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The SET took a 1.29% nosedive to close at 1,339.45 on Wednesday, after the Federal Aviation Administration (FAA) announced that it was downgrading Thailand's aviation safety rating to Category 2, meaning Thailand-based carriers will be banned from adding new routes to the United States or expanding existing ones. Shares in several Thai airlines fell following the news, lead by Thai Airways International PCL [SET:THAI] which was down 7.47% on Tuesday. The proprietary traders did most of the selling on the SET, with net sells of 1.76 billion baht. Most of the sell orders came during the afternoon session after a modestly bullish morning session, the trading strategy known as “bull traps”.
Although there is no immediate commercial impact on THAI, as the company had already ceased operations to its only U.S. destination of Los Angeles as of 25 October 2015, the concern is that the European Aviation Safety Agency (EASA) might follow suit and downgrade Thailand. That would affect the ability of state-controlled THAI to add flights to the 11 European destinations it currently serves. The EASA is scheduled to release the results of its own audit of Thailand’s aviation system on December 10, according to The Wall Street Journal.
The Bank of Thailand (BOT) said on Monday that Thailand's economic recovery remained anemic in October, as its data showed that the private consumption index rose just 2.2% on a year-on-year basis, weaker than September's revised 3.0% increase on an annualized basis. The bank said Thailand's private investment index increased 1.5% in October from last year, stronger than a revised 1.3% rise in September, the fourth straight month of increase.
The BOT said international trade continued to contract in October, with exports falling 8.0% and imports plunging 21.3% from the same period a year earlier, citing the economic slowdown in China and in many Southeast Asian countries which are Thailand's major trading partners. The trade surplus now stands at a record level of $4.3 billion, with a current account surplus of $5.1 billion, according to Dow Jones Newswires.
From our technical viewpoint, the SET broke down the bearish ascending broadening (ASC/B) wedge chart pattern, the 1,362.26 and 1,345.71 key technical supports, or the 50% and 61.8% Fibonacci retracement levels, respectively. The bearish lower low chart pattern, meaning every low (L) is lower than the previous low, is confirmed. Sentiment has shifted to very bearish, and the price target for the event of the ascending wedge breakdown is 1,298. Of course, nothing goes straight down as there are multiple support levels, until 1,298, that the SET could bounce off from.
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