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The SET index declined 1.38% for the week to close on Friday at 1,473.86, as foreign investors continue selling. According to the SET data as of November 18, net sells by foreign investors jumped to 25.57 billion baht month-to-date, compared to net sells of 14.48 billion baht during the entire month of November last year. The SET still struggles at the 1,478.40 resistance level, or 23.8% Fibonacci retracement, while it is retesting the trendline support and trying to bounce off from there. If the SET can close above the 1,513 level, we could see the SET climb to the 1,560 level by the year end. We think that it might be an opportunity at this level and took long-positions in some Healthcare and Financials stocks. This is not our recommendation.
The Thai baht continued to weaken against the U.S. dollar. For the week, the USD/THB exchange rate inched up 0.51% to close on Friday at 35.57 baht per dollar, despite a shape rise in the U.S. Dollar index (DXY), practically the USD/EUR exchange rate, after Fed Chair Janet Yellen told U.S. Congress on Thursday that a Fed rate hike could come “relatively soon”. For the week, the DXY index rose another 2.25% to close on Friday at 101.28, a thirteen-year high.
Wall Street now wants to see the Federal Reserve raise the federal funds rate target to 50 and 75 basis points at the December 13-14 FOMC meeting since the probability of a 25 basis point rate hike has surged to 95.4%, based on the CME Group 30-day Fed Fund futures prices as of November 18. Failure to do so is no longer an option.
The strong U.S. dollar and the rise in Treasury yields, which are intended consequences of a Fed rate hike, will hammer U.S. exports and corporate earnings. According to data from the Bureau of Economic Analysis (BEA), U.S. exports of goods and services plunged from $597.8 billion in the third-quarter 2014 to a one-and-a-half year low of $538.9 billion in the first-quarter 2016, while the U.S. dollar appreciated about 10% against other major currencies during the same period.
The yield of Thailand 10-year government bonds skyrocketed another 9.96% for the week, to close at 2.65% on Friday. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 2.34% on Friday, widened to 0.031 percentage points.
Shares of PTT PCL (SET:PTT) and PTT Exploration and Production PCL (SET:PTTEP) were up 5.20% and 2.87%, respectively, for the week, along with crude oil prices. PTT PCL said on Friday it will spin off its oil marketing and retail business and plans to list the division on Thailand's stock exchange. The retail division, to be renamed PTT Oil and Retail Business Co Ltd (PTTOR), may be valued between $2 billion and $3 billion, according to Reuters. PTT PCL posted its third-quarter 2016 revenues of 435.17 billion baht last Friday, down 13.84% year-on-year, missing analysts’ expectations of 457.90 billion baht.
The WTI crude price jumped 6.80% this week, to close at $46.36 per barrel on Friday, while the Brent crude spot price surged 5.32% to close at $46.88 per barrel, despite a bearish EIA weekly U.S. oil inventory report. WTI crude price surged 1.31% to an intraday high of $46.41 per barrel on Wednesday, after Russia's Energy Minister Alexander Novak that he sees big chances for the Organization of the Petroleum Exporting Countries (OPEC) to reach an agreement to curb production, according to Reuters. Some OPEC members are now saying OPEC will do whatever it takes to make all members join the production cut agreement — willingly or unwillingly.
Part of the crude oil volatility this week was also due to the rollover of crude oil futures contracts on Thursday. The crude oil WTI Jan 17 contract (CLF7) became the lead contract as the Dec 16 contract (CLZ6) expires on Monday, November 21.
The EIA weekly U.S. oil inventory report on Wednesday showed that domestic crude supplies increased by 5.3 million barrels to 490.3 million barrels, excluding the Strategic Petroleum Reserve, in the week ending November 11, compared to S&P Global Platts analysts’ expectations for a decline of 2.0 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory increase of 3.65 million barrels.
Separately, the EIA said the weekly U.S. crude oil production dropped 11,000 barrels per day (bpd) for the week ending November 11, to 8.681 million bpd. Weekly U.S. crude oil output has fallen about 9.67% 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 rose by 19 to 471, compared to 316, when the rig count hit the low on June 6, 2016. |
