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The SET closed up 0.33% on Wednesday, the last trading day of the year, at 1,288.02, down 14% for the full-year 2015. According to our technical analysis, the overall markets still remain bearish, as the SET index was unable to close above 1,295.82, with the key sectors trending downward, including Energy, Financials and Telecommunication Services. To make matters worse, the recent auction of two 4G spectrum licenses, in our opinion, has resulted in no 4G winners but an increase in the risk for a price war in the Thailand Telecommunication services sector, which could turn profitable businesses into losses.
More uncertainties are ahead for the Thai financial markets, as Bank of Thailand (BOT) governor Veerathai Santiprabhob told The Wall Street Journal on Monday that the Thai economy is entering a difficult transition, and that he stands ready to tailor the bank’s policies to support more growth, while strictly managing price pressures.
In response to the BOT comment, Barclays wrote in a research note that it believes the BOT is likely to keep rates unchanged through 2016, with a bias for a weaker exchange rate. However, if the Thai baht were to materially appreciate, it could not rule out the possibility of rate cuts aimed at weakening the currency.
The Commerce Ministry of Thailand reported on Monday that November imports sank 9.53%, while exports contracted 7.4% from a year earlier, worse than the 5.1% drop estimated by economists in a Reuters poll. According to the Reuters report, exports to China in November were 6.1% below a year earlier, while those to Japan were off 4.7%. Shipments to Europe declined 6.7%, and those to the United States fell by 6.3%.
The BOT trimmed its 2016 economic growth forecast last Friday to 3.5% from 3.7%, citing a greater slowdown in China's and other Asian economies, low farm prices and the prolonged severe drought in Thailand. The bank expects exports to fall 5.5% in 2015 and to remain flat in 2016, compared to the previous 2016 forecast of a 1.2% rise. JP Morgan now sees Thai GDP to grow only 2.9% in 2016 and downgraded Thailand to underweight. HSBC is a little more upbeat and forecasts Thailand’s GDP growth to be 3.3% next year.
The USD/THB exchange rate was quoted at 36.045 baht per dollar on Friday, virtually unchanged for the week, but up 9.53% for the year. The Thai 10-year bonds were yielding at 2.52% at the close on Monday, down 13.4% for the year. The yield spread between the Thailand 10-year bond and U.S. 10-year Treasury Note, yielding at 2.269% on Thursday, printed at 0.251 percentage points.
Technically, the SET continues to trade in bear market territory, below the 1,295.82 level. A bearish shooting star chart pattern has emerged, with the neckline at the 1,284 level. There is significant downside risk if the index breaks below the neckline support and the shooting star chart pattern is confirmed.
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