Born and raised in south-east Tasmania, Frances and Peter Bender began dabbling in salmon farming 30 years ago to bolster their sheep and cattle business.

The now ASX-listed company Huon Aquaculture this year posted revenue of more than $230 million and it employs 524 Tasmanians.

Four Corners can reveal Huon Aquaculture has confidentially briefed the Tasmanian Government about the need to reduce fish stocks in Macquarie Harbour on three occasions this year.

The Government has also been provided with scientific reports and data showing concerning temperature spikes and dangerous drops in water oxygen levels in February this year.

The fish were recorded struggling to breathe and were so stressed they stopped feeding and went into survival mode.

Ms Bender said the science and Huon's pleas for change had been ignored by the State Government and the Department of Primary Industries, Parks, Water and Environment (DPIPWE).

"The Department can't claim ignorance," she said.

"It's concerning for my company, it's concerning for the region and everyone that lives there, it's concerning for the reputation of our industry.

"It's concerning for regional Tasmania and it's concerning for the brand that is Tasmania."

In May 2015 around 85,000 salmon belonging to the smallest of the big three producers, Petuna Seafoods, suffocated in Macquarie Harbour.

The storm surge pushed water that was lower in oxygen towards the surface of the harbour.

Petuna chief executive Mark Porter said salmon farming in Macquarie Harbour was having a "minimal" impact on the waterway.

But Huon Aquaculture is now scaling back its operations in the harbour.

"The science is telling us that Macquarie Harbour is a harbour under stress," Ms Bender said.

Associate professor Tim Dempster from Melbourne University's sustainable aquaculture laboratory told Four Corners it was "ill-advised to have more fish in this harbour going through these conditions".

Instead of scaling back the number of fish being allowed in Macquarie Harbour, the secretary of the DPIPWE has increased the cap twice in the past two years.

Most recently, in April 2016 Tasmania's DPIPWE lifted the cap on the number of farmed salmon in Macquarie Harbour by 1,350 tonnes.

Dr Tim Dempster said the decision was "perplexing".

Industry divided over Macquarie Harbour

While Huon says Macquarie Harbour is under stress, the biggest salmon producer Tassal has a different view.

Tassal owns three leases in Macquarie Harbour and accounts for more than 40 per cent of the market, an ASX listed company with an annual revenue of $430 million.

Its chief executive Mark Ryan, a former chartered accountant with financial restructuring and turnaround firm KordaMentha, has told Four Corners Tassal's science shows Macquarie Harbour is a sustainable waterway.

"Different companies have different views on it," Mr Ryan said.

"Everyone wants a sustainable industry [in Macquarie Harbour] but people farm with different practices and that's okay."

Both the Tasmanian Minister for Primary Industries and the Premier declined to be interviewed by Four Corners.

In a statement, the State Government said a management framework was in place "to ensure the sustainable management of Macquarie Harbour into the future".

It said the Tasmanian Government liaised with salmon companies on a broad range of issues including environmental conditions.

Watch the Four Corners investigation on ABC TV at 8.30pm.

Dreamworld deaths: Can the company's leaders save the now-maligned theme park?

Ardent Leisure Group's biggest hurdle is rebuilding the public's trust in Australia's biggest theme park after four people were killed at Dreamworld on Tuesday.

And at the helm of this disaster is the company's CEO and chairman — the two high-profiled media figures boasting more than 60 years' experience between them.

Yet paradoxically, the fallout from the country's worst theme park incident since 1979 has been a public relations disaster.

Ardent chief executive Deborah Thomas is an iconic women's magazine editor, and its chairman Neil Balnaves is a former media-executive-turned-businessmen and art philanthropist.

Both are facing condemnation from the victims' families and the public over their response to the tragedy.

The theme park deaths came as Ardent, which owns Dreamworld, WhiteWater World, Skypoint, AMF bowling and GoodLife Health Clubs, planned to shift its business focus away from Australia to its growing entertainment empire in the United States.

Head of Ardent Leisure Ms Thomas faced a barrage of criticism over yesterday's announcement she would still receive a performance bonus of up to $840,000 despite this week's fatal accident at the Gold Coast theme park.

The decade-long editor of Australian Women's Weekly and former editor in chief of CLEO and ELLE magazines took on the top job with Ardent in March last year.

Ardent went ahead with its scheduled annual general meeting yesterday to discuss the tragedy and to sign off on executive bonuses.

Late on Thursday, Ms Thomas announced she would donate her $167,500 cash bonus to charity.

She has also been lambasted for failing to contact the victims' families.

At service for staff at the Gold Coast theme park today she gave an emotional apology.

"I would like to say that if I hadn't handled it as well as I could, we thought we were doing the right things in terms of the way we approached it through the police," she told reporters.

"But if the families are watching, I have spoken to a number of them and we will look after them."

Ms Thomas said Ardent's support would include counsellors and immediate financial assistance.

Millionaire philanthropist plans to retire

Mr Balnaves has defended the timing of the AGM, saying the company was bound by law to hold the meeting.

He also said the theme park's earnings would take a substantial hit in the current financial year, following the accident that killed four people.

In 2014, Dreamworld was voted Australia's third most popular tourist attraction in the National Tourism Awards.

The chairman also went through his planned retirement at the meeting, but promised he would not just "disappear" and would be available to consult the board as it dealt with the accident.

"I will be in touch and available to the board," he told reporters at the AGM.

Prior to this role, Mr Balnaves spent four decades with Southern Star Television, bringing shows such as Blue Heelers, Water Rats, The Secret Life of Us and Big Brother to Australian screens.

A near-death boat accident in 2002 inspired the television executive to invest his fortunes in supporting art in Australia.

In 2006, he established the Balnaves Foundation, which seeks to broaden community access to the arts.

He has been awarded an order of Australia for this work and has donated more than $20 million in the past decade.

Arduous times for Ardent group

Dreamworld had planned to reopen its doors for the first time today, and hold a memorial service for the victims.

But the park will now stay closed until at least Monday, after concerns that opening too soon could hamper the police's investigation.

The company's theme park division, which encompasses Dreamworld and WhiteWater World, generates about one-third of Ardent's total earnings.

This is the first major tragedy for the leisure group but Mr Balnaves said the horrific accident would not impact the company's expansion into the US.

In 2012, the group entered the US and Main Event is now the fastest-growing bowling-anchored family entertainment chain in the US.

He said funding for the expansion would mostly come from the sale of the Ardent's gym and marina businesses rather than relying on its theme park revenue.

Genco eyes B10m waste management

Managing director Ronnachai Tantragoon

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SET-Listed General Environmental Conservation Plc (GENCO), an industrial waste disposal company, plans to start another waste management business next year with an investment budget of more than 10 million baht.

