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The SET closed at 1,376.83 on Friday, down 0.97% for the week after the Bank of Thailand
(BoT) revised its 2015 economic growth forecast downward to 2.7%, from 3%, due to lackluster exports. The bank now sees Thailand exports shrinking 5%, instead of a 1.5% decline, citing economic slumps in China and Thailand's other trading partners.
Separately, the Asian Development Bank (ADB) cut its 2015 Thailand GDP growth forecast on Friday to 2.7% from 3%, blaming weak domestic demand and the economic slowdown in China and other Asian economies. The bank said that economic growth in Thailand could be bumped up by a couple of tenths-of-a-percentage point if the stimulus measures just approved by the Thai government were included. The ADB also trimmed Thai economic growth in 2016 to 3.8% from 4.1%.
Earlier in the week, the ADB cut their growth forecasts for China to 6.8% this year, down from 7.2%, noting weaker exports and investment. The bank also revised growth for India downward to 7.4% in 2015, from an earlier estimate of 7.8%.
SET investors apparently shrugged off the weak economic news from the BoT and ADB and instead focused more on Federal Reserve Chair Janet Yellen’s speech at the University of Massachusetts Amherst on Thursday evening. In the speech, Ms. Yellen said that it would likely be appropriate to raise rates from near zero "sometime later this year," although the decision would continue to rely on economic data. Last week, the U.S. Federal Reserve decided to hold off a rate hike and maintain their zero interest rate policy after its Federal Open Market Committee
(FOMC) Meeting, citing the economic slowdown in China and emerging markets as the reason for the delay.
The federal-funds futures, commonly used to estimate the market’s views on the likelihood of changes in U.S. monetary policy, indicate only 11% odds for a quarter-point rate hike at the October 2015 policy meeting, while the odds are 39% at the December 2015 meeting, according to data from CME Group, as of September 25.
Earlier this week, the U.S. equity market was in a tailspin after Hillary Clinton, U.S. presidential candidate, went on a Twitter frenzy and sent out a tweet about “outrageous” price gouging by a pharmaceutical CEO and caused the S&P 500 biotech and healthcare sectors to crash. Short-sellers saw opportunities and took the rest of the S&P 500 sectors down and wiped out billions of dollars from U.S. retirement accounts. Luckily, buyers stepped in and pushed the market higher or the Asian markets would have seen more red on Tuesday.
Short-sellers returned with full force on Friday and took the S&P 500 biotech and healthcare sectors down another 3.41% and 2.7%, respectively. Since the damages were limited to the healthcare sector, there shouldn’t be much impact on the Asian markets when they open on Monday.
The VW scandal dragged the DAX down almost 8% on Monday and Tuesday and spilled over to the U.S. equity and emerging markets. The whole European automobile sector practically collapsed. Deutsche Bank trimmed the year-end target for the DAX to 10,300, from a previous forecast of 11,300, citing a huge headwind from the auto sector, which makes up about a 25% market cap contribution to the German blue chips index.
If you think, “why should I care?”, think again as there are VW manufacturing facilities and part-makers located around the globe, including in the U.S., Brazil, India and Thailand. In February, Volkswagen got Thai government approval for a plant near Bangkok to produce 300,000 fuel efficient cars a year.
More bad news from China as Caixin/Markit China Manufacturing PMI for September came in on Wednesday at a six-and-a-half year low. The Shanghai composite index, which has been stuck in a sideways trading pattern for over a month at around the 3,137 level, may be ready to make a major move next week either to the upside or downside. As the Shanghai composite index goes, so goes the SET.
The Thai baht depreciated 1.45% against the U.S. dollar for the week, while the Thailand 10-year Government bond yield inched up just 0.71% to close at 2.82%. Foreign investors’ selling for the SET seemed to pick up again on Friday as the Thai baht slid, with net sells so far this month of about 15.09 billion
baht. The year-to-date foreign investors’ net sells top 101.5 billion
baht, up almost 2,600% from the same period last year.
Technically, the SET is trading in a narrow symmetrical triangle chart pattern, within the range between 1,370 and 1,401, since it bounced off the August 24 low. If the index can successfully bounce off the 1,375.99 support level, it should break out the symmetrical triangle or else head back down to retest the 1,300 level.
The headline risks for the SET are end-of-the-quarter window dressing by institutional investors, the Thai
baht, the Shanghai composite index and the U.S. non-farm payrolls report due on Friday, October
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