TRADE TENSIONS WORRY GLOBAL EQUITY INVESTORS, SET RETREATS
RECAP: Global trade tensions dented investor confidence yesterday after the US imposed 25% tariffs on steel and 10% tariffs on aluminium imports from the European Union, Mexico and Canada. Markets are keeping a close watch on whether trading partners will retaliate, while US-China trade negotiations continue to be closely watched.
The SET index moved in a range of 1,711.73 and 1,738.92 points before closing at 1,719.82, down 1.2% from the previous week, in heavy turnover averaging 85.16 billion baht a day.
Foreign investors were net sellers of 14.99 billion baht and brokerage firms sold 2.45 billion worth of shares. Retail investors were net buyers of 9.5 billion baht and institutional investors purchased 7.93 billion.
NEWSMAKERS: US tariffs on steel and aluminium from the EU, Mexico and Canada took effect yesterday after a deadline for negotiating a compromise passed. Washington is also finalising plans for 25% tariffs on $50 billion worth of Chinese imports, to take effect around mid-June, barring some form of new agreement with Beijing.
US President Donald Trump is expected to receive a letter from Kim Jong-un, as efforts continue to salvage the June 12 summit with the North Korean leader. The letter was to be delivered yesterday by Mr Kim’s right-hand man, Kim Yong-chol, who has already met with Secretary of State Mike Pompeo. A populist anti-austerity government was sworn in yesterday in Italy after a last-ditch coalition deal was sealed to end months of political deadlock, narrowly avoiding fresh elections in the euro zone’s third-largest economy.
The EU has passed a law requiring firms to comply with local standards when they post workers temporarily to another EU country. They will be entitled to the same level of pay as their local counterparts. In France, the UK and Germany there have been complaints of unfair competition from cheaper eastern European workers.
China’s manufacturing sector grew at the fastest pace in eight months in May, easing concerns about an economic slowdown even as risks from trade tensions with the US and a crackdown on debt point to a bumpy ride ahead. Malaysian Prime Minister Mahathir Mohamad has cancelled a proposed multibillion-dollar high-speed railway to Singapore, one of several big-ticket projects of the previous government. He said the national debt was alarmingly high, at 80% of GDP, as he opened a crowdfunding campaign for the public to donate money to pay it down.
The Thai economy got off to a good start in the second quarter, buoyed by solid exports and improved private consumption in April, but overall household purchasing power is not yet robust, says a senior official at the Bank of Thailand.
The central bank has warned banks in light of the growing appetite for mortgages, urging them to retain sound risk management practices. Some financial institutions are offering a higher loan-to-value ratio to homebuyers amid intense competition, said Bank of Thailand governor Veerathai Santiprabhob.
The superboard overseeing state enterprises is considering what to do about the state-owned Islamic Bank of Thailand (IBank) after its refusal to accept a partnership proposal. A source at the State Enterprise Policy Commission said the bank had turned down proposals made by a few investors as it was not satisfied with them. Insurance products exist to cover losses on cryptocurrency transactions in foreign countries, but they are not allowed in Thailand given the vague status of virtual currencies, says the Office of the Insurance Commission. As expected, all five contending exploration and production companies passed pre-qualification screening to take part in the auction for new licences for the Erawan and Bongkot gas blocks, said the Mineral Fuels Department. They are Chevron, PTTEP, Total, Mubadala and OMV.
SET-listed BTS Group Holdings Plc plans to join the bidding for an 18.3km light rail route from Bang Na to Suvarnabhumi airport, the 39.6km Orange Line and a 220km high-speed railway. China has reaffirmed its intention to join the auction for the 224.5-billion-baht high-speed railway linking Don Mueang, Suvarnabhumi and U-tapao airports.
COMING UP: The Reserve Bank of Australia will hold a policy meeting on Tuesday, and the US will release manufacturing and services purchasing managers’ index updates for May. Australia will release first-quarter GDP data and the US will release April trade figures on Wednesday. Australia will release April trade figures on Thursday, with the EU releasing final first-quarter GDP figures.
China will release May trade figures and Germany will release April trade data on Friday. The Bank of England will release its inflation projection for the next 12 months and Canada will announce May employment figures the same day.
China will release May inflation data on Saturday.
STOCKS TO WATCH: DBS Vickers Securities Thailand recommends stocks with good fundamentals for the second quarter, including AEONTS, AOT, ERW, DIF, IVL and SENA. Tisco Securities suggests stocks with good fundamentals and growth potential stemming from investments in the Eastern Economic Corridor, such as EA, IVL, ROJNA and SEAFCO.
TECHNICAL VIEW: DBS Vickers Securities Thailand sees support at 1,700 points and resistance at 1,760. Tisco Securities sees support at 1,710 and resistance at 1,745.