Managing director Ronnachai Tantragoon said the company is about to invest in sanitary landfill services in Ratchaburi and Bangkok.

He said it was a part of plans to capitalise on rising amounts of garbage and community waste, which will continue to increase in Bangkok and its suburbs.

The Industry Ministry has extended the operating licence granted to Genco for another 10 years to continue its waste management and treatment activities in Bangkok and Ratchaburi. That, in turn, has encouraged the company to expand.

"Sanitary landfill closure is a new business for us that we are about to invest in next year. That would make us a fully-integrated waste management company," he said, adding that it also focuses on both toxic waste from industry and general waste from neighbourhoods and households.

Genco's current core businesses are waste treatment and real estate development under C-Space and B-Live brands. Mr Ronnachai said the board of directors is set consider expansion plans for 2017.

He said the company also hopes it will eventually be granted two licences to develop two waste-to-energy power plants with a combined power generating capacity of 10 megawatts.

"We aim to develop two power plants with 5MW capacity each, one in Rayong and the other in Chonburi. The total investment would be about 2 billion baht," he said.

Tobacco law loophole under review

First step towards legal import of e-cigarettes, baraku

E-cigarettes (vaping) and baraku (shisha) are legal throughout the world, but can only be obtained in Thailand via smugglers. These baraku sets were seized by customs agents, and are displayed at the Bangkok Post. (Photo by Chanat Katanyu)

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The Excise Department may ask the government to allow the legal import of electronic cigarettes and baraku, which would be taxed like cigarettes, says director-general Somchai Poolsavasdi.

He said the department has noticed a loophole in the current tobacco law, which does not define these products as new types of tobacco-related goods intended to replace conventional cigarettes.

"We are still uncertain whether we will allow them to be imported legally or not, but if we decide to allow it we will have to tax them for sure," said Mr Somchai.

"We have decided to take the first step to treat them properly by adjusting the legal definition of tobacco to cover all of these items. It not only concerns electronic cigarettes and baraku, but everything that has been created to be consumed in place of cigarettes," he added.

Under the Tobacco Act 1966, tobacco products are defined as those made from tobacco leaf only, hence, it cannot govern cigarettes in electronic form or water pipes, also known as baraku, which are also now available in electronic form.

"Once we define these goods as taxable items, it will be easier for us to tax them later if we allow them to be imported legally," said Mr Somchai.

While new ways of smoking and vaping have been available on markets worldwide for years, it is illegal to import such items into Thailand, resulting in them being smuggled in.

"It is quite complicated as tobacco is a sensitive issue here. We have to study thoroughly the pros and cons of allowing them to be imported legally," he said.

It is still debatable whether e-cigarettes or baraku are healthier alternatives to cigarettes and cigars.

The amended law on excise tax has been passed by the Council of State after earlier being approved by the cabinet. It is now under consideration of the National Legislative Assembly. If the NLA approves the revised law, it will come into effect 180 days after it is announced in the Royal Gazette.

The excise tax restructuring is part of the Finance Ministry's comprehensive tax reforms, while the Tobacco Act is a part of the tax reform plan. The legal amendments will switch the excise tax basis to state-recommended retail prices from ex-factory prices. The change is expected to come into force by mid-2017.

Switching the method of calculation will standardise duty collection and create more fairness and transparency, said the director-general.

Under the current system of calculating excise tax, importers have used loopholes to understate the value of costs, insurance and freight (CIF) in order to reduce their tax burdens.

But the excise duty calculation based on state-recommended retail prices will make it harder for importers to evade making tax payments, said Mr Somchai.

Even though state-recommended retail prices are normally higher than ex-factory prices and CIF value, he said the change will not further burden importers, as the Excise Department will mitigate the effects by lowering the current rates.

Apart from the Tobacco Act, six other laws will be integrated into a single act to standardise and simplify the tax collection process to facilitate the new tax calculation structure.

They are the Liquor Act of 1950, the Playing Card Act of 1943, the Excise Tariff Act of 1984, the Excise Tax Act of 1984, the Allocation of Excise Tax Act of 1984 and the Allocation of Liquor Tax Act of 1984.

Weakness in europe keeps global equities subdued

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Recap: Global equities were affected by poor sentiment led by European stocks, which fell for the entire week on disappointing corporate results. The European Central Bank is expected to now consider further stimulus to spur the lacklustre euro zone. The US Federal Reserve, meanwhile, is seen as moving closer to raising interest rates as third-quarter GDP growth of 2.9% exceeded expectations.

The SET index moved in a range of 1,491.32 to 1,508.89 points before closing on Friday at 1,494.44, down 0.4% from the previous week, in moderate turnover averaging 50.28 billion baht a day. Institutional investors were net sellers of 348.14 million baht. Brokers were net buyers of 1.26 billion baht, foreign investors sold 4 billion and retail investors bought 3.09 billion.

Big movers: Newcomer Sahakol Equipment (SQ) finished its first day at 4.00 baht, up 25% from its IPO price of 3.20 baht, and closed the week at 4.14 baht. Banpu Power (BPP) made its SET debut on Friday, closing at 27.25 baht, up 29.8% from its IPO price at 21.00 baht, making it the week's top gainer. SUPER led in volume and turnover, down 4.7% to 1.62 baht. __news was the top loser, plunging 14.3% to 0.12 baht.

Newsmakers: Finance Minister Apisak Tantivorawong said the economic growth outlook for the fourth quarter remained healthy, as consumption was already recovering after a short-term slowdown. The Fiscal Policy Office maintained its forecast of 3.3% GDP expansion for the year.

The National Economic and Social Development Board is standing pat with its 3.3% growth projection for 2016 despite concerns about a slowdown in recent weeks. It said growth would be driven by healthy tourism, recovering domestic consumption, and accelerated state spending and measures to assist low-income groups. The NESDB will announce official third-quarter GDP figures on Nov 21.

Mr Apisak said the government's e-tax scheme would be introduced in mid-2017 and would begin with large firms. It may take around three years to encourage businesses of all sizes to enter the online tax system, designed to enhance tax collection and spur digital economy development.

BPP, the power flagship of BANPU, made its market debut after raising 13.6 billion baht through an IPO to finance expansion of its renewable-power business domestically and internationally to 2,400 megawatts (MW) of capacity by 2018. It has a long-term target of 4,300MW by 2025, compared with 1,913 MW now. It also has 643MW in solar projects under development with power purchase agreements (PPA) already in place.

PTTEP reported a third-quarter net profit of 5.4 billion baht in line with forecasts. The figure was up 105% on the quarter, supported by non-recurring gains, and reversed a loss of 46.2 billion in the same period last year that resulted from a huge impairment charge. Core profit still declined 20% from a quarter earlier to 4.4 billion baht.

