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The SET climbed another 0.99% during the busiest week of the year filled with market moving economic events, to close at 1524.07 on Friday, near its 52-week high. Japan's prime minister Shinzo Abe unveiled a surprisingly large 28 trillion yen (U.S. $265 billion) fiscal package on Wednesday to boost the faltering Japanese economy, following circulating rumors last week of a government spending supplement to the fall budget. The market response was mixed, as the plan didn’t specify the time frame for the outlays, so this may take place over the next few years.
The U.S. Federal Reserve concluded its two-day FOMC meeting on Wednesday without a rate hike, while releasing a policy statement saying that the Fed has increasing confidence in the improving labor market and the ability for inflation to move toward its 2% annual target. The Fed also said, “Near-term risks to the economic outlook have diminished.”, meaning further rate hikes could be on the table.
The Bank of Japan disappointed the market on Friday when they did not announce any government bond buying or further cuts in interest rates after their policy meeting, but said the bank will increase purchases of exchange-traded funds to raise its balance sheet to an annual pace of 6 trillion yen, from 3.3 trillion yen previously.
The Bank of Thailand said this week that overall economic growth could expand at a higher rate in the second-quarter than the 3.2% growth in the first-quarter, with domestic demand being the main driver despite uncertainty about exports, according to the Bangkok Post.
The Commerce Ministry of Thailand said on Wednesday that exports dropped for the third consecutive month in June, by 0.1% year-on-year to $18.15 billion. For the first half, exports in this sector shrank by 4%. Imports in June tumbled 10.1% to $16.18 billion, resulting in a trade surplus of $1.96 billion.
The Industry Ministry of Thailand said on Thursday that its manufacturing production index
(MPI) in June rose 0.8% from a year earlier, but missed a Reuters poll forecast of a 2.0% rise. The May figure was revised upward to 2.7% year-over-year, from the 2.6% previously reported.
The USD/THB exchange rate was quoted at 34.77 baht per dollar on Friday, down 0.59% for the week, while the
THB/JPY printed at 2.9357 yen per baht, down 3.21% for the week. The
USD/THB technical support is at 34.80 baht per dollar, while the
THB/JPY technical resistance is at 3.07 yen per baht.
The Thailand 10-year bond yield jumped another 1.95% for the week, to close at 2.09% on Friday. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 1.45% on Friday, widened to a year-to-date high of 0.640 percentage points. The global bond markets continued to be rattled from global uncertainty, as the 10-year Japanese government bond (JGB) yield stayed at negative 0.182% at the close on Friday, while the 10-year German bund yield is back to negative 0.122%.
The WTI crude oil spot price tumbled another 5.86% for the week to close on Friday at $41.60 per barrel, while the Brent crude price took a 5.31% nosedive to close at $43.32 per barrel, following another bearish report from the Energy Information Administration (EIA) showing a larger-than-expected build in crude oil inventory stockpiles and weak U.S. demand for gasoline. About 50% of total U.S. liquid fuels consumption is gasoline. The SET index has decoupled from Brent crude prices since June 24, after the Brexit vote, so it might not matter that crude oil prices are heading south, until it matters.
The EIA weekly U.S. oil inventory report on Wednesday showed an increase of 1.7 million barrels to 521.1 million barrels, excluding strategic inventories, in the week ending July 22, compared to S&P Global Platts analysts’ expectations for a drawdown of 2.6 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory draw of 827,000 barrels for the week.
There was another large build last week in U.S. gasoline supplies of 500,000 barrels, while distillate stockpiles, including jet fuel, diesel fuel and heating oil, fell by 800,000 barrels, according to the EIA. Analysts were expecting a drawdown of the gasoline stocks of 700,000 barrels and a rise of 400,000 barrels for distillates.
Separately, the EIA said the weekly U.S. crude oil production jumped by 21,000 barrels per day (bpd) for the week ending July 22, 2016, to 8.515 million bpd. Weekly U.S. crude oil output has fallen about 11.39% 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 3 from the previous week, to 374, compared to 316, when the rig count hit the low on June 6.
Technically, the SET continues to move higher as the bulls still have control over the market. Since July 14, the index has been in overbought territory (RSI > 70) and hence, investors may want to be cautious chasing after the market. While the MACD line still stays above the signal line, upside momentum is weakening. The SET may be facing more downside risk on a pullback, but the objective target is 1,600.
The U.S. Bureau of Economic Analysis released the second-quarter GDP (advance estimate) on Friday, after the SET close, showing a disappointing GDP of 1.2%. So far this year, the U.S. economy is growing at about a 1% annual rate, the worst first-half performance since 2011. GDP growth was revised down to a 0.8% pace in the first-quarter, from 1.1%. Growth also was revised downward for the fourth-quarter of 2015 to 0.9%, from 1.4%.
The probability of a 25 basis point rate hike at the next FOMC meeting on September 21 tumbled 6 percentage points to 12.0%, while the probability of a no rate hike jumped to 88.0% from 82.0%, according to data from the CME Group as of July 29. |
