|
The SET closed at 1,484.90 on Friday, up 0.84% along with the Shanghai composite index, which rocketed 4.54% higher for the second day in a row to close at 3,877.803, after the People's Bank of China
(PBoC) announced unprecedented market interventions on Wednesday. The PBoC said it will provide liquidity to the government-owned margin lender China Securities Finance Corp
(CSFC) so that the CSFC can give credit lines to 21 brokerage houses to purchase Chinese equities to stop the markets from crashing further. The bears are skeptical though, as 40% of all Chinese stocks are now halted. The selling could resume if those stocks are opened for trading.
For the week, the SET inched down just 0.45% despite weak underlying fundamentals. The University of the Thai Chamber of Commerce said on Thursday that its 2015 growth forecast might be cut to 2.68%, from 3.2% earlier, because of the drought. The Thailand GDP could be knocked down further as on Thursday, the International Monetary Fund
(IMF) trimmed its forecast for global economic growth for this year, to 3.3% from 3.5%, to take into account the impact of recent weakness in the United States.
Greek people finally know what the vote “No” means after Greece’s parliament approved Prime Minister Alexis
Tsipras’ bailout proposals on late Friday. Some said that the €53.5 billion bailout package with harsh austerity terms was remarkably similar to the one Greek voters rejected in a referendum less than a week ago. In practice, the Greek people should have voted “Yes” last week, in order to avoid economic hardship and to gain some credibility from the European partners.
The European finance ministers will make their final decision on Saturday whether Greece will receive its third financial bailout. The
EUR/USD exchange rate inched up 1.14% to 1.1162 dollars per euro on Friday as traders covered their short positions ahead of the European finance ministers meeting. The perception that the Greek bailout deal is kicking the can down the road again, could spur another euro sell-off on Monday.
On Friday, Federal Reserve Chair Janet Yellen said in a speech that she expects the Fed to raise interest rates at some point this year, but pointed strongly to her concerns that U.S. labor markets remain weak and that more workers could be encouraged back into the job market with stronger growth. Her comments sparked a bond sell-off, as the U.S. 10-Year Treasury Note yield tumbled 4.34% to 2.401% on Friday.
Despite urgings from the IMF and the World Bank for the Fed not to hike rates until 2016, some Fed members are eager to hike the rate in September as they may be concerned to fall behind the curve. Another concern is that the Fed could be running the risk of losing control of bond yields if they don't do anything after a lot of hype. Since the Fed's committee removed the key word "patient" from its March 18 statement, the 10-year U.S. Treasury yield has skyrocketed 24.35%, from 1.93% on that day, to 2.4% on Friday.
In fact, the U.S. economy is showing some signs of weakness again. The Institute for Supply Management (ISM) said on Monday that its non-manufacturing index rose to 56.0% last month, from 55.7% in May, missing Wall Street's expectations of a 56.3% rise. A reading over 50% indicates more companies are expanding. Their Employment index fell to 52.7% from 55.3% in May, reflecting growing employment levels from May at a slower rate, said the ISM.
The U.S. Department of Labor said last Thursday that the June jobs numbers came in with a 223,000 increase, below estimates of a 230,000 gain. The Department of Labor also said more than 400,000 people left the labor force, pushing the labor force participation rate to a 38-year low at 62.6%. Average hourly earnings, the most Fed’s watched data, remained unchanged at $24.95, as higher paying manufacturing and construction jobs showed no change over the month.
The USD/THB exchange rate hit a multi-year and intraday high of 34.076 baht per dollar on Wednesday and is closed at 33.929 baht per dollar on Friday, down 0.47% for the week. A weak baht could be good news for the Thai exporters but it could dampen consumer spending, though. The 10-year Thailand Government bond yield printed at 2.82%, down 5.37% for the week. The yield spread between the U.S. 10-Year Treasury Note, yielding at 2.40%, and the Thailand 10-Year Government bond, narrowed to 0.42%. Narrowing the bond yield spread could spur capital outflows. A sinking 10-year Thailand Government bond yield could signal that more rate cuts from the Bank of Thailand are coming.
From our technical viewpoint, the SET bounced off 1,469.11, or the 61.8% Fibonacci retracement level. The bounce could go on for several days, but there are near-term head resistances at 1,492 and 1,497.88, or the 50% Fibonacci retracement level. The concern is still that the SET is moving in a lower high (L-H) chart pattern since it peaked in February, meaning every high is lower than the previous high while every low is lower than the previous low. This lower high chart pattern signals a continuous bearish downtrend.
The downside risks exist as Thailand economic growth is facing another downgrade and a hit from capital outflows, due to monetary policy divergence. As the symmetrical triangle chart patterns have broken down, the falling wedge breakdown could send the SET downwards, towards 1,375.99 and lower. If the SET breaks down below the 1,450 technical level, the 5-year lower trendline support, it could head even lower to test the long-term supports at 1,307 and 1,110. |
