TRADE WORRIES DENT SENTIMENT AHEAD OF Q2 EARNINGS

Concerