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Technically, the SET should bounce off the 1,412 level when it opens for trading on Friday, as the relative strength index (RSI) and the Moving Average Convergence/Divergence (MACD) point to the extremely oversold conditions. Nonetheless, a trend reversal in the oversold SET might not happen as the fundamentals have shifted dramatically towards the downside in the past 24 hours.
From the Fed’s statement after the U.S. FOMC meeting on Wednesday, it is almost certain that the Fed will hike the rate in September, regardless of the tepid U.S. economy. The reason is because the Fed seems not to have much choice, as unemployment is heading to 5%, meaning full employment, while inflation is well below the Fed's target of 2%. In theory, inflation should be rising sharply and that makes the Fed concerned that they might already be behind the curve.
The forward and backward looking U.S. economic data look mixed. The U.S. Bureau of Economic Analysis said today that the first estimate of second quarter 2015 U.S. GDP was 2.3%, missing expectations of 2.6%. For the first half of 2015, the U.S. GDP was revised upward to 1.45% from 1.25%. The U.S. National Retail Federation said this week that 2015 back-to-school sales look grim, and back-to-school is the second largest shopping season in the U.S. behind Christmas.
Foreign investor selling in the SET could accelerate again, as the USD/THB exchange rate just broke the key technical level at 35 baht per dollar and was quoted at 35.23 baht per dollar at 09:20:00 GMT on Thursday. Our near-term target for USD/THB was 35.2 baht per dollar with the long-term head resistance, February 2009, at 36.31 baht per dollar, as of July 25.
China’s stock market rout seems to have no end in sight. The Shanghai composite index pulled back another 2.2% on Thursday to close at 3,705.766, after Wednesday’s run up of 3.44%. A key technical level for the Shanghai composite is 3,624.73. The index could be heading further south to revisit the low 3,000 level, if the 200-day SMA can’t hold. If the Shanghai composite index goes, so goes the SET. |
