|
The People’s Bank of China (PBoC) said on Monday that the bank cut the required reserve ratio (RRR) by 0.5 percentage points, effective March 1. According to Bloomberg, the action will inject about 685 billion yuan ($105 billion) into the financial system. The Fitch ratings agency told Reuters that the cut could fuel increased lending growth by the Chinese banks, which would result in more bank risks.
As the economy slows, China's bad loans have risen to the highest level in a decade. The China Banking Regulatory Commission said earlier this year that the new non-performing loans (NPL) held by Chinese banks more than doubled in 2015 from the previous year.
Growth in China’s manufacturing sector remains weak, as the official manufacturing Purchasing Managers' Index (PMI) in February came in at 49.0, missing the Reuters forecast of 49.3, and contracting for the seventh straight month. A reading below 50 indicates a contraction in the manufacturing sector. Separately, the Caixin/Markit manufacturing Purchasing Managers' Index, which tracks smaller and medium sized firms, fell to 48.0 in February from a six-month high of 48.2 in January.
The SET gained another 2.71% for the week, to close at 1,379.53 on Friday. The USD/THB exchange rate was quoted at 35.357 baht per dollar on Friday, down 1.87% since the beginning of the year, while the CNY/THB has slid 2.39% year-to-date, to close at 5.434 baht per yuan. The Thailand 10-year bonds were yielding at 1.96% at the close on Friday, down 22.22% year-to-date. The yield spread between the Thailand 10-year bond and U.S. 10-year Treasury Note, yielding at 1.876% on Friday, narrowed to 0.084 percentage points.
The WTI crude oil price surged another 10.63% for the week, as the Chinese National People’s Congress kicked off on Thursday to discuss the next 5-year development plan and there will be an announcement this weekend about what will be included in the plan. There were a lot of speculations, meaning preparing to buy the rumors and to sell the news.
The Thailand Commerce Ministry said on Tuesday that the consumer price index came in at 105.62 in February, down for the 14th month in a row. Inflation dropped 0.5% year-on-year in February, compared to a 0.53% decline in January. The core inflation, which excludes volatile food and energy prices, registered at 106.37, a 0.68% increase on an annual basis last month, up from 0.59% in January.
Separately, the Bank of Thailand (BoT) said on Tuesday that the private consumption index expanded by 1.2% year-on-year in January, down from December's growth of 3.9%. Nominal farm incomes contracted in January, falling by 3.1% after December's 35.9% growth. Farm incomes contracted following a decline in the prices of rubber and cassava, according to the Bangkok Post.
The Industry Ministry of Thailand said on Monday that the manufacturing production index (MPI) contracted by 3.3% year-on-year in January after two months of growth, citing continued global economic weakness. The January MPI reading missed a Reuters forecast of a 0.2% drop. The December figure was revised to a 1.4% gain.
From our technical viewpoint, the SET is now in very overbought territory, with the RSI at 74.44. This could be a setup for a steep pullback. As the old saying goes, “the higher you go, the harder you fall”. One should also be cautious as the yield spread between the Thailand 10-year bond and U.S. 10-year Treasury Note, now at 0.084 percentage points, is starting to not make sense.
|
