The SET closed down 0.44% for the week at 1,404.61 on Friday, up 9.05% year-to-date. The USD/THB exchange rate was quoted at 34.92 baht per dollar on Friday, down 3.08% since the beginning of the year, while the CNY/THB has declined 3.11% year-to-date, to close at 5.3939 baht per yuan. The Thai baht could strengthen further against the U.S. dollar, after the Federal Reserve decided at their FOMC meeting on Wednesday to kept the key interest rate unchanged at between 0.25% and 0.5%. The U.S. dollar index tanked 2.16% to close on Friday at 93.03, below the technical support of 93.78, meaning there is more downside to come. 

The Japanese yen surged against the Thai baht to close at a two-and-a-half year low of 3.0449 yen per baht on Friday, down 8.82% year-to-date, after the Bank of Japan (BOJ) decided to keep its monetary policy on hold after a two-day board meeting on Thursday. Global markets were surprised with the BOJ’s decision, as Bloomberg reported on April 22 that the BOJ was considering to cut the interest on excess reserves (IOER) deeper and offer negative rates to its lending program for financial institutions. That means the BOJ would be paying commercial banks to accept funding in an effort to boost lending and stimulate the economy.

In February, the BOJ introduced quantitative and qualitative monetary easing (QQE) with a negative 0.1% IOER of financial institutions placed at the bank. The BOJ also said it left the buying program of government bonds and exchange traded funds (ETFs) unchanged. Under the current QQE program introduced in April 2013, the BOJ buys 80 trillion yen per year in government bonds and 3.3 trillion yen of ETFs.

The Finance Ministry of Thailand said on Thursday that it cut the 2016 GDP forecast to 3.3% from the January estimate of 3.7%, citing that global uncertainties continued to put pressure on exports. The ministry saw a 0.7% contraction for Thai exports this year, compared to the 0.1% growth it predicted in the January forecast, according to the Bangkok Post. Last month, the Bank of Thailand cut its 2016 growth forecast to 3.1% from 3.5% earlier, with exports shrinking by 2%.

The Industry Ministry of Thailand said on Friday that its manufacturing production index (MPI) in March rose 1.83% from a year earlier, exceeding expectations of a 0.1% drop, according to Reuters.

The Thailand 10-year bond yield continued to move higher, as it closed at 1.84% on Friday, down 27.78% year-to-date, after plunging to a record low at 1.555% on April 7. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 1.835% on Friday, is 0.005 percentage points.

Since May 2015, the SET index and WTI crude oil price are highly correlated with a coefficient of 0.85 over a 200-day period, where 1 is total positive correlation. The WTI crude oil spot price closed up another 5.12% for the week, at $45.99 per barrel on Friday, after closing up 4.79% last week. The key driver for the crude oil price this week was the falling U.S. dollar, as fundamentals were a mixed bag.

The Energy Information Administration (EIA) weekly U.S. oil inventory report on Wednesday showed a build of 2 million barrels in the week ending April 22, compared to analysts’ expectations for a 1.75 million barrel build. The American Petroleum Institute (API) inventory data on Tuesday showed a 1.1 million barrel draw. The EIA also said the weekly U.S. crude oil production fell again for the thirteenth consecutive week, to 8.938 million barrels per day (bpd) for the week ending April 22, 2016, the lowest level since October 24, 2014, at 8.970 million bpd. Weekly U.S. crude oil output, however, has fallen 6.99% from the peak level of 9.61 million bpd during the week ending June 6, 2015. 

More bullish news for the oil market came from Houston-based oilfield services company Baker Hughes Inc., who said on Friday that the U.S. oil rig count is now down another 11 to 332, a 79.4% drop from the peak number of 1,609 in October 2014. 

Saudi Arabia currently set its crude oil price range at $20-$40 per barrel. The Kingdom's oil output may rise to 10.5 million bpd to record highs in the coming weeks to meet summer demand, said Reuters. Days before the Doha meeting, Saudi Arabia's top oil official, Deputy Crown Prince Mohammed bin Salman, said the kingdom could boost output immediately to 11.5 million bpd and go to 12.5 million bpd in six to nine months, according to Aljazeera.

From our technical viewpoint of the SET, a bullish golden cross, or the 50-day and 200-day SMA crossover, has emerged. The V-shaped bounce may still be at risk as long as the index stays under the 1,476 resistance level. The SET index and WTIC are positively correlated, meaning the SET and WTIC move in the same direction, up or down. Hence, a breakout may require decoupling between the SET and WTIC. 

THAILAND SET INVESTMENT RESEARCH