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The SET index inched lower 0.65% for the week, to close at 1,483.21 on Friday, retesting the key trendline support at 1,478.40, or 23.6% Fibonacci
retracement, while the USD/THB currency pair was retesting the technical resistance at 34.74 baht per dollar, or 23.6% Fibonacci
retracement. A breakdown of the 1,478.40 level could send the SET index quickly down to the 1,470 level. The
USD/THB traded at an intraday high of 34.76 baht per dollar on Friday, before pulling back to 34.59 baht per dollar at the close, down 0.17% for the week. The
THB/JPY currency pair was 0.52% higher for the week to close at 2.9299 yen per
baht, approaching the technical resistance at 3.07 yen per baht.
The yield of the Thailand 10-year government bond tanked another 3.15% for the week, to close at 2.15% on Friday. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 1.598% on Friday, narrowed to 0.552 percentage points.
Stronger-than-expected growth in the first-half of this year prompted the Manila-based Asian Development Bank
(ADB) to raise its Thailand economic growth forecast for 2016 on Tuesday to 3.2%, from 3% previously forecasted in March. Following the ADB’s move, Kasikorn Research Center (K-Research) raised its GDP forecast for 2016 on Thursday to 3.3%, from 3% previously, on anticipation that the recovery momentum will continue into the second-half, according to the Bangkok Post.
Despite the upbeat economic outlooks, 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 4.0% year-to-date against the
USD, due to the capital inflows into the Thai stock and bond markets.
Shares of big Thai banks with substantial exposure to foreign markets, including Siam Commercial Bank PCL
(SET:SCB) and Bangkok Bank PCL (SET:BBL), tumbled 2.95% and 2.69% for the week, respectively, along with troubled Frankfurt-based Deutsche Bank A.G.
Shares of PTT PCL (SET:PTT) and PTT Exploration and Production PCL (SET:PTTEP), outperformed compared to the SET index, up 1.80% and 0.93%, respectively for the week, along with crude prices. The WTI crude price surged 8.45% for the week to close at $48.24 per barrel, while the Brent crude spot price jumped 7.52% to close at $50.05 per barrel, after Reuters reported on Wednesday from Algeria that OPEC agreed to reduce its output to a range of 32.5-33.0 million barrels per day (bpd) from the current output at 33.24 million bpd, or a decrease of about 700,000 bpd.
There are few details available as to how much each OPEC member will produce until the next formal meeting in Vienna on November 30, when an invitation to join the cuts could also be extended to non-OPEC countries such as Russia. Some analysts believe that the actual cut would be much smaller, potentially less than 500,000 bpd.
According to CNBC, the OPEC deal to cut oil production may provide a short-term support for prices, but chances are it won't change the supply outlook much, said Goldman Sachs in a research note to investors. "If this proposed cut is strictly enforced and supports prices, we would expect it to prove self-defeating medium term with a large drilling response around the world," Goldman's analysts said. The investment bank was sticking with its forecasts of $43 a barrel for WTI crude at the end of this year, and $53 a barrel in 2017.
The EIA weekly U.S. oil inventory report on Wednesday showed another decrease of 1.96 million barrels to 502.7 million barrels, excluding the Strategic Petroleum Reserve, in the week ending September 23, compared to S&P Global Platts analysts’ expectations for a rise of 3.2 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory decrease of 752,000 barrels.
Separately, the EIA said the weekly U.S. crude oil production decreased by 15,000 bpd for the week ending September 23, 2016, to 8.497 million bpd. Weekly U.S. crude oil output has fallen about 11.58% 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 7 to 425, compared to 316, when the rig count hit the low on June 6, 2016.
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