FED AND ECB DECISIONS PUSH DOWN SHARES, SET RETREATS
RECAP: Global stock markets declined after the US Federal Reserve signalled at least two more interest-rate increases in 2018 and the European Central Bank (ECB) said it would end its bond-buying stimulus in December.
Concerns over a trade war intensified as Washington announced details of Chinese tech products that would face tariffs, and tensions between President Donald Trump and his G7 allies festered.
Locally, the SET index continued its retreat toward 1,700 amid anxiety over persistent capital outflows in response to the Fed and ECB policy decisions.
The SET index moved in a range of 1,695.39 and 1,735.84 points before closing at 1,704.82, down 1% from the previous week, in moderate turnover averaging 52.11 billion baht a day.
Foreign investors were net sellers of 24.56 billion baht, and brokers cashed out 61.7 million. Retail investors bought 13.34 billion baht more than they sold, with institutional investors buying 11.3 billion worth of shares.
NEWSMAKERS: Donald Trump and Kim Jong-un made history on Tuesday, becoming the first sitting US and North Korean leaders to meet, as they began to search for ways to end a decades-old nuclear standoff. Mr Trump also said the US would stop holding “provocative” military exercises on the Korean peninsula. Now it will be up to officials of both countries to negotiate the details.
A war of words erupted between Mr Trump and other G7 leaders, hours after he departed their summit in Canada for Singapore. Germany’s Angela Merkel said Mr Trump’s decision to reject a joint communique, announced from Air Force One, was “depressing”. New US tariffs on steel and aluminium imports have become a major sore point.
The Fed raised its interest rate for the second time this year by a quarter point to a range of 1.75-2%, as expected, and signalled two more increases in 2018. It also dropped its pledge to keep rates low enough to stimulate the economy “for some time” and signalled it would tolerate inflation above its 2% target at least through 2020.
The ECB will end its bond purchase programme by the close of the year, a major step towards dismantling crisis-era stimulus a decade after the start of the economic downturn. But acknowledging the uncertainties hanging over the economy, it signalled that any interest-rate increase is still distant.
Prime Minister Shinzo Abe said Japan would set up a new $50-billion framework to help finance infrastructure projects in the Indo-Pacific region, a move aimed at countering China’s growing influence.
Malaysian Prime Minister Mahathir Mohamad has called for the revised Trans-Pacific Partnership (TPP) to be “renegotiated” to improve protection for smaller countries such as his.
Thai state agencies disbursed just 37.1% of their annual investment budget for the eight months of the fiscal year through May, well below the full-year target of 87%, says a Finance Ministry source.
State enterprises contributed 25% more income than targeted in the first eight months of fiscal 2018, sending 125 billion baht to government coffers.
The government has agreed to cap the retail price of cooking gas at below global market prices, which could drain the state cooking gas fund within a month. The market price of cooking gas is rising, but with 392 million baht in cash in hand, the fund will only be able to subsidise prices until mid-July, the Energy Policy Administration Committee has admitted.
Embattled Inter Far East Energy Corp Plc will hold an extraordinary shareholders’ meeting by July 8 to fill vacant board positions in a bid to resume normal operations.
The SEC has accused financially beleaguered Energy Earth Plc of falsifying details related to its actual level of indebtedness in an attempt to conceal information from investors and justify entering a business rehabilitation plan. Creditors will meet to consider the plan on Aug 2.
Foxconn Technology, the Taiwan-based maker of IT products and a major Apple supplier, is eager to invest in the Eastern Economic Corridor, says Deputy Prime Minister Somkid Jatusripitak.
COMING UP: ECB president Mario Draghi will address a central banking forum in Portugal on Tuesday, when he is expected to elaborate on the winding down of stimulus programmes.
The Bank of Thailand’s Monetary Policy Committee (MPC) is expected to leave its key rate untouched when it meets on Wednesday. Also due Wednesday are minutes of the last Bank of Japan policy meeting, and US existing home sales for May.
Thailand will release May trade figures on Thursday. On Friday, Japan and Canada will release May inflation data.
STOCKS TO WATCH: Maybank Kim Eng Securities (Thailand) recommends holding 40% cash in one’s portfolio and investing in domestic and defensive stocks such as BTS and BEM. Its top picks in property are GOLD and LH, and in retail it likes HMPRO. The broker also recommends construction stocks in anticipation of bidding for the Rama III-Dao Khanong Expressway and the high-speed train link to three airports. It has a trading-buy rating on CK and STEC.
Tisco Securities recommends cutting losses on some stocks if the SET Index drops below 1,700, and switching to other stocks with low P/E ratios. SCC and TVO are among its recommendations for cutting losses when prices reach 444 baht and 30 baht, respectively. It has no buy recommendations given the current market volatility.
TECHNICAL VIEW: Maybank Kim Eng Securities sees support at 1,680 points with resistance at 1,730. DBS Vickers Securities puts support at 1,680 and resistance at 1,725.