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The SET managed to close with just a 0.2% loss on Friday, following a sell-off in the telecom sector on Thursday and releases of mixed bags of data for the Thai and Asian economies on Friday. The SET tumbled 1.13% to its lowest close since October 5 on Thursday, lead by shares of Advanced Info Service and True Corporation, on concerns about recent high bidding prices for 4G mobile licenses. A short trading week could have added to market volatility, as the U.S. financial markets were closed on Thursday and were only open for a half-day on Friday.
The Industry Ministry of Thailand said on Friday that its manufacturing production index
(MPI) in October dropped 4.17% from a year earlier, after September's revised 0.38% dip, missing a 3.75% decline expected by economists in a Reuters poll. The Industry Ministry also said that the output in electronics and plastics was down, while auto production rose 3.52% on improving exports. The Federation of Thai Industries
(FTI) said on Wednesday that it expects auto exports to rise by 6.4% to a record 1.2 million this year, and 1.22 million next year.
The National Bureau of Statistics (NBS) of China said on Friday that industrial profits fell 4.6% year-on-year in October, compared to 0.1% the month before, citing the impact of foreign exchange, sluggish demand from overseas, overcapacity and inefficiency. To make matters worse, the nation’s largest brokerages, Citic Securities Co. and Guosen Securities Co. , said they were facing regulatory probes for alleged rule violations, while China Shanshui Cement Group Ltd and state-owned steel trader Sinosteel Co. said they’re struggling to repay bonds. The headline news sent the Shanghai Composite Index tumbling 5.48% on Friday, as fears of a China hard landing grow.
Earlier in the week, the SET gyrated between 1,401 and the trendline support (T/S), after Turkish fighter jets shot down a Russian warplane near the Syrian border on Tuesday and the Islamic terrorist group, Islamic State of Iraq and Syria (ISIS), is still threatening Brussels, Belgium, with Paris-style attacks. Ironically, NATO headquarters is located in Brussels, but on the northeast perimeter of the city.
Turkey may have to pay the price for being quick on the trigger, as Russia can use its natural gas ties with Turkey as a geopolitical weapon. Russia, the largest supplier of natural gas to Turkey, exported 27.33 billion cubic meters of natural gas to Turkey last year. Russia’s Gazprom is currently in talks with Turkey about building a natural gas pipeline, called Turkish Stream, to ship Russian gas underneath the Black Sea to Turkey. The deal is now at risk.
The SET closed at 1,363.13 on Friday, down 2.2% for the week, an eight-week low. The USD/THB exchange rate was quoted at 35.875 baht per dollar on Friday, up 0.43% for the week, while the Thailand 10-Year Government bond yield tanked 3.7% to close at 2.735%. The spread between the Thailand 10-Year Government bond yield and the U.S. 10-Year Treasury Note yield, yielding at 2.222%, has now narrowed to 0.513 percentage points. This will likely trigger capital outflows and another wave of foreigner selling on the SET.
The foreign investors net sells were 119.25 billion baht year-to-date, compared to about 8.85 billion baht during the same period last year. The foreign investors net sells in November alone were 11.91 billion baht.
More selling could be coming from Thai institutional investors next year, as Thailand’s Government Pension Fund, with over 700 billion baht under management, said in a Bloomberg interview last Friday that they are considering buying equities in Japan and Europe next year as higher U.S. interest rates weigh on emerging-market assets.
From our technical viewpoint, the SET broke down the lower trendline support of the bearish ascending broadening (ASC/B) wedge chart pattern and is on the verge of breaching the 1,362.26 key technical support, or the 50% Fibonacci retracement level. The bearish lower low chart pattern, meaning every low (L) is lower than the previous low, has now emerged. Sentiment has shifted to bearish, and the price target in the event of the ascending wedge breakdown is 1,298.
Note that the downturn of 20%, to the 1,295.81 level, or more, over a two-month period or longer, is considered an entry into a bear market. Of course, there are multiple support levels, until 1,298, that the SET could bounce off from.
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. |
