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The SET tumbled 1.94% on Friday to close at 1,284.92, led by PTT plc and Advanced Info Service plc, top constituents of SET50, which took nosedives of 7.02% and 3.02%, respectively. Shares of PTT, which are traded along with the crude oil price, fluctuated between 206 and 244 baht a share, while the WTI crude oil futures contracts January’16 [CLF16.NYM] were quoted between $37.59 and $34.78 a barrel during the week.
High volatility in the crude oil market this week was associated with the futures contract rollover, from the January’16 to the February’16 contracts, and fluctuations in FX currency, as crude oil is traded inversely correlated to the U.S. dollar. The January’16 contract closed on Friday at $34.55 a barrel, while the February’16 contract will begin trading on Monday at $35.83 a barrel, so there could be jump in crude oil prices when the markets open next week.
Shares of companies in the Telecommunication services sector were rattled this week while the National Broadcasting and Telecommunications Commission (NBTC) of Thailand held its auction of the 900MHz spectrum. True Corporation and Jasmine International won the bids and will pay 76.3 and 75.67 billion baht, respectively, for the two 4G spectrum licenses. It could be a race to the bottom though, as shares of True Corporation and Jasmine International are already traded near their 52-week lows. The market will decide next week who the real winners and losers are.
The Bank of Thailand (BOT) said on Wednesday that they kept rates unchanged for a fifth-straight meeting, despite a weak economy. The BOT also said that the monetary policy would stay accommodative to help the economic recovery, as inflationary pressures remained low. The USD/THB exchange rate was quoted at 36.12 baht per dollar on Friday, unchanged for the week.
On Wednesday, the U.S. Federal Reserve announced a quarter-point hike in interest rates, as expected. The Fed also said that they expect the fed funds rate to rise to 1.375% by the end of 2016, meaning that they will make at least four more quarter-point rate hikes next year. Although the rate hike decision was unanimous, it didn't necessary imply that the Fed is now in full-on hawkish mode. In fact, Fed Chair Janet Yellen needed to get as unanimous of a decision as possible to gain credibility, particularly on the rate lift-off and that had nothing to do with being hawkish or dovish.
At the press conference after the FOMC meeting, Yellen also made it clear that the pace of increases will be gradual and dependent on the quality of economic data. Although the Fed’s objectives are maximum employment and a 2% inflation target based upon core personal consumption expenditures (PCE), the Fed expects core PCE inflation to reach 1.6% in 2016 and 1.9% in 2017. The Fed statement sounds like, “one-and-wait” which is as close as you can get to what the market was expecting, which was a “one-and-done” for a considerable length of time.
According to the U.S. Department of Commerce, the latest reading of the core PCE for October was 1.28% year-on-year. Thus, the Fed may have to sit and wait for a while until inflation gets to their target level, especially when the crude oil price is tumbling. Yellen thinks that the crude oil price will find the bottom sometime and the inflation will start rising. That is what she hopes.
Technically, the SET fell back into bear market territory again, since it closed on Friday below the 1,295.82 level. The index is unable to gain any traction, as the Energy and Telecommunication services sectors continue to be a drag. The bearish lower low chart pattern, meaning every low (L) is lower than the previous low, persists and technical support is at around the 1,268 level. The SET could be range-bound until the end of the year, as investors have to figure out what will be next with the Thai economy.
On the bright side, the SET, which is down 14.21% year-to-date, is outperforming the MSCI Emerging Markets Index, which has plunged 20.88% so far this year. In relative terms, it could be worse. |
