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The SET bounced and gyrated most of the week, after the Islamic terrorist group, Islamic State of Iraq and Syria (ISIS), released a video on Monday threatening Washington D.C. with Paris-style attacks. The fear of a bomb threat by the group on Tuesday resulted in the cancellation of the Germany-Netherlands soccer game in
Hannover, Germany, less than two hours before kickoff, as Chancellor Angela Merkel was on her way to the match. The French police's raid on suspected terrorists in a Paris suburb on Wednesday morning, which ended up with 3 terrorists dead and multiple terror suspects arrested, added more chaos to the situation.
The National Economic and Social Development Board (NESDB) of Thailand said on Monday that third-quarter gross domestic product (GDP), came in at 1% on a quarter-on-quarter basis, beating the Bloomberg median estimate of 0.6%. On a year-on-year basis, the GDP climbed 2.9%, exceeding the median forecast of 2.5%. The NESDB also said that tourist arrivals last quarter totaled 7.3 million, a 24% increase from a year earlier. Tourism in Thailand makes up about 10% of GDP.
On Wednesday, the NESDB said that the Thai economy is expected to grow 2.9% in 2015, the highest level in three years, citing increases in government spending and investment. The Bank of Thailand
(BOT) had previously forecasted economic growth of 2.7% this year and 3.7% in 2016. It will give its new forecasts next month. Economists in a Reuters poll predict 2.7% growth in 2015.
The SET shrugged off the better-than-expected NESDB GDP forecast and was selling off ahead of the Wednesday release of the U.S. Federal Reserve minutes of the October 27-28 FOMC meeting. The Fed minutes, which said, “Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting,”, surprisingly didn’t move the market much the following trading day.
The Asian markets, including the SET, got a boost on Friday after European Central Bank
(ECB) President Mario Draghi gave a speech at the European Banking Congress in Frankfurt, underlining the ECB’s concerns about eurozone inflation and hinted at more quantitative easing. The market is pricing in various measures from the
ECB, to be announced at its Governing Council meeting on December 3, including an expansion of the 1.1 trillion euro bond-buying program or measures such as taking the deposit rate further below zero.
Despite the volatility, the SET closed at 1,393.84 on Friday, up 0.82% for the week. The financials and resources sectors continue to put a drag on the SET, as the combined weights of both sectors in the index are over 40%. Shares of Siam Commercial Bank, the worst performer in the financials sector, edged lower another 0.75% for the week, while PTT plc, top constituent of the SET50 and the energy sector, inched down 0.36%.
The USD/THB exchange rate was quoted at 35.742 baht per dollar on Friday, down 0.44% for the week. The spread between the Thailand 10-Year Government bond yield, yielding at 2.84%, and the U.S. 10-Year Treasury Note yield, yielding at 2.264%, has now narrowed to 0.576 percentage points. This will likely trigger capital outflows and another wave of foreigner selling on the SET. Foreign investors’ selling for the SET seems to have picked up again, with net sells this month of about 10.09 billion baht. The foreign investors net sells were 117.4 billion baht year-to-date, compared to about 8.8 billion baht during the same period last year.
From our technical viewpoint, the SET successfully retested the lower trendline support of the bearish ascending broadening (ASC/B) wedge chart pattern. 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 still intact as long as the SET closes above 1,368.29. The index is wedged in and needs to decide next week whether it will move higher or lower.
Sentiment will become increasing bearish, very fast, if the ascending broadening wedge breaks down. This could send the SET back to the base of the wedge, at about the 1,320 level, or below the 1,300 level. One should be aware that the MSCI Emerging Markets (EM) Index will be adding 14 Chinese companies, including Alibaba and Baidu, to their index effective November 30. EM fund managers may have to sell some stocks to make room for the new Chinese additions. This may or may not effect foreign fund outflows from the SET. |