The European Central Bank will decide in December on how to prolong its quantitative easing programme, policymaker Ewald Nowotny said. Earlier President Mario Draghi said the ECB would keep a "very substantial degree of monetary accommodation", dismissing talk of an abrupt end to the €80-billion monthly asset buying programme.

Thai exports in September rose 3.4% year-on-year, the second straight month of gains, to $19.46 billion while imports were up 5.6% to $16.91 billion. The Commerce Ministry said the increase reflected strong expansion of machinery and chemical products, as well as agricultural products. It expects growth to continue for the rest of the year.

Public debt in August was 5.95 trillion baht, or 42.6% of GDP, down from 42.9% in July. The Public Debt Management Office forecast a peak of 53% in 2019 based on expected borrowing of 300-400 billion baht a year for infrastructure investments.

SCC reported a Q3 net profit of 14.1 billion baht (down 12% on the quarter but up 57% year-on-year), beating the Bloomberg consensus of 13.2 billion baht due to deferred tax assets of 1.8 billion baht.

The Mass Rapid Transit Authority expects to open bidding and start construction next year on three rail route extensions in Bangkok. They are the 23.6km Purple Line route from Tao Pun to Rat Burana; the 8km Blue Line route from Bang Khae to Phutthamonthon Sai 4; and the 17.5km Orange Line extension from the Thailand Cultural Center to Taling Chan.

The Tourism and Sports Ministry projects 2016 tourism revenue will reach 2.4 trillion baht as expected, citing satisfactory growth in the first nine months. This is despite a slight impact from cancellations of entertainment activities during the 30-day mourning period for King Bhumibol and the crackdown on zero-dollar tours. The latter could reduce Chinese arrivals by 20% in the last quarter, bringing full-year Chinese arrivals to 9.21 million, short of the target of 10.1 million.

Coming up this week: Thailand will release October inflation data tomorrow. The Bank of Japan meets the same day.

The US Federal Reserve will meet tomorrow and Wednesday but with the election just a week away, expect no __news that would unsettle markets.

Japan will report October consumer confidence on Wednesday. Thai consumer confidence figures for October are due on Thursday. The Bank of England also meets Thursday.

Stocks to watch: Tisco Securities suggests high-growth stocks such as CK, EGCO, GLOBAL, KAMART, QH and WHA; firms with expected net profit growth exceeding 20% such as ANAN, BCH, CENTEL, CPN, DRT, GFPT, LPN, PYLON, SYNEX and UNIQ; and those likely to show improved H2 profits over H1, including ANAN, BEM, BLA, ILINK, JWD, KAMART, SAWAD, SEAFCO, SPA, TPIPL, TTCL and UNIQ.

Bualuang Securities recommends high-growth stocks that will report good Q3 results, such as TACC, ITEL, SEAFCO, BLA and MTLS.

Technical view: Bualuang Securities sees support at 1,480 and resistance at 1,520. Thanachart Securities puts support at 1,480 with resistance at 1,520.

Rice farmers despair amid low prices

No way out: Just as the rice harvest begins, farmers are caught in a trap, facing the lowest prices of the century, with worldwide demand still falling. (File photo)

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Kneeling and sobbing before a top commerce ministry official, a Phichit farmer appealed to the government Sunday to help growers suffering from the fall in rice prices to 5,000 baht a tonne, the lowest level in decades.

Sanit Kaho, a 63-year-old farmer, held the legs of permanent secretary for commerce Wiboonlasana Ruamraksa, who visited Wangkrod Tai Tambon Administration Organisation (TAO) in Muang district to meet local authorities, farmers and rice millers to discuss ways to deal with the tumbling price of paddy.

The farmer said she wanted the prime minister to help. She can't afford to sell her Hom Mali rice now due to current prices, adding that mills are offering just 5,000 baht per tonne.

The crop will be ready to harvest this week, though farmers will not be able to survive with this price, she said.

According to Commerce Minister Apiradi Tantraporn, a new scheme will be proposed at a meeting today held by the national rice policy committee.

The scheme sets out a pledging price of no less than 10,000 baht a tonne for Thai Hom Mali paddy.

The measure is expected to be forwarded to the cabinet tomorrow for approval and will take immediate effect as one measure to help farmers.

Ms Sanit said most of Phichit farmers do not have their own barns and usually sell their rice immediately after harvesting it.

The government should come up with ways to address this problem, she said.

Mana Wuthiyakorn, head of the rice farmer network in Bang Mun Nak district, said the government should buy Hom Mali rice directly from farmers at 10,000 baht per tonne, insisting farmers would shoulder the cost of rice production.

He asked Ms Wiboonlasana to relay the concerns to Prime Minister Prayut Chan-o-cha.

He said farmers in the province's three districts are due to harvest their rice this week, but prices are still falling due to manipulation by middlemen and millers.

He said his group will close the Bang Moon-Tapan Hin road if nothing is done to solve the problem.

Mingkwan Pook-eiam, head of an unofficial rice milling club in Phichit, said it is impossible to force millers to buy rice from farmers at 10,000 baht per tonne as exporters buy rice from the millers at lower prices, adding the government should hold talks with exporters to find ways to deal with the issue.

Ms Wiboonlasana said falling global rice prices are to blame for the problem, noting that many rice-growing countries are undercutting Thailand.

As part of the scheme up for approval, the government is planning to set a quota of 50,000 tonnes at US$600 (about 21,000 baht) to countries and exporters interested in buying Thai rice, a measure that should shore up prices, says Ms Wiboonslasana.

The government will launch campaigns to boost domestic demand in rice, such as holding farmers markets specialising in rice, and seek more foreign markets, she said.

Government spokesman Sansern Kaewkamnerd insisted the government wants to solve the problem of falling rice prices in a sustainable way, while educating farmers and the public that domestic prices are determined by global pressures.

Baiyoke gets into office buildings to diversify

Baiyoke 2 Tower in Bangkok is seen after a sunrise on January 1, 2016. (Bangkok Post file photo)

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Baiyoke Group of Hotels is diversifying into office buildings in a bid to reduce its business risks.

Vice-chairman Piyalert Baiyoke said the group will start construction of an office building with over 20 floors on Sri Ayutthaya Road. Construction is expected to be completed within two years.

The shift to building is being viewed as a long-term investment, as demand for office space in Bangkok tends to rise over time.

"It's our first office building after putting our focus on hotels for a long time. We started expanding into the food business four to five years ago and now it's about property," he said.

While the group has some land plots waiting for future development, hotels will remain its core business.

