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The SET index gained 1.26 points for the week to close on Friday at 1,501.66, above the 1,500 psychological level and practically unchanged from last week, as the Thai baht continued to hold its ground against the U.S. dollar. For the week, the USD/THB exchange rate dropped 3 pips to close on Friday at 35.60 baht per dollar, while the U.S. Dollar index (DXY), essentially the USD/EUR exchange rate, pulled back 0.66% to close at 100.66, as the hype about a December Fed interest rate hike wanes.
The USD/THB exchange rate may be heading back to retest the 35.90 baht technical resistance level if Fed officials still continue talking up interest rate hikes. Fed hawks, including Cleveland Fed President Loretta Mester, said this week that raising interest rates now would help, rather than hurt, the economic recovery. David Kostin, Goldman's chief U.S. equity strategist, wrote in a client note on Wednesday that the Fed would raise the short-term rate target to a total of 100 basis points, meaning a 25 basis point rate hike in December and two more hikes next year.
According to the SET data as of December 2, net sells by Thai retail investors surged to 2.5 billion baht month-to-date, ahead of the Italian referendum vote on Sunday. Retail investors may also take profits before year’s end, but the SET trade could get messy if selling persists and the ascending wedge chart pattern breaks down.
The yield of Thailand 10-year government bonds surged 2.64% for the week, to close at 2.74% on Friday. There is a major head resistance at 3.0%, where buyers might step in. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 2.392% on Friday, widened to 0.348 percentage points.
The Commerce Ministry of Thailand said on Monday that October exports fell 4.2% from a year earlier, missing the Reuters consensus expectation of a 2.2% rise, while imports unexpectedly rose 6.5% from a year earlier, beating the consensus estimate of a 3.6% gain. Exports to the U.S. and EU were down 4.7% and 9.2%, respectively.
Shares of PTT PCL (SET:PTT) and PTT Exploration and Production PCL (SET:PTTEP) were up 2.3% and 8.49%, respectively, for the week, along with crude oil prices. The WTI crude price jumped 12.2% this week, to close at $51.68 per barrel on Friday, while the Brent crude spot price gained 15.33% to close at $54.48 per barrel, after OPEC agreed on Wednesday in Vienna to reduce its production from 33.7 million barrels per day (bpd) to 32.5 million bpd, effective in January. According to Reuters, OPEC will meet with non-OPEC countries on December 10 in Moscow to finalize the deal of their output in the next six months, but Russia has already promised to reduce 300,000 bpd from its production.
The EIA weekly U.S. oil inventory report on Wednesday showed that domestic crude supplies fell by 900,000 barrels to 488.1 million barrels, excluding the Strategic Petroleum Reserve, in the week ending November 25, compared to S&P Global Platts analysts’ expectations for a decline of 250,000 barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory decrease of 717,000 barrels.
Separately, the EIA said the weekly U.S. crude oil production rose 9,000 bpd for the week ending November 25, to 8.699 million bpd. Weekly U.S. crude oil output has fallen about 9.48% from the peak level of 9.61 million bpd during the week ending June 5, 2015. Houston-based oilfield services company Baker Hughes Inc. said on Friday that the U.S. oil rig count rose by another 3 to 477, compared to 316, when the rig count hit the low on June 6, 2016.
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