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The SET was already jittery from the negative headline news earlier in the week and continued its downslide on Friday, after the European Central Bank
(ECB) announced at its Governing Council meeting in Frankfurt that they would cut the overnight deposit rate to minus 0.3% from minus 0.2%, and leave its key lending rate unchanged at 0.05%. The ECB also said it decided to extend purchases of government bonds and other assets from the September 2016 target date through at least March 2017. The markets had expected the ECB to drop the overnight rate to minus 0.4% and the key lending rate to zero from 0.05%, as well as to expand its 1.1 trillion euro bond-buying program by 360 billion euros.
SET investors were running to the exits, as serious concerns about corporate governance were raised after Thailand’s Securities & Exchange Commission (SEC) announced late Wednesday that it imposed a 30.2 million baht fine on CP All Vice Chairman Korsak Chairasmisak for using material, non-public information to buy shares of Siam Makro Pcl in 2013. The inside information was available to Mr. Korsak during CP All’s negotiations with SHV Netherland BV to acquire shares in Siam
Makro, the regulator said. Shares of CP All Plc [SET:CPALL], top constituent of the SET50 index, fell 5.35% on Thursday on heavy volume, about 160 million shares or 11.48 times the 30-day average.
The SEC insider trading fines came on the heels of the Federal Aviation Administration (FAA) announcement on Wednesday 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 news took the SET down 1.29%, to close at 1,339.45 on Wednesday.
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.
The SET closed at 1,333.57 on Friday, down 2.17% for the week, a three-month low. The
USD/THB exchange rate was quoted at 35.761 baht per dollar on Friday, down 0.32% for the week, while the Thailand 10-Year Government bond yield was down 0.55% to close at 2.72%. The spread between the Thailand 10-Year Government bond yield and the U.S. 10-Year Treasury Note yield, yielding at 2.273%, has now narrowed to 0.447 percentage points. This will likely trigger capital outflows and another wave of foreigner selling on the SET.
The U.S. Labor Department released the nonfarm payrolls report for November, after the SET close on Friday, showing 211,000 jobs were added to the economy, while the U-3 headline unemployment rate held at 5.0%. Wall Street economists’ consensus expectations were only for a 200,000 jobs gain with the unemployment rate remaining at 5.0%.
In her speech delivered at the Economic Club in Washington on Wednesday, U.S. Federal Reserve Chair Janet Yellen laid the groundwork for an interest rate liftoff as she put it, “Holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and thus undermine financial stability,”.
The federal funds futures, traded on the Chicago Mercantile Exchange and commonly used to estimate the market’s views on the likelihood of changes in U.S. monetary policy, dropped to 21.0% odds for a quarter-point rate hike at the Fed’s FOMC meeting on December 15-16 while the odds for a half-point rate hike jumped to 79.1%, according to data from the CME Group as of December 4.
From our technical viewpoint, the SET broke down the ascending broadening
(ASC/B) wedge chart pattern and 1,345.71 key technical support, or the 61.8% Fibonacci retracement level, meaning the uptrend which began in late August no longer exists. 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. Our guess is that the SET has already priced in the Fed rate hike, but you never know until it happens. |