Panlert Baiyoke, Piyalert's father and founder of Baiyoke Group, allows his children to manage several business units. Mr Piyalert is in charge of hotel operations in Bangkok and upcountry.

There are four hotels in Bangkok -- Baiyoke Sky Hotel, Baiyoke Suite Hotel, Baiyoke Boutique Hotel and Hua Chang Heritage Hotel.

The group also has another four upcountry comprising Baiyoke Ciao Hotel in Chiang Mai, Baiyoke Chalet Hotel in Mae Hong Son, Santisuk Beach Resort in Cha-am, Phetchaburi and Baiyoke Seacoast Resort in Koh Samui.

Mr Piyalert said the group is now building Bangkok Midtown Hotel on a 10-rai plot on Phetchaburi Road. This four-star hotel will have 180 rooms and construction is around 80% complete. It is scheduled to open early next year.

The group will then open another four-star hotel with 80 rooms on Ratchadaphisek Road by the end of next year.

In addition to the two hotels in Bangkok, he is also interested in building a resort in Hua Hin, which has become a popular tourist destination for Thais.

The government's infrastructure projects such as a high-speed train and the expansion of Hua Hin airport as well as private investments including shopping complexes, condominiums, theme parks and hotels will help increase tourism in the seaside resort, he said.

Mr Piyalert said he also aims to develop a community mall at a yet to be determined location.

Apart from hotels, food is the group's second priority for expansion, as the business complements its hotel operations.

"I have worked in the service area at Baiyoke Group for 14 years. I love it and have a passion for it," Mr Piyalert said.

"If we expand our food business, we will mainly focus on Japanese food. I like to deal with Japanese business partners because they have a similar business culture," he added.

The week in finance: RBA, Federal Reserve and Bank of Japan meet while ANZ profit set to slip

Everything is pretty much in pause mode pending a flurry of central bank meetings in Australia, US and Japan this week that are likely to provide some direction for markets.

On Friday Wall Street had an up and down session, ending pretty well where it started despite gross domestic product (GDP) data that looked solid at first glance.

That left ASX futures in marginally negative territory over the weekend, pointing to a soft start to the week.

Over the week, the ASX had a shocker, down almost 3 per cent as the renewed appetite for resources failed to offset the dumping of higher yielding defensive stocks.

Spot iron ore prices rallied more than 5 per cent over the week up to their loftiest point since early May, thanks to higher Chinese rebar steel (used in reinforced concrete) prices, which also pushed coking coal spot and futures prices higher.

Oil headed in the other direction, dropping below $US50 a barrel for the biggest weekly loss in almost two months as traders lost faith in OPEC regaining its cartel-like swagger.

Iran and Iraq are not fans of the production cuts being driven by the Saudis and bluntly told a private meeting of the big oil producers in Vienna over the weekend they did not trust the numbers behind OPEC's plan to cut up to 33 million barrels a day from the market.

A final decision on whether to cut or not is expected at an OPEC meeting set down for the end of November.

RBA to hold rates steady at Cup day meeting

The betting is the Reserve Bank will again hold the official cash rate at a record low of 1.5 per cent on Melbourne Cup day.

The market is pricing in only a 6 per cent chance of a cut, while the majority of market economists surveyed — 21 out of 27 — are also punting on a hold.

While it is unwise to bet against a favourite, it is worth pointing out that a 101-to-1 shot got up on Cup day last year.

Inflation is still well below the long-term trend, but right on the RBA's projection for a slow and steady rise back to its 2 per cent to 3 per cent target band.

The housing market is still strong, growth is picking up and Australia's terms of trade appear to be turning the corner on the back of stronger commodity prices, so there is no incentive to cut there either.

The accompanying commentary from Reserve Bank governor Phillip Lowe and Friday's quarterly Statement on Monetary Policy should give a clearer picture of current thinking, with a fairly positive message likely to point to the RBA staying on the sidelines for sometime yet.

There is also a solid flow of other key domestic data out this week.

Private credit (Monday) is expected to ease and house prices for October (Tuesday) are forecast to kick up again to more than 7 per cent over the year.

The volatile building permits series (Wednesday) should ease back a tad, but remain near historic highs. The focus again will be on the extraordinary — some would say disturbing — pace being set in the apartment sector.

September retail sales (Friday) are expected to grow at about 0.4 per cent, the same pace as in August, while the trade deficit (Thursday) is expected to again about $2 billion, with the recent surge in iron ore and coal prices expected to show up next month.

Federal Reserve, Bank of Japan and Bank of England all on hold

The other big central banks in the US (Wednesday), UK (Thursday) and Japan (Tuesday) all meet as well and all are expected to do either nothing or very little.

For the record, the European Central Bank will meet on Tuesday, but it is a non-voting meeting, so you can pencil a hold in there as well.

US GDP growth for the third quarter came in a 2.9 per cent, the strongest bounce in two years and ahead of consensus estimates.

Digging a bit deeper into the data, a large part of the jump was due to some pretty impressive shipments of soybeans — a huge quarter for the bean counters in the US Department of Economics and Statistics — rather than consumer-driven strength that would have made the Fed happier to lift rates.

Anyway, the Fed is not about to do anything rash just days before the US presidential election, and the whole subject of a hike may be revisited in December.

The statement from Federal Reserve chair Janet Yellen is likely to provide the most interest.

The US has important jobs data out (Friday) which may see unemployment drop lower again to 4.9 per cent.

The Bank of England decision is evenly balanced.

The UK so far seems to have weathered the Brexit vote pretty well and there is evidence inflation is back on track to hit 3 per cent sometime in 2018, although some big banks are betting on a 10-basis point cut just for insurance.

The Bank of Japan could surprise with a move too, primarily because it does not seem to mind the odd surprise and things are still pretty moribund and deflationary. A rate cut or stepping up the asset buying programs are both live options.

The global manufacturing pulse will be taken with October purchasing managers' index readings released for the US, UK, Europe, Japan and China on Tuesday and Wednesday.

From Australia's point of view, the Chinese PMIs — official and unofficial (Tuesday) — hold the most interest and may kick commodities higher still if there is evidence of an expansion in activity going on.

ANZ results head the corporate diary

The ANZ is expected to trot out full-year cash earnings — that is with one-off gains and losses stripped out — of about $6.2 billion, a 15 per cent slide on last year.

ANZ took out some trash last week announcing charges against earnings totalling around $360 million.

The market has embraced the tidying up the bank has been doing — exiting Asia and returning dividends to sustainable levels — and should applaud further cost cutting that is likely to be unveiled.

ANZ appears to be a bit ahead of the others in the bank's renewed focus on cost cutting to drive up profits, given there is nothing much happening in top line growth.

