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The SET index gained 1.64% for the short-trading week, to close on Friday at 1,526.32, as the Thai baht continued to hold its ground against the U.S. dollar. For the week, the USD/THB exchange rate inched up just 0.13% to close on Friday at 35.645 baht per dollar, while the U.S. Dollar index (DXY), essentially the USD/EUR exchange rate, increased 0.63% to close at 101.50, despite the Italian referendum vote over the weekend and the ECB meeting on Thursday.
The Federation of Thai Capital Market Organization (FETCO) said on Wednesday that its investor confidence index in December fell 8.5% to 95.69, from November's reading of 104.6, according to the Bangkok Post. A reading between 80 and 120 indicates neutral confidence, while a number below 80 and above 120, corresponds to bearish and bullish confidence, respectively. From the FETCO report, retail investor confidence came in at 89.24, the lowest confidence among other groups of investors, including institutional and foreign. The SET data as of December 9, showed that net sells by Thai retail investors has already exceeded 8.19 billion baht month-to-date, ahead of the U.S. Federal Reserve FOMC meeting on December 13-14.
The yield of Thailand 10-year government bonds inched 0.36% lower for the week, to close at 2.73% 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 2.466% on Friday, narrowed to 0.264 percentage points.
Traders began dumping longer-dated U.S. Treasury securities and longer-dated European bonds, including those issued by the eurozone’s weaker economies — Italy, Spain and Portugal, after the ECB’s Mario Draghi said on Thursday that it will start buying bonds with one-year maturity, which currently carry a negative yield. Previously, the shortest maturity allowed for bonds was two years. Traders were also surprised that the ECB decided to reduce its monthly bond purchases from their current level of €80 billion a month to €60 billion a month, starting in April, while saying the program would be extended until the end of next year.
Shares of PTT PCL (SET:PTT) and PTT Exploration and Production PCL (SET:PTTEP) were up 3.65% and 2.51%, respectively, for the week, despite a decline in crude oil prices. The WTI crude price dropped 0.35% this week, to close at $51.50 per barrel on Friday, while the Brent crude spot price inched lower 0.15% to close at $54.40 per barrel, ahead of the meeting between OPEC members and non-OPEC countries on December 10 in Moscow to finalize the deal of their output in the next six months. The market is expecting a 600,000 barrels per day (bpd) cut from the non-OPEC countries. Russia has already committed to reduce 300,000 bpd from its production in the first half of 2017.
The EIA weekly U.S. oil inventory report on Wednesday showed that domestic crude supplies fell by 2.4 million to 485.8 million barrels, excluding the Strategic Petroleum Reserve, in the week ending December 2, compared to S&P Global Platts analysts’ expectations for a decline of 1.7 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory decrease of 2.2 million barrels.
The EIA also said that gasoline supplies climbed by 3.4 million barrels and distillate stockpiles rose 2.5 million barrels, exceeding analysts’ expectations of 900,000 barrels for gasoline and 100,000 barrels for distillates. A larger-than-expected build in distillate supplies sent the WTI crude price tumbling 2.3% as traders see less demand for crude oil in coming weeks.
Separately, the EIA said the weekly U.S. crude oil production declined 2,000 bpd for the week ending December 2, to 8.697 million bpd. Weekly U.S. crude oil output has fallen about 9.5% 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 jumped by 21 to 498, compared to 316, when the rig count hit the low on June 6, 2016.
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