US MARKETS HAIL TAX PLAN AND FED CHOICE, SET VOLATILE
RECAP:
US markets this week cheered a Republican tax cut plan and President Donald Trump’s choice of a new Federal Reserve chief who is seen as offering continuity. On the domestic front, Thai shares fluctuated on concerns about capital flow movements and third-quarter corporate operating results.
The SET index fluctuated in a wide range during the week after the royal cremation ceremony of King Rama IX. The index moved between 1,696.66 and 1,729.64 points before closing at 1,701.47, down 0.85% from the previous week, in heavy trade averaging 60.39 billion baht a day. Foreign investors were net sellers of 8.56 billion baht and brokers sold 2.44 billion baht worth of shares. Institutional investors were net buyers of 3.59 billion baht and retail investors bought 7.41 billion.
NEWSMAKERS:
President Trump has named Jerome Powell as his pick to lead the Federal Reserve after Janet Yellen’s term ends in February. Mr Powell, a Republican multi-millionaire, has served on the bank’s board since in 2012. Analysts regard him as a status quo candidate, likely to continue the Fed’s current policy of gradually raising interest rates.
The Fed said US economic activity remained “solid” despite recent hurricanes and voted to hold interest rates steady. The outcome was widely expected, but most observers still believe the central bank will raise its benchmark rate at its last meeting of the year on Dec 12-13. The Bank of England has raised interest rates for the first time in more than 10 years. The official bank rate has been lifted from 0.25% to 0.5%. The move reverses the cut made in August of last year in the wake of the vote to leave the European Union.
Prime Minister Shinzo Abe says he plans to introduce a bold economic package worth ¥2 trillion early next month to combat various woes related to Japan’s rapidly ageing population.
The Stock Exchange of Thailand (SET) index could experience a downward correction to 1,700 points because of lower earnings in the banking sector in the third quarter and asset impairment at PTT Exploration and Production (PTTEP), says Apple Wealth Securities. Two executives from embattled International Engineering Plc (IEC) have been dismissed as a result of criminal charges brought by the Securities and Exchange Commission (SEC). Siam Commercial Bank (SCB) is in talks with foreign insurers to jointly develop a life insurance business. Partners with expertise in innovative technologies are the bank’s focus, said president and chief executive Arthid Nanthawithaya. The bank may welcome more than one business partner to join SCB Life Assurance as some have expertise in other areas. Central JD Commerce Co, a joint venture between top Thai retailer Central Group and JD.com, the biggest e-commerce company in China, aims to invest up to 100 billion baht over the next three years in e-commerce, e-logistics, e-finance, e-marketing and technology.
A law to pool money from bank accounts that have been inactive for at least 10 years into the Finance Ministry’s accounts is expected to be enforced in October next year at the earliest. However, the funds from such accounts cannot be used for any public purpose. They must remain available to be returned to account holders.
The Revenue Department will discuss a possible tax break for year-end shopping with Finance Minister Apisak Tantivorawong after Prime Minister Prayut Chan-o-cha ordered the ministry to offer the incentive for a longer period this year.
Thailand jumped 22 spots in the World Bank’s Doing Business 2018 report, to 26th place among 190 economies in ease of doing business. The report said the country had made impressive strides after adopting eight reforms in the past year.
Consumer prices rose for the fourth straight month in October for an annualised inflation rate of 0.86%, according to the Commerce Ministry. The rise was driven by higher prices of seasonal fresh food and oil and higher cigarette and liquor prices because of increases in excise tax.
COMING UP:
On Monday, the Bank of Japan will release minutes of its last meeting and Germany will release its services purchasing managers’ index (PMI) for October. France and the euro zone will also release October PMI and the euro zone will also release its producer price index for September.
On Tuesday, the euro zone and France will release retail sales data for September. The Reserve Bank of Australia meets the same day. The Bank of Thailand will meet on Wednesday and no change in rates is expected. Japan will release foreign reserve figures for October and China will update its business confidence index. On Thursday, Japan will release September machinery orders and China will release October consumer and producer price indices. Germany will release trade figures for September.
STOCKS TO WATCH:
Asia Plus Securities recommends selected laggard stocks such as PTTEP and MINT, with an overweight view on construction stocks including ITD, CK, STEC and UNIQ.
DBS Vickers Securities’ recommendations for November are AMATA, ERW, DIF, SPALI and TMB. For high dividend yields, it recommends KKP, TISCO, LH, PSH, LALIN, TMT, MODERN, BCP, MC, SENA, SNC, DIF, CPNRF and LHHOTEL.
TECHNICAL VIEW:
Bualuang Securities sees support at 1,680 points and resistance at 1,730. DBS Vickers Securities sees support at 1,680 points and resistance at 1,720.