Bad and doubtful debts may edge up, and the bank will be happier it has the troublesome aspiring fertiliser magnates the Oswalds off their books — even if it did cost $145 million.

The world's biggest explosives maker Orica will release its full year results on Friday, while building materials supplier CSR will report its interim numbers on Wednesday.

There is a host of quarterly sales and productions figures being dropped as well.

Australia
Monday 31/10/16	Private sector credit Inflation gauge Origin Energy update Qantas update Infigin Energy update	Sep: Up around 6pc YoY Oct: TD Securities series Q3 production report Q3 trading update Q3 production update
Tuesday 1/11/16	RBA meeting Manufacturing index Home value index	No change expected Sep: Not helped by higher dollar, may bounce back Oct: CoreLogic RP Data series up 7 per cent
Wednesday 2/11/16	Building approvals CSR interim results Nufarm AGM	Sep: Focus on apartment data
Thursday 3/11/16	International trade ANZ FY results Boral AGM Downer EDI AGM Fairfax Media AGM Perpetual AGM REA update	Sep: Same old, $2bn plus deficit expected Cash profit of $6.2bn forecasr Q3 trading update
Friday 4/11/16	Statement on Monetary Policy Retail trade Orica FY result	Key quarterly update from RBA, little change in inflation or growth forecasts Sep: Growing at around 0.4pc MoM

Overseas
Monday 31/10/16	US: Personal income EU: GDP EU: Inflation	Sep: Very low growth Q3: Forecast to be 1.3pc YoY Oct: Core inflation around 1pc YoY
Tuesday 1/11/16	US: ISM manufacturing US: Construction CH: PMI UK: PMI JP: BoJ meeting	Oct: Gaining strength Sep: Spending may edge up after contraction Oct: Official and Caixin readings, marginal expansion of factory activity forecast Oct: Manufacturing may be weaker No change expected
Wednesday 2/11/16	US: Fed rate meeting US: ADP employment change EU: ECB meeting EU: PMI	No change expected (Announced 5am Thursday) Job expected to lift by around 170K Non-voting meeting Oct: Going OK
Thursday 3/11/16	EU: Unemployment UK: Interest rates	Sep: Still around 10pc Another hold, no change on QE either
Friday 4/11/16	US: Non-farm payrolls US: Trade Balance EU: Producer prices	Oct: Another 170K jobs forecast, unemployment 5pc Sep: Deficit stuck at around $US40bn Sep: Deflating

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Foreigners buying directly from rubber farmers

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While the local rice market is mired in a deep slump due to oversupply, the rubber trade has begun to pick up, with foreign buyers now seeking to buy directly from planters and bypassing the futures market.

Foreign buyers have bypassed the futures market and bought rubber directly from Thai planters for two years.

Representatives from rubber-processing companies from Malaysia, China and India have been in direct contact with the Rubber Network Council and Rubber Farmers Institution of Thailand (RNRF) since rubber prices started to dip over a year ago, RNRF communications officer Veerasak Sinthuwong said on Saturday.

"They want to buy directly from farmers due to a large price gap compared to what's quoted in the futures market," he said.

The foreign buyers first headed south, hoping to buy from rubber companies and large farmers' groups there, but were told the supply was not enough.

They subsequently turned to Indonesia but found the quality of cup rubber in the neighbouring country did not meet their requirements.

They finally turned to planters in the Northeast through their network. The prices have been set based on prevailing market rates plus management fees and a profit margin.

"There's no limit to how much these companies would buy and official talks will be held again next month," he said.

Rubber companies are now competing hard for supply, offering one baht more for a kilogramme each day. The price of 100% cup lump is now 51-52 baht a kg while raw cup lump is sold for 21-32 baht and latex from the south for 56 baht.

"From February next year, we should see rubber prices rebound to 75-80 baht a kg. Planters in the South, Northeast and some parts of the Central region have seen that trend and are telling their network members to hold it for sale by then," he said. 

Rice farmers plead for help amid deep price slump

A group of farmers from three districts in Phichit province submit a complaint against low rice prices to the government centre through the provincial hall on Saturday. (Photo by Surachai Piraksa)

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Rice farmers in some provinces have grown increasingly impatient and are imploring the government to help them after prices plunged to a 10-year low.

In Buri Ram, farmers say they are in deep trouble as rice prices have dipped well below cost to five baht a kilogramme. They have asked the government to help prop the prices to at least 10 baht per kg, their break-even level.

Millers are now paying them only 5,000 baht a tonne for the main crop they are harvesting, citing high humidity and impurities.

They claim the price is the lowest in decades, yet they have no choice but to accept it in order to repay debts and have money for daily expenses, harvesting equipment rentals, and school supplies for their children for the coming semester.

"We spent 70,000 to 80,000 baht to farm on our 35 rai this year. Although the output was good, it's questionable whether our income will cover the costs," said Prakong Hoopracone, 49, from Muang district of the northeastern province.

Somyot Singthongprasert shared her view, adding that if the government doesn't help them by propping up prices or controlling millers, he couldn't see how he could repay debts and meet daily expenses.

In Phichit province in the Central region, groups of farmers from three districts -- Muang, Taphan Hin and Bang Moon Nak -- gathered at the provincial hall to submit a complaint to the government's help centre. Deputy governor Piya Wongluacha accepted their letter.

The farmers said they were about to harvest jasmine rice but the price had dropped to 6,000 baht a tonne.

In Chai Nat, some farmers reportedly are putting their land up for sale because they can't bear to lose any more money on their crops.

Government spokesman Lt Gen Sansern Kaewkamnerd said on Saturday that the government was speeding up efforts to solve the problem, with the rice policy committee planning to meet on Monday.

But he dismissed some __news reports as "half-truths", such as stories linking farmland sales to low rice prices.

"We've checked the facts and found that the people who are selling farmland right now are actually landlords who no longer want to rent it or those with no manpower to work the fields," he said.

Prime Minister Prayut Chan-o-cha commended farmers who have switched to other crops or joined together to form community milling cooperatives, he added.

The junta's answer to the costly rice-pledging programme of its predecessor is a barn-pledging scheme.

Aimed at slowing down the market supply of jasmine and glutinous rice paddy, the programme involves having the state-owned Bank for Agriculture and Agricultural Cooperatives (BAAC) lend to farmers in the North and Northeast.

Growers are required to keep harvests in their barns and the bank will give them loans equal to 90% of the target prices, plus 1,000 baht a tonne as the storage cost.

In return, the government subsidises the interest for farmers, with a cap of 300,000 baht per household, or 20 tonnes of paddy.

For their part, the farmers keep the paddy until the time is appropriate to sell it. Farmers who don't have barns can join through cooperatives.

