The Thailand SET bounced off the 1,485 support level on Thursday after Finance Minister Sommai Phasee said that he is lowering the growth forecast to 3.5%, from the 3.7% announced in late April. This will be the third GDP cut this year as the economy has struggled to regain traction. In late January, the Fiscal Policy Office (FPO), the Finance Ministry's think tank, made their first adjustment to the economic growth projection for 2015, down to just 3.9% from the previous 4% forecast in December 2014.

The Thailand SET, which is traded in an inverse correlation with the dollar-baht (USD/THB) exchange rate, took a 1.49% nose dive on Tuesday to an intra-day low of 1,478.90, after the USD/THB hit the intra-day high at 33.90 baht per dollar. The baht made an oversold bounce as the USD/THB pulled back from 33.85 baht per dollar, the trendline resistance. For the week, the USD/THB exchange rate dipped 0.21% from last week to close at 33.48 baht per dollar.

The Thailand 10-year Government bond yield climbed another 2.07% for the week to close at 2.96% on Friday, after the yield skyrocketed 17.89% last week. It should not come as a surprise as major government debt markets, including Germany, the U.S. and the U.K. have seen also a dramatic sell-off, sparking stark jumps in bond yields. 

The sell-off in global sovereign bonds, lead by German Government bonds or Bunds, is either an unintended consequence of the quantitative-easing program or a result of growing optimism that the QE program is working and inflation is rebounding. Ordinarily, that would lead to higher bond yields. 

Until mid-April, hedge funds were pushing the yield on the German 10-year Government bond to a record low of 0.049%. Hedge funds unwinding their positions could be responsible, in part, for the surge in the German 10-year Bund yield, which was 0.635% at the close on Friday. Paper losses across the spectrum of the global bond markets are roughly half a trillion dollars, according to Bloomberg.

For the week, the Thailand SET still managed to close up 0.11% at 1,512.19 on Friday, a gain of 2.82% year-to-date. The sell-off in the bank stocks continued as the market believes that bank revenues and profits are at risk from a fall in lending, and a rise in non-performing loans. The shares of Krung Thai Bank PCL [SET:KTB] stock, the country's second largest lender, slid 1.49% this week as the bank saw first-quarter non-performing loans jump 18% to 68 billion baht, the sharpest spike among the top four Thai banks.

Although low interest rates decrease borrowing costs, it limits what the banks can charge on loans and what they earn on other investments, meaning lower net interest margins down the road.

From our technical viewpoint, the sellers/shorts were unable to take the SET down below the 1,485 level on Thursday and the buyers stepped in. Selling may be exhausted and a near-term tradable bottom, or even a double bottom, is now in place. The bullish signs are that the Thailand SET closed above the 1,500 level and it was positive for the week. 

The Relative Strength Index (RSI) is on the rebound and the Moving Average Convergence Divergence (MACD) is bullish, as a bullish divergence has now emerged. The next head resistance is the 61.8% Fibonacci retracement level, which is the trendline resistance of the falling wedge at 1,520.

A Fed rate hike is off the table for now as a mixed bag of weak U.S. economic data has prompted Wall Street analysts to revise their first-quarter U.S. GDP estimate from -0.8% to -1.0%, while cutting its second-quarter forecast by 0.5% to 2%. 

According to MarketWatch, former Fed Vice Chairman Donald Kohn thinks that a June rate hike is too early, following weaker-than-expected April retail sales. Some Wall Street strategists believe that the Fed may begin hiking the rate later this year, or in early 2016.

Related Ticker: iShares MSCI Thailand Capped ETF [NYSEARCA:THD]