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The SET index inched up 0.93% for the week, to close at 1,492.88 on Friday, breaking out the key trendline resistances as the
USD/THB currency pair coincidentally broke through the technical support at 34.74 baht per dollar, or 23.6% Fibonacci
retracement. The USD/THB was quoted at 34.65 baht per dollar at the close on Friday, down 0.80% for the week, while the
THB/JPY currency pair was 0.46% lower for the week to close at 2.9147 yen per
baht.
The USD/THB broke down the key technical support at 34.74 baht per dollar on Wednesday, after the U.S. Federal Reserve decided to keep its benchmark interest rate unchanged and pretty much told everybody, “See you again in December for a rate decision, maybe”. There were “very unusual” trading activities on Tuesday prior to the Fed decision.
The SET downside risks still remain, as Credit Suisse and Kasikornbank see the
USD/THB exchange rate at 35.50 baht per dollar by the year-end, according to a Bangkok Post report this week. Both forecasts are in-line with a Bloomberg survey showing that the baht is expected to weaken to 35.40 baht per dollar by year-end. The baht has risen 3.83% year-to-date against the
USD, due to the capital inflows into the Thai stock and bond markets.
The U.S. economy is showing signs of a significant slowdown. The Federal Reserve Bank of New York knocked 50 basis points off its third-quarter and fourth-quarter 2016 GDP forecast on Friday, to 2.3% and 1.2%, respectively, from the previous 2.8% and 1.7%, citing U.S. data in the past two weeks, from manufacturing, retail sales, housing and construction, that has been negative. Taking the latest New York Fed forecast into account, the pace of U.S. GDP annual growth will be just 1.4% year-on-year, the slowest growth since 2009. The current blue chip consensus U.S. GDP 2016 forecast is 1.8%.
On Tuesday, the Federal Reserve Bank of Atlanta revised its third-quarter 2016 GDP forecast 10 basis points downward, to 2.9% from the previous 3.0%, after the U.S. Department of Commerce said that housing starts fell 5.8% last month from July, to an annual rate of 1.142 million. In fact, housing starts have been volatile, with a deviation of as much as 20% on month-on-month basis.
The yield of the Thailand 10-year government bond tanked 2.20% for the week, to close at 2.22% on Friday. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 1.62% on Friday, widened to 0.6 percentage points. According to the Bangkok Post, offshore investors' net buying of Thai debt papers declined to 114 billion baht as of Sept 16, from 146 billion at the end of August, said Ariya Tiranaprakit, executive vice-president of the Thai Bond Market Association.
Shares of PTT PCL (SET:PTT) and PTT Exploration and Production PCL (SET:PTTEP), outperformed compared to the SET index, up 2.15% and 1.90%, respectively for the week, along with crude prices. The WTI crude price, which surged earlier in the week following bullish weekly inventory reports and a weak U.S. dollar, took a U-turn on Friday and tumbled 3.97%, while the Brent crude spot price tanked 2.93% after Reuters reported that Saudi Arabia was ready to cut output to levels seen early this year in exchange for Iran freezing production at the current level, which is 3.6 million barrels per day (bpd).
According to Reuters, the information came from a source familiar with the matter, while three more sources confirmed that the Saudi offer was presented to the Iranian government. The market thinks that Iran will not agree to such a proposal at the informal OPEC meeting next week, or any time soon. The WTI crude spot price still managed to close up 1.97% for the week, at $44.48 per barrel on Friday, while the Brent crude spot price was practically unchanged for the week to close at $46.00 per barrel.
The EIA weekly U.S. oil inventory report on Wednesday showed a decrease of 6.2 million barrels to 504.6 million barrels, excluding the Strategic Petroleum Reserve, in the week ending September 16, compared to S&P Global Platts analysts’ expectations for a rise of 2.8 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory decrease of 7.5 million barrels.
Separately, the EIA said the weekly U.S. crude oil production increased by 19,000 bpd for the week ending September 16, 2016, to 8.512 million bpd. Weekly U.S. crude oil output has fallen about 11.43% 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 2 to 418, compared to 316, when the rig count hit the low on June 6, 2016.
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