Asian markets surge as Fed holds rate
Baht gain muted on external risks
Thai shares, in line with advances across Asian bourses, crossed the 1,500-point marker after the US Federal Reserve stood pat on borrowing costs and scaled back the number of rate increases expected in the years ahead.
The SET index skyrocketed on the news, then zig-zagged back and forth across the 1,500-point threshold before closing at 1,505.99, up 1.3% in brisk trade worth 46.5 billion baht.
The Fed’s dovish comments encouraged foreign investors to be net buyers of 2.01 billion baht yesterday, stretching their buying spree to 135.77 billion year-to-date. Thai shares have gained back almost 90 points from Sept 12’s close of 1,411.85 after the 136-point slide from the end of August. The SET index, one of Asia’s best performers, has shot up almost 17% this year.
Japan’s Nikkei Stock Index 225 surged the most among Asian peers yesterday in response to a Bank of Japan (BoJ) move to target interest rates for government bonds, which could ease profit pressure on banks and insurers from ultra-low interest rates. The Nikkei rose 1.9%. South Korea’s Kospi climbed 0.7% higher, the Philippines’ PSE Composite Index gained 1.1% and Indonesia’s Jakarta Composite was up 0.7%.
Somchai Anektaweepol, research manager for Finansia Syrus Securities, warned that the SET run-up could trigger profittaking, so investors should be cautious. He deemed the BoJ move as neutral for the Thai stock market.
The broker set its year-end SET target at 1,650 points.
Bualuang Securities said yesterday’s market rally created strong technical support and the bull run is expected to continue because it is liquidity-driven. The broker is optimistic that the SET Index will go on an extended run as the market anticipates the Fed raising rates in December.
Bualuang recommends buying high-dividend plays and stocks with strong fundamentals.
Chantavarn Sucharitakul, the assistant governor overseeing financial market operations for the Bank of Thailand, said the baht and other regional currencies mostly firmed marginally as the Fed decision was expected.
“The baht rose slightly this morning to a range of 34.64-34.67 to the US dollar, 0.3% stronger than yesterday, while the volatility rate also gained to 3.5%,” she said.
The Fed’s potential rate hike later this year is another reason the baht’s rise was muted, Mrs Chantavarn said.
She said Thai government bond yields dipped slightly, in line with US government bonds.
“The rise of regional currencies today was a short-term reaction,” she said. “For the long run, we will have to continue to monitor the market’s reaction, since there’s still uncertainty about the monetary policy directions of the Fed and other major economies, such as the move Japan made today.
“External factors remain that affect capital flows in the global financial market. Everyone should use currency risk management to cope with future fluctuations.”
HSBC said in its latest “FOMC FX Reaction” report that the Fed decision will weaken the dollar modestly after it had gained in response to hawkish comments on the rate outlook by Fed officials.
The US Dollar Index had rallied 2% from a nadir in mid-August, suggesting that some probability of a move was embedded in the price and will now disappear.