The government approved the programme in late October 2015. For 2015, the crops were limited to jasmine and glutinous paddy in the North and Northeast. The maximum pledged amount was 2 million tonnes for a maximum credit line of 26.74 billion baht.

The pledged prices were up to 13,500 baht a tonne for jasmine paddy and 11,300 baht for glutinous paddy, or 90% of the market prices at the time.

Critics said the cap at 2 million tonnes was less than a third of the 7-million-tonne output of the two varieties.

Because of the restrictions and higher rice prices at the time, 80,000 farmers pledged 450,000 tonnes for loans totalling 6.39 billion baht for the 2014-15 crop year, according to BAAC data as of March 31, 2015.  

Rice prices around the world have fallen as a record crop is forecast for the 2016-17 harvest season, the UN Food and Agriculture Organization (FAO) said in its latest Rice Price Update.

The FAO’s All Rice Price Index showed international rice prices in the first eight months of 2016 were 9% below the levels of a year earlier

The International Grains Council (IGC) also noted a sharp fall in export prices of Thai rice in August.

“The market in Thailand was weighed down by sluggish international demand and increasing secondary crop arrivals, while additional pressure stemmed from efforts by the government to offload state reserves through a series of auctions,” it said. “At $369 [a tonne], 5% broken rice was down by $43 month-over-month."

Farmers in Buri Ram say they have no choice but to accept as little as 5,000 baht a tonne for their rice.

The logic behind record-setting land prices

Many factors besides location can influence what developers must pay for prime sites in central Bangkok, and Thailand's new land and buildings tax could further complicate the equation

HOT PROPERTY: The Swissotel Nai Lert Park Hotel was sold to Bangkok Dusit Medical Services for 10.8 billion baht. (Photo by Krit Promsaka na Sakolnakorn)

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In the property industry, it is the land market that leads the price trends for all sectors, from residential condominium prices to office and retail space rents. Given that the land price is often one of the largest components in a development project, it is the base that dictates property prices.

Many buyers wonder, for example, why condominium prices in Bangkok's central business district are constantly rising. Aside from the more premium design, specifications and services that new prime CBD developments offer, it is the developer's land acquisition cost that affects the price at the end of the day.

Every now and again we will read __news of record-breaking land prices, particularly for prime sites in the heart of the CBD. Last year, a three-rai plot on Chidlom Road was sold to the SET-listed developer SC Asset Plc for 1.9 million baht per square wah (four square metres), a value the market thought was overpriced at that time. The site will now be developed into a super-luxury condominium.

Just a few weeks ago, the largest land transaction in the capital's history was announced. The legendary Swissotel Nai Lert Park Hotel, which sits on a prime 15-rai plot on Wireless Road, was sold to Bangkok Dusit Medical Services, the country's largest hospital operator, for 1.8 million baht per square wah, in a deal worth a total of 10.8 billion baht. The buyer plans to develop a high-end wellness centre.

Prices of prime land in the CBD have shown no signs of slowing down. While there are only a handful of prime transactions in a given year, scarcity is the key factor that keeps pushing prices up, particularly for prime plots eyed by top developers.

However, not all plots are equally attractive and can command the prices we read about in the headlines. There are a number of factors that determine what a plot is worth. It is important to understand what they are and how they come into play.

Location is, of course, the key price determinant. But within the same location, one plot can vary significantly in price compared with another. The first factor that affects price is zoning as this dictates the land use -- whether it can be used for commercial purposes or residential only.

Plots that allow commercial use will typically command the highest value as they can be built to a higher plot ratio. Another factor that directly affects land value is the road width where the land is located. This has a direct impact on the gross floor area of a building that can be constructed on the plot.

For example, plots on roads between six and 10 metres wide can only accommodate low-rises under 23 metres and with a gross floor area of under 10,000 square metres. On a plot on a road that is 10 to 18 metres wide, a developer can erect a building with between 10,000 and 30,000 sq m of gross floor area, and plots on roads that are 18 metres wide or more can accommodate buildings in excess of 30,000 sq m.

Several other factors affect value. These include proximity to mass transit, expressways and main roads, the shape of the plot, views from the site and proximity to amenities such as retail centres, schools and hospitals.

Another key consideration, particularly for Bangkok, is access to and from the site. Given the city's traffic conditions, having multiple entries and exits is extremely beneficial and certainly has added value, particularly for larger plots planned for large mixed-use developments.

With all these considerations coming into play, even plots on the same road can vary substantially in value. A good example is Sukhumvit Road, where only certain sub-sois are wide enough to build high-rise developments. The Sukhumvit sois with the highest potential for new high-rise residential developments today include sois 21, 39, 55 and 63 on the north side and 22, 26, 40 and 42 on the south side.

Given the variations in values of plots, rates of capital appreciation also vary. If we look at the CBD areas, the compounded annual growth rate for prime plots in the Phloenchit/Lumpini, Sukhumvit, Silom and Sathon areas was 14% on average between 2002 and 2016. The highest growth rate was on Sukhumvit at 16%.

However, this price growth does not reflect the market average for land plots across the CBD as it only represents prime main-road plots in the heart of Bangkok. As an overall estimate, land prices in the CBD are rising on average by 3-5% annually. Suburban locations where there is less development interest and activity will experience a lower growth rate.

An additional factor that will now affect land pricing and land stock for sale is the introduction of the land and buildings tax that will come into effect next year. The new tax is likely to create a wave of change in the land market. The current municipal and household tax rates are relatively low. The land and buildings tax will represent the first imposition of a significant holding cost on land and property.

One of the short-term impacts we may see is an increase in plots available for sale, which will create a more active land market with more transactions. We will have to wait and see how this affects land values and whether it will affect certain areas only or values across the market.

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Aliwassa Pathnadabutr is managing director of CBRE Thailand. She can be reached at bangkok@cbre.co.th; Facebook: CBRE.Thailand; Twitter: @CBREThailand; LinkedIn: CBRE Thailand; website: www.cbre.co.th.

Chilling silence surrounds Rohingya

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For much of last week, the silence was disconcerting. After a series of coordinated attacks on border posts in western Myanmar's troubled Rakhine state left nine soldiers and police dead on Oct 9, a crackdown followed and the hunt for some 400 suspects turned bloody. The violence in the two weeks which followed left a further five officers dead, which is unforgivable, but the crackdown from authorities against the unrecognised Rohingya Muslim minority was more brutal: officially 33 accused insurgents were killed, including several suspects in custody, but given the secrecy there are fears the toll is much higher.

