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The SET inched up 0.74% for the week, to close at 1,455.65 on Friday, despite tumbling crude oil prices and concerns about the impact of Britain's decision to leave the European Union, or
Brexit. Retail investors were buying, with net buys of 2.44 billion
baht, ahead of the U.S. June nonfarm payrolls report on Friday. The U.S. Labor Department said that 287,000 jobs were added in June, while Wall Street economists had forecasted only 175,000 jobs. The June nonfarm payrolls number could be an outlier, as the margin of error may be as high as plus or minus 115,000.
The probability of a rate hike at the September 21 FOMC meeting, after the reported blowout jobs number, based on the 30-day prices of federal funds futures, jumped from 0% to 11.7%, while the probability of a no rate hike dropped from 96.4% to 86.2%, according to data from the CME Group as of July 8. iShares MSCI Thailand Capped ETF
(NYSEARCA:THD), which is traded on the New York Stock Exchange, was up 1.36% on Friday, pointing to a higher opening of the SET on Monday, but that is no guarantee.
The USD/THB exchange rate was quoted at 35.171 baht per dollar on Friday, up 0.20% for the week, while the
THB/JPY printed at 2.8594 yen per baht, down 2.11% for the week. The
USD/THB technical support is at 34.80 baht per dollar, while the
THB/JPY technical support is at 2.787 yen per baht.
The Thailand 10-year bond yield sank another 2.53% for the week, at 1.93% on Friday. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 1.358% on Friday, widened to 0.572 percentage points. The global bond markets are rattled, as the 10-year Japanese government bond
(JGB) yield dropped to negative 0.282% at the close on Friday, while the 10-year German bund yield printed at negative 0.196%, both record lows.
The University of the Thai Chamber of Commerce said on Wednesday that its consumer confidence index dropped to 71.6 in June, a 25-month low, citing worries about the impact of Brexit on the domestic and global economy. Separately, HSBC lowered growth forecasts for Thailand to 2.8% for both 2016 and 2017, from 3.0% and 3.1%, respectively, due to the continuously sluggish Thai economy and possible headwinds from the
Brexit.
Last Tuesday, the World Bank said it maintained Thailand's economic growth forecast this year at 2.5%, as the global economy has been weakening and exports have been slowing. The Bank of Thailand recently forecasted economic growth to be 3.1% in 2016, while the Fiscal Policy Office, the Ministry of Finance of Thailand, is predicting growth to be as high as 3.3%.
Since May 2015, the Thailand SET has been positively correlated with the Brent crude oil price, the global benchmark, where the correlation coefficient between both of them is +0.86, over the 100-day period. Traders, including algorithmic and high-frequency traders (HFT), may be creating greater profit opportunities by coupling the volatility and price swings in the crude oil futures market with the SET index.
The WTI crude oil spot price tumbled 8.44% for the week, closing at $45.12 per barrel on Friday, while the Brent crude price took an 8.09% nosedive for the week to close at $46.55 per barrel, following a bearish research note from JPMorgan Chase & Co. and Bloomberg's report of an increase in Nigerian crude oil production.
Analysts at JPMorgan Chase sent out a research note on June 29 telling clients that China is likely close to filling its strategic petroleum reserves (SPR) after doubling purchases for it this year as prices plunged. Stopping shipments for the reserve would wipe out about 15% of China's crude oil imports. Bloomberg reported on Monday that Nigeria pumped an average 1.53 million barrels per day (bpd) last month, an increase of about 90,000 bpd from May.
The Energy Information Administration (EIA) weekly U.S. oil inventory report on Thursday showed a decline of 2.2 million barrels to 524.4 million barrels in the week ending July 1, compared to analysts’ expectations for a draw-down of 2.6 million barrels. The American Petroleum Institute (API) inventory data on Wednesday showed U.S. crude inventories fell another 6.7 million barrels for the week.
Separately, the EIA said the weekly U.S. crude oil production decreased by 194,000 bpd for the week ending July 1, 2016, to 8.428 million bpd. Weekly U.S. crude oil output has fallen about 12.30% from the peak level of 9.61 million bpd during the week ending June 6, 2015. Houston-based oilfield services company Baker Hughes Inc. said on Friday that the U.S. oil rig count was up another 10 from the previous week, to 351, compared to 316, when the rig count hit the low on June 6.
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