DOVISH TONE FROM YELLEN HEARTENS EQUITY INVESTORS
Recap: Most Asian stock markets gained last week as investors took their cue from another all-time closing high for the Dow Jones Industrial Average, while dovish comments from the Federal Reserve on the interest rate outlook also bolstered risk sentiment. Oil prices also rallied but the impact on the energy-heavy Thai bourse was limited.
The SET index moved in a tight range of 1,564.75 and 1,584.26 points before closing at 1,577.79, up 0.5% from the previous week, in brisk turnover averaging 42.4 billion baht a day for the holiday-shortened week. Foreign investors continued to be net buyers at 1.42 billion baht and institutional investors bought 1.46 billion. Brokers were net sellers of 733 million baht and retail investors sold 2.2 billion.
Big movers: CPALL led in turnover, down 1.6% to 61 baht; CPF was off 0.4% to 24.60 baht, and AOT fell 0.5% to 48.75 baht. NEWS led in volume and also top loser, plunged 80% to 0.02 baht. Top gainer MATI surged 18% to 10.50 baht.
Newsmakers: Federal Reserve Chair Janet Yellen signalled that the Fed would consider slowing the pace of its interest rate increases if US inflation remains persistently below its target of 2%. June inflation was unchanged at 1.6% year-on-year. For now, though, she indicated that one more increase this year was possible, and that the Fed still wanted to begin gradually trimming its US$4.5 trillion in bond holdings later this year, which would put upward pressure on interest rates.
China’s exports rose 11.3% yearon-year in June as global demand held up and trade tensions with the US were kept in check. At home, resilient demand lifted imports 17.2% in dollar terms, leaving a trade surplus of $42.8 billion.
Chinese producer prices stabilised in June after slowing for three straight months, but analysts expect weakening economic growth will continue to weigh on inflation. The producer price index rose 5.5% from a year ago, unchanged from May but down from eight-year high of 7.8% in February as Beijing puts the brakes on freewheeling credit. Consumer prices rose 1.5% in June, unchanged from May.
The Bank of Japan raised its assessment for five of the country’s nine regional economies amid strong exports to the rest of Asia. It pointed to strong demand for electronic components such as those used in smartphones as well as manufacturing equipment in China, Taiwan and Southeast Asia.
Singapore’s economy rebounded in the second quarter on a global trade pickup. GDP rose by 0.4%, following a contraction of 1.9% in the first quarter.
Vietnam’s surprise lowering of interest rates for the first time in three years may help support economic growth, but raises credit risks in a country still grappling with a hangover of bad debt. The central bank reduced its refinance rate by 25 basis points to 6.25% and also lowered the discount rate to 4.25% from 4.5%.
The purchasing power of major trade partners and production restructuring to keep up with demand are having larger effects on exports than the movement of the baht, says a senior official at the Bank of Thailand.
Krungthai Bank (KTB) says full provisions for loan losses from beleaguered Energy Earth Plc, coupled with a recent cut in the lending rate, took a bite out of second-quarter net profits, which will be reported this month.
Analysts cut their Q2 profit forecasts for KTB by 70% after the country’s second-biggest lender warned that provisions for Energy Earth would hurt its bottom line. Asia Plus Securities cut its forecast to 4.78 billion baht from 7.79 billion, and Phillip Securities predicts 2.3 billion, down from an earlier forecast of 7.8 billion, assuming loan impairment charges of 15 billion baht.
Supalai Plc is launching 22 new property projects worth a combined 21.54 billion baht in the second half as planned after posting presales growth of 29% to 13.3 billion baht in the first six months of the year. The new projects consist of four condominiums worth 9.95 billion baht and 18 single-house and townhouse projects worth 11.6 billion.
Triple i Logistics Plc plans an initial public offering later this year to raise funds for working capital and business expansion. According to a filing with the SEC, the logistics provider will offer a maximum of 164.5 million shares, representing 27.21% of total issued shares after the IPO.
The SET will seek Finance Ministry approval to waive capital gains tax for 10 years for investors who put money into Live, a planned fundraising platform for startups.
State enterprises contributed 129 billion baht in revenue to government coffers in the nine months to June, exceeding the target by 26% and close to the full-year target of 131 billion set earlier by the State Enterprise Policy Office.
Coming up this week: Thai banks will release their second-quarter earnings this week.
China will release second-quarter GDP figures today.
Euro zone inflation for June will be released tomorrow, followed by consumer confidence on Thursday.
US housing starts and building permits for June will be announced on Wednesday.
Thailand will release June auto export data on Thursday. The central banks of Japan and Indonesia will meet on Thursday, as will the European Central Bank.
Stocks to watch: Capital Nomura Securities suggests a portfolio consisting of 70% equities, 12.5% gold, 5% bonds and 12.5% cash. Recommended stocks are in construction (CK and STEC), banks (SCB, TCAP), tourism (AOT, MINT and ERW), industrial estates (AMATA, WHA), retail (BJC), and property (BLAND, AP and SIRI).
Bualuang Securities has buy recommendations for BANPU, ADVANC, CPALL,SPCG, TASCO, EA, TISCO, KTC, THREL,PTTGC, MACRO, AH, INTUCH, AOT, CPN, CENTEL, SCC, SPRC, SAMART, COL, BEM and GLOBAL.
Technical view: DBS Vickers Securities (Thailand) tips support at 1,550 with resistance at 1,590 points. Capital Nomura Securities pegs support at 1,560 and resistance at 1,610 points.