The area was sealed off from outsiders, international aid was denied or severely restricted, and little to nothing was said officially about what was happening in the flashpoint border city Maungdaw or elsewhere in Rakhine state. On Sunday, reports filtered through that security officials had forced about 2,000 Rohingya from their homes in western Myanmar's Kyee Kan Pyin village as part of the crackdown. It was also said 1,000 Buddhist residents had been displaced.

NGOs and the United Nations called for access and information, saying there were allegations of human rights abuses, with unarmed people shot, women and girls raped and assaulted, homes and Korans burned and shops looted. Allegations, it should be noted, that are extremely difficult to corroborate in the circumstances. The World Food Programme, which assists 152,000 people in Rakhine state, said while deliveries were slowly being made, as of Friday 50,000 people had not been reached in weeks.

On Friday, the silence broke with reports from Reuters that dozens of Rohingya women had been raped by groups of soldiers. The accounts from eight women interviewed both on the phone and in person were chilling, with a mother of seven saying her headscarf was removed before four men attacked her and a 15-year-old daughter. A 30-year-old woman also described being knocked off her feet by soldiers and repeatedly raped. "They told me, 'We will kill you. We will not allow you to live in this country,'" she told Reuters.

Senior figures in the Myanmar government denied the accusations, with one going as far as calling the accounts Islamist propaganda. The US State Department responded by saying it had voiced concern to Myanmar's foreign ministry and calling for an investigation which held those responsible to account. Brad Adams, Asia director at Human Rights Watch, said: "The Burmese government should ensure a credible inquiry into the Oct 9 violence by inviting UN human rights experts to take part. Rakhine state's ethnic divide is perhaps Burma's biggest fault line. The government's handling of this inquiry is a big test for preventing future violence against the Rohingya and other populations."

One account the government has not denied, however, is the death in custody of Khawrimular, a 60-year-old Rohingya detained on Oct 14 on suspicion of involvement in the earlier attacks. Arrested along with his three sons and two of his brothers, he was described as a community leader yet authorities said he had to be subdued after grabbing a gun while in custody.

He was rendered unconscious and died on the way to hospital. The government has promised an investigation into this death.

Observers are worried this could be the worst violence to hit Rakhine state in the four years since 125,000 people were left displaced, leading to an annual exodus of asylum seekers. Without access it is impossible to say, but it does come at a difficult time as the government of Aung San Suu Kyi's National League for Democracy is still finding its feet and negotiating the balance of power with an army that still holds tremendous sway.

Much criticism has been levelled at Ms Suu Kyi for perceived and real failures to address or in some instances even acknowledge the plight of the Rohingya, considered among the world's most repressed and officially denied citizenship and rights under previous junta rule thanks to enmity that in turn dates back to the colonial era. Some of this criticism is justified, and even in June she told the UN her government would continue the policy of avoiding the term "Rohingya" -- they are seen by many as illegal Bangladeshi migrants. More sympathetically, it should be remembered democracy remains fragile in Myanmar after so many decades of military rule and there are many competing political forces, ethnic minorities and war-torn regions for the government to deal with. This is to say nothing of the men with weapons, money and power who stand to lose from the transition to democracy.

Nearly a year has passed since her election. While Ms Suu Kyi cannot hold the office of president, as a democracy hero and de facto leader her words carry weight. She is no longer an opposition figure but a world leader, and she needs to act as such. For years, her silence on the Rohingya has been disconcerting. In light of the recent violence, it is more troubling still.

Dow Chemical earnings up

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The Michigan-based Dow Chemical Co has posted a 10% rise in sales volume in the third quarter of 2016 with operating Ebitda rising US$118 million to $2.5 billion.

Andrew N Liveris, Dow's chairman and chief executive, said in a statement the company's earning per share was at $0.63, up 11% on year with more than $900 million returned to shareholders through dividends and share repurchases.

"We have now achieved four full years -- 16 consecutive quarters -- of year-over-year operating earnings growth and margin expansion, during which time Dow has also delivered three consecutive years of volume growth," said Mr Leveris.

He said sales volume grew 6%, excluding the impact of divestitures and acquisitions, reflecting broad-based, consumer-driven demand with gains in all geographic areas.

Dow returned $928 million to shareholders through paid dividends of $512 million and share repurchases of $416 million.

FPO upbeat on recovery

Cargo ships pictured near the port in Bangkok. Officials expect Thailand's economy to meet the projection of 3.3% growth this year.

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The Fiscal Policy Office (FPO) has maintained its 3.3% economic growth projection for the year, signalling that recovery is firming up, says a senior official.

Director-general Krisada Chinavicharana added that for next year, the FPO projects growth to range between 2.9% to 3.9%, driven mainly by state investment and expenditures, including direct investment by government, local administrations and state enterprises.

"The country's expansion next year will be led by state investment, as it was this year," said Mr Krisada.

He said total investment next year will amount to 1.02 trillion baht, a 6.7% increase from the 2016 fiscal year. Investment will include infrastructure projects such as the double railway and new electric train routes.

For 2016, the FPO maintains its projection of 3.3%, slightly higher than 2.8% seen in 2015 on the back of the numerous measures by the government aimed to pump up consumption through spending.

The government spending for 2016 is likely to reach 955 billion baht, a 10.5% rise from last year.

This year will be supported by the growth of tourist arrivals to 33.3 million, despite it being slightly lower than 33.8 million tourists targeted earlier.

"Tourism revenue this year will stand as high as 1.68 trillion baht, but not lower than 1.71 trillion baht," Mr Krisada said, adding that next year tourist arrivals will rise to 37.2 million, with 1.92 trillion baht in revenue.

Real private consumption in 2016 should end this year with 2.9% growth, exceeding the earlier projection of 2.3%, he said. Meanwhile, private investment this year is likely to improve from a contraction of 2% last year to a 1.6% expansion, but it is still lower than the earlier prediction of 2.6%.

Next year, private investment will continue to stay low as a result of capacity utilisation rate in the manufacturing sector remaining weak this year and is not set to improve next year.

Finance Minister Apisak Tantiworavong agrees that economic expansion will exceed 3%, in line with the prospects of fourth quarter consumption, despite low consumption during the week after the demise of His Majesty, King Bhumibol Adulyadej.

"From the government's report, the consumption dropped sharply before bouncing back within two weeks, so we are confident we can have over 3% growth," said Mr Apisak.

Banpu Power's IPO skyrockets 19% on opening day

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The first day of Banpu Power Plc's (BPP) initial public offering (IPO) yesterday was well-received by investors, indicating the power-generating business remains a popular sector for investment.

BPP is the power-generating subsidiary of Banpu Plc, Thailand's largest coal miner.

Voravudhi Linananda, chief executive of BPP, said the company raised 13.6 billion baht in funds from the IPO thus far.

