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The SET closed at 1,486.74 on Wednesday, down 0.11% along with the Shanghai composite index, which tumbled 3.03% to close at 3,805.703, as more shares resumed trading on the Shanghai and Shenzhen exchanges after being halted last week. Thailand's Finance Minister Sommai Phasee said on Wednesday that the economy is expected to grow 2.6% in the second half of this year, a slower pace than the first half. Mr. Sommai didn’t say what the GDP for the first half of this year was. Exports are likely to contract for the third straight year, down 1.7% this year compared to a 0.2% rise forecasted by the ministry in April.
The SET is struggling to break out the trendline resistance of the symmetrical triangle at the 1,490 level. The index ran up to an intraday high of 1,496.17 on Wednesday, but didn’t want to go near 1,497.88, or the 50% Fibonacci retracement level. The bulls are cautious for a good reason.
Here comes Fed Chair Janet Yellen’s semiannual testimony in front of the U.S. House Financial Services Committee. It sounds like Ms. Yellen is going to raise the rate between September and December this year, regardless of weak June retail sales and nonfarm payrolls reports. Ms. Yellen is under pressure as some Fed members are concerned that the Fed might be falling 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 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% last Friday. NYSE floor traders said that there is money from the bond market on the sidelines, ready to be put to work. So, Wall Street is expecting a sell-off after the Fed's rate hike announcement.
Bond king Jeffrey Gundlach, CEO of the DoubleLine Capital with about $46 billion under management, disagreed with Ms. Yellen and said the Fed won’t raise rates in 2015. The bond market seems to agree with Mr. Gundlach as the U.S. 10-Year Treasury Note yield ticked down 1.65% to 2.359%, as of 16:35:20 GMT on Wednesday.
The USD/THB exchange rate hit another fresh multi-year and intraday high of 34.197 baht per dollar and quoted at 34.190 baht per dollar, as of 16:38:32 GMT on Wednesday. A weak baht could be good news for the Thai exporters but it could dampen consumer spending. Countries with a weak currency generally have poor economic fundamentals, though.
The 10-year Thailand Government bond yield printed at 2.835%, as of 13:02:14 GMT on Wednesday. The yield spread between the U.S. 10-Year Treasury Note and the Thailand 10-Year Government bond, narrowed to 0.476%. Narrowing the bond yield spread and depreciating the Thai baht 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. |
