Time to Flip-A-Coin for the SET Index

Witawat (Ed) Wijaranakula, Ph.D.
Fri Jan 13, 2017

Related Ticker: iShares MSCI Thailand Capped ETF (NYSEARCA:THD)

The SET index added another 0.24% for the week, to close on Friday at 1,575.24, despite that big cap energy stocks, including PTT PCL (SET:PTT) and PTT Exploration and Production PCL (SET:PTTEP), were down 0.77% and 2.54%, respectively, along with the Brent crude oil spot price. According to the Bangkok Post, PTTEP said the company cut its 2017 investment budget by 30% to US$2.9 billion and is focusing on efficiency. This included $1.64 billion in capital expenditures (capex) and $1.26 billion in operating expenditures.

The SET index has been consolidating at the 1,572 level since early January and may be about to break out to the upside, or head down to test the 1,552 level. The RSI signals the index is slightly overbought and the MACD momentum indicator is weakening. The good news is the USD/THB exchange rate is bearish, but the bad news is that the Brent crude price continues to tumble. 

The World Bank said on Wednesday it is maintaining their Thai GDP growth projection at 3.2% for 2017, citing recovering commodity prices, improving confidence and accommodating policies, according to the Bangkok Post. Last week, HSBC raised its forecast for Thailand's 2017 economic growth to 3.2% from 2.8%. The bank cited an increased outlook, as public investment remains the main growth driver, and a rebound in tourism. 

The USD/THB continues to pull back and closed on Friday at 35.4 baht per dollar, down another 0.95% for the week. The U.S. Dollar index (DXY), a measure of the U.S. dollar value relative to a basket of foreign currencies, closed at 101.19, down 1.0% for the week, after Donald Trump failed to deliver any details or timelines for his big infrastructure and tax bills at his first press conference on Wednesday as President-elect. The yield of Thailand 10-year government bonds dropped 0.37% for the week, to close at 2.69% on Friday. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 2.398% on Friday, widened to 0.292 percentage points.

The WTI crude price tanked 3.0% for the week to close at $52.37 per barrel on Friday, while the Brent crude spot price dropped 2.16% to close at $55.64 per barrel, after the EIA reported an unexpectedly large build in crude oil inventories and a surge in U.S. crude oil production. 

According to Reuters, the deputy leader of the UN-backed government in Libya said on Wednesday that Libya’s production rose 50,000 barrels last week to 750,000 barrels per day (bpd). The WTI crude price is now trading under the $53.96 resistance level, or 76.4% Fibonacci retracement, as the market begins to cast doubt on the OPEC and non-OPEC production cut of 1.8 million bpd, beginning in January 2017.

The EIA weekly U.S. oil inventory report on Wednesday showed that domestic crude supplies increased by 4.1 million barrels to 483.1 million barrels, excluding the Strategic Petroleum Reserve, in the week ending January 6, compared to the S&P Global Platts forecast for a stockpile increase of 1.75 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed a U.S. crude inventory increase of 1.5 million barrels. 

Separately, the EIA said the weekly U.S. crude oil production surged 180,000 bpd for the week ending January 6, to 8.946 million bpd. Weekly U.S. crude oil output has fallen about 6.91% 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 dropped 7 to 522, compared to 316, when the rig count hit the low on June 6, 2016.


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