The price of the IPO, set at 21 baht per share, rose by 18.5% to 24.90 baht in trading, reflecting strong demand.

BPP invests in domestic and overseas power-generating businesses and has a market capitalisation of 63.96 billion baht at its IPO.

The company has paid-up registered capital of 30.5 billion baht, consisting of 2.3 billion baht worth of existing common shares and 648.5 million newly issued shares.

"BPP's share price increased 18.6% because of investors' confidence that the power business has high potential and will continue to grow in both the domestic and overseas markets. It is a sunrise business and is trendy," said Mr Voravudhi.

He said some 12 billion baht raised from the IPO would be used to pay debt and another 1 billion is for new investment in renewable energy and power-generating business.

The company is focused on investment in China, Japan, Indonesia, Vietnam and Laos, where power demand remains strong and governments are attracting foreign investors, said Mr Voravudhi.

BPP expects its power-generating capacity to reach 2,500 megawatts in 2018, up from 1,913MW now. The company wants to raise capacity to 4,300MW by 2025.

"New projects in China and Japan should help us reach our 2,500MW goal in 2018. More than 1,000MW from renewable power is expected to be added to enable the company to meet our total capacity target of 4,300MW by 2025," he said.

For the renewable energy sector, he said BPP is interested in biomass and biogas power because it offers quicker return on investment than other options, said Mr Voravudhi.

He said the company set aside around US$70-75 million for investments in 2017-18 and another $700 million for investment from 2018-2025.

Parent company Banpu is considering investment in another shale gas operation in Pennsylvania in the US.

"We are considering whether to invest in a new gas operation in the US, so now we are doing research to complete our due diligence," said Somruedee Chaimongkol, president and chief executive of Banpu.

Ms Somruedee said Banpu is also mulling a plan to buy an additional 5% stake from a US investor who is one of the partners in the Chaffee Corners Joint Exploration Agreement.

No one wins in AIS, 7-11 dispute

A sign at a 7-Eleven convenience store informs customers that AIS's 1-2-Call SIM is out of stock.

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While the dispute between Advanced Info Service (AIS) and 7-Eleven over commission for mobile top-up services have left both sides bruised, it appears that the country's largest mobile operator is taking the brunt of the tussle.

CP All Plc, the operator of 7-Eleven convenience stores, has banned AIS's mobile top-up services at its stores and is facing inevitable revenue loss.

More importantly, the disputes have caused consumers significant inconveniences.

The National Broadcasting and Telecommunications Commission (NBTC), meanwhile, says it does not plan to intervene in this case, stating the regulator has no legal authority to interfere in a personal commercial deal.

CP banned the refill of AIS's prepaid mobile service early this month. The company said the ban was because of "normal unsettled commission deal".

As of June 2016, AIS had 33.5 million prepaid customers out of a total 39.4 million subscribers.

Titipong Khiewpaisal, senior vice-president for marketing of AIS, declined to elaborate on how sudden the financial impact will manifest after the ban, but he admitted that the ban was causing inconvenience to its prepaid customers.

"We completely disagree with 7-Eleven asking us to pay it commission at the same rate of DTAC or TrueMove," he said, adding that 7-Eleven and AIS have been in business together for 16 years.

7-Eleven wants to raise the commission for AIS's refill prepaid card value service to 6%, up from the current 4%. If AIS customers top up 100 baht, the convenience store operator earns a commission of four baht.

Second-ranked Total Access Communication (DTAC) pays between 6-7% while third-ranked True Move pays 7-8%.

Mr Titipong argued that AIS generates much more top-up commissions than its smaller rivals because the company has 51% service revenue market share in the overall mobile market.

Without 7-Eleven as the refill channel, Mr Titipong said AIS customers can refill credit on their mobile phones through almost 130,000 of its partners' online top-up machines nationwide.

Of the total, there are 90,000 Boonterm online top-up service machines operated by Forth Smart Service (FSMART); 30,000 through Singer online top-up machines; and 7,300 Feel-top machines owned by Thanatat Solution.

In addition, customers can top up their cards at 350,000 AIS dealer shops nationwide; 40,000 ATMs of 11 commercial banks; and 5,000 service points at modern trade and convenience stores.

It's undeniable that 7-Eleven is the most recognisable convenience retailer in Thailand due to its vast network of franchises.

Potential cause of dispute

Industry veterans identify the potential root cause of the ban as the battle between AIS and TrueMove, the mobile business unit of CP.

Early this year, TrueMove filed a complaint with the Office of the Consumer Protection Board (OCPB), the primary investigative section for consumer complaints, alleging unfair business practices by AIS.

True alleges AIS blocked its 2G customers who wanted to sign up for True's 3G and 4G service from accessing True's call centre. The company said it received complaints from AIS's 2G users who had attempted to contact True's call centre in many provinces.

True believes AIS engaged in unfair business practices, violating the Computer Crime Act and the Telecommunications Business Act. AIS may have also violated consumers' privacy and rights to access telecommunications services.

True said AIS must expedite the migration of its previous 11 million 2G customers on the 900 megahertz network to its 3G system before the network is shut down after True pays for its 900MHz licences.

The OCPB has submitted its findings to the Consumer Protection Police Division for further scrutiny.

The 900MHz spectrum was previously used by AIS under a concession to provide 2G mobile service. That concession expired last September.

FSMART gets windfalls

The ban has given Forth Smart Service (FSMART), an online top-up machines provider, a financial windfall of almost 20 million baht a month.

Pongchai Amatanon, chief executive of FSMART, acknowledged that the company has seen increase of over 30% in mobile top-up value at its Boonterm refill machines nationwide, especially those located in front of 7-Eleven stores.

"Our top-up value reached 80 million baht per day in October, up from 62 million last month," he said.

FSMART now provides a total 90,000 Boonterm online top-up machines to five mobile operators at convenience stores, especially outside 7-Eleven stores and public transportation areas.

FSMART earns a commission of 12% on average per transaction.

Mr Pongchai said his company expects top-up sales to reach 25 billion baht this year. "We expect a net profit of 400 million baht this year, up from 290 million baht in 2015."

However, Mr Pongchai admitted that many people are still not familiar with top-up machines, as they prefer to use prepaid credit through the more convenient counter service channel.

Consumers on social media say that AIS prepaid users upcountry might face difficulties in refilling mobile phones as 7-Eleven has extensive network coverage.

"I'm not familiar with the refilling procedure via electronic channels," one consumer wrote on Pantip.com.

Many comments posted that 7-Eleven has the right to stop providing the refill service, and AIS just has to seek other channels to replace if the company could not accept the new higher fees.

Another post noted 7-Eleven does not take advantage of consumers, it simply takes business advantages.