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The SET index surged 1.42% for the week, to close at 1,504.34 on Friday, after breaking out the key technical resistance at 1,478.40, or 23.6% Fibonacci retracement on Tuesday, while the
USD/THB currency pair also gained 0.87% for the week, to close at 34.89 baht per dollar. A headline news story in the Bangkok Post that a senior official at the Bank of Thailand said the Thai banking system is safe and protected from any troubles that may engulf Deutsche Bank, could have moved the SET index.
Frankfurt-based Deutsche Bank has been in trouble since the third-quarter 2015, when the bank posted surprise massive losses in its investment banking business and is now facing the prospect of a $14 billion fine from the U.S. Justice Department for its role in underwriting and issuing risky residential-mortgage-backed securities from 2005 to 2007.
One should be aware that the USD/THB currency pair also broke out the key technical resistance at 34.74 baht per dollar, or 23.6% Fibonacci
retracement, on Tuesday and traded as high as 34.952 baht per dollar on Friday. Federal Reserve officials talked up a rate hike and sent the U.S. dollar index surging 1.33% for the week, to close at 96.654 on Friday. Currency traders might also be selling the
baht, following a Bloomberg report that KGI Securities (Thailand) PCL is ready to launch U.S. dollar denominated structured notes as early as the beginning of next year. A structured note is a debt obligation, or IOU, that contains an embedded derivative component that adjusts the security's risk/return profile.
Theoretically, it may seem normal for the SET index and the baht to have an inverse correlation, as a weaker baht would help prop up earnings for Thai exporters and so lift the equities market. In practice, however, a weaker baht could trigger foreign-portfolio outflows and selling pressure on the SET index.
The yield of Thailand 10-year government bonds surged 4.19% for the week, to close at 2.24% on Friday. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 1.723% on Friday, narrowed to 0.517 percentage points.
Shares of PTT PCL (SET:PTT) and PTT Exploration and Production PCL (SET:PTTEP), outperformed compared to the SET index, up 1.77% and 2.47%, respectively for the week, along with crude prices. The WTI crude price surged another 3.25% for the week to close at $49.81 per barrel, while the Brent crude spot price jumped 3.3% to close at $51.68 per barrel, after a Reuters report said that Saudi, Iranian and Iraqi energy ministers will meet Russian energy minister Alexander Novak on the sidelines at the World Energy Conference in Istanbul next week.
The EIA weekly U.S. oil inventory report on Wednesday showed another decrease of 3 million barrels to 499.7 million barrels, excluding the Strategic Petroleum Reserve, in the week ending September 30, compared to S&P Global Platts analysts’ expectations for a rise of 2 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory decrease of 7.6 million barrels.
Separately, the EIA said the weekly U.S. crude oil production decreased by 30,000 barrels per day (bpd) for the week ending September 30, to 8.467 million bpd. Weekly U.S. crude oil output has fallen about 11.89% 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 3 to 428, compared to 316, when the rig count hit the low on June 6, 2016.
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