The SET shrugged off the weak economic news released by the National Economic and Social Development Board (NESDB) on Monday, which said that the first-quarter 2015 Thailand gross domestic product (GDP) grew 3.0% from a year earlier, compared with a Reuters poll of a 3.4% gain. The weaker-than-expected first-quarter GDP came on the heels of the announcement last Thursday by Finance Minister Sommai Phasee that the ministry revised the full-year 2015 GDP downward to 3.5%, from 3.7%, the third GDP downward revision this year as the Thai economy has struggled to regain traction. 

On Tuesday, the SET gapped up 3.42 points at the opening on and surged 1.14% to an intra-day high of 1,527.6, after European Central Bank (ECB) Executive Board member Benoit Coeure announced that the ECB will frontload the quantitative easing (QE) 60 billion euro monthly bond buying, in May and June, in order for the central bank not to disrupt the market when trading volumes are lower in the summer. 

Trading was sluggish the rest of the week as the global markets were anticipating more information regarding the monetary policies from the minutes of the last Federal Open Market Committee (FOMC) meeting, scheduled for release on Wednesday, and important speeches from ECB president Mario Draghi and Fed Chair Janet Yellen on Friday. 

The USD/THB exchange rate was unchanged for the week at 33.48 baht per dollar, while the 10-year Thailand Government bond yield dropped 2.03% for the week to close at 2.9% on Friday. The capital outflows and foreign investor selling might pick up as the yield spread between the U.S. 10-Year Treasury, yielding at 2.2145%, and the Thailand 10-Year Government bond has narrowed to 0.6855%. According to Bloomberg, global bond funds pulled a net U.S. $912 million from the Thai debt market this month. 

The SET closed on Friday at 1,523.86, up 0.77% for the week and a gain of 3.62% year-to-date. The sell-off in 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. 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.

The shares of Krung Thai Bank [SET:KTB] stock, tumbled another 6.03% this week after a 1.49% slide last 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. The shares of Siam Commercial Bank [SET:SCB], Bangkok Bank [SET:BBL] and Kasikornbank [SET:KBANK] were down 1.52%, 2.94% and 3.85%, respectively.

From our technical viewpoint, the SET made a near-term falling wedge breakout while it is still running in a long-term symmetrical triangle chart pattern. The double bottom is now in place, but will be confirmed when the SET closes above 1,575.39. The projected price for the falling wedge breakout event is 1,580, determined by adding the width at the top of the pattern to the point of breakout. The top of the trading range for the symmetrical triangle pattern is about 1,560.

After the falling wedge breakout, the SET was traded on a slight uptrend but under the 50-day SMA, between the 1,529 and 1,518 levels, which are the resistance and support Fibonacci retracement levels. The good news is that the SET closed above the 1,500 psychological level. The Relative Strength Index (RSI) is on the rebound and the Moving Average Convergence Divergence (MACD) is bullish, as a bullish divergence and a bullish centerline crossover have emerged. 

One should also pay attention to when, or if, a bullish crossover occurs since a bullish crossover means “buy” for algorithm trading. Crossovers, particularly when the 50-day SMA crosses above the 200-day SMA and when the 100-day SMA crosses above the 200-day SMA, are buy signals.

Many Wall Street strategists believe that a Fed rate hike may be off the table for now as a mixed bag of weak U.S. economic data has prompted analysts and the Fed to revise their first-quarter U.S. GDP estimate and second-quarter forecasts downward. 

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. 

Federal Reserve Chairwoman Janet Yellen, in her speech on Friday in Providence, R.I. appeared to be confident that the central bank is on track to raise interest rates this year, but will likely proceed cautiously because the job market hasn’t fully healed, inflation is low, and economic growth has again disappointed.

It will be a reality check on May 29 when the second estimate of the first-quarter GDP will be released. The Fed’s Yellen expects the U.S. economy to strengthen while Wall Street economists forecast the first-quarter GDP second reading to contract 0.9%, compared to the initial reading of 0.2% growth.