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The SET closed at 1,390.15 on Wednesday, down 0.59% for the day. In the past 5 trading days, the SET, which is weighted too heavily on the financials and resources sectors, has lost 2.53%. According to the June 2015 SET fact sheet, the combined weights of the financials and resources sectors in the index are over 40%. Shares of Siam Commercial Bank, the worst performer in the financials sector, tumbled 4.33% in the past 5 trading sessions, as the bank and Krungthai Bank had to deal with the collapse of Sahaviriya Steel Industries. The other big Thai banks, Bangkok Bank and Kasikorn Bank, were not involved in the steel company bailout, but are still facing double-digit increases in nonperforming loans.
International Energy Agency (IEA) Executive Director Fatih Birol told CNBC on Tuesday that they could not rule out the scenario that crude oil prices would remain close to $50 a barrel until the end of 2020, before rising gradually back to $85 a barrel in 2040. Low crude prices will drag down the profits of energy companies for years, and that will not be good for the SET since it is weighted so heavily in the resources sector.
Additional SET selling pressure is also mounting as the U.S. Federal Reserve is planning to hike interest rates in December. The spread between the Thailand 10-Year Government bond yield, yielding at 2.72%, and the U.S. 10-Year Treasury Note yield, yielding at 2.336%, has now narrowed to 0.384 percentage points. This could likely trigger capital outflows and another wave of foreigner selling on the SET.
From our technical viewpoint, the SET just broke down the ascending (ASC) wedge chart pattern as the index was unable to break out the 100-day SMA (blue line) head resistance. The index is now supported by the 50-day SMA (green line). Note that the 100-day SMA is running in parallel to the
upper trendline resistance of the symmetrical triangle (SYM TRI).
One should pay attention that the bullish higher low (H-L) chart pattern, meaning every low is higher than the previous low while every high is higher than the previous high, is also about to break down if the SET closes below 1,387.75. There is still a trendline support (T/S) at the 1,382 level if the 50-day SMA support fails. The Thai baht is on the move again, so watch out!
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