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The SET index was down 3.81 points for another short-trading week, to close on Friday at 1,522.51, as the USD/THB exchange rate may be heading back to retest the 35.90 baht level. The market was surprised by the Fed’s hawkish stance after the December FOMC meeting, now that the Fed’s so-called “dot plot” signals that there could be three more interest rate hikes in 2017. The Fed told the market that the U.S. economy is strong enough for interest rate normalization and raised the target range for its federal funds rate by 25 basis points to 0.5% - 0.75%, as expected.
Technically, the SET index could end up in the trading range between 1,513 and 1,532 until the end of the year if it is unable to break out. The Fed may be out of the picture for now, but tensions are rising again between the Greek government and its creditors, as well as between the ECB and Banca Monte dei Paschi di Siena, Italy’s third-largest and most troubled bank.
For the week, the USD/THB exchange rate inched up 0.58% to close on Friday at 35.85 baht per dollar, while the U.S. Dollar index (DXY), essentially the USD/EUR exchange rate, jumped 1.4% to close at 102.92. The yield of Thailand 10-year government bonds surged 5.86% for the week, to close at 2.89% 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 2.6% on Friday, widened to 0.29 percentage points.
The U.S. Department of Treasury released their monthly data of foreign holdings of U.S. Treasury securities this week for October 2016. The report showed Thailand increased its U.S. Treasury securities holdings in October by 18.6% month-over-month, to $59.2 billion. China has been dumping their U.S. debt holdings since June 2016, and now has just $1.1157 trillion, which is behind Japan at $1.1319 trillion.
Shares of Airports of Thailand PCL (SET:AOT) were down just 0.51% for the week, despite a report in the Bangkok Post saying that passenger traffic through Thailand's main airports in October showed the slowest monthly growth in years. Analysts expect passenger traffic in November and December to continue at a slower pace as tourism authorities in Thailand and China are joining forces to clamp down on "zero-dollar tours".
Shares of Robinson Department Store PCL (SET:ROBINS) tanked 3.85% for the week, even though the cabinet of Thailand approved a shopping tax break on Tuesday allowing consumers an income tax deduction of up to 15,000 baht on receipted domestic purchases of goods and services from December 14-31, according the Bangkok Post.
Shares of PTT PCL (SET:PTT) and PTT Exploration and Production PCL (SET:PTTEP) were down 1.63% and 0.54%, respectively, for the week. The energy sector could get a boost on Monday as the spot WTI and Brent crude price jumped on Friday, 4.03% and 2.05%, respectively. The WTI crude price surged 2.82% this week, to close at $52.95 per barrel on Friday, while the Brent crude spot price gained 1.64% to close at $55.29 per barrel, where most of the gains came on Friday after OPEC members, including Kuwait, notified customers that cuts are coming, according to The Wall Street Journal.
Earlier in the week, the WTI crude price jumped 2.58% to close at $52.83 per barrel on Monday, after non-OPEC countries agreed on Sunday in Moscow to reduce production by 558,000 barrels a day (bpd). The market though, was expecting a deeper cut of 600,000 bpd from the non-OPEC countries in the first half of 2017. Crude Oil futures Jan 17 (CLF7), surged as high as $54.50 a barrel in electronic trading on Sunday evening in New York, following comments from Saudi Arabia’s Energy Minister Khalid al-Falih saying that the Kingdom would be cutting even more than it had committed to at the November 30 OPEC meeting in Vienna, meaning the Saudis could reduce its output below 10.058 million bpd.
The EIA weekly U.S. oil inventory report on Wednesday showed that domestic crude supplies fell by 2.6 million to 483.2 million barrels, excluding the Strategic Petroleum Reserve, in the week ending December 9, compared to The Wall Street Journal forecast for a stockpile decline of 1.7 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory increase of 4.7 million barrels.
Separately, the EIA said the weekly U.S. crude oil production jumped 990,000 bpd for the week ending December 9, to 8.796 million bpd. Weekly U.S. crude oil output has fallen about 8.5% 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 12 to 510, compared to 316, when the rig count hit the low on June 6, 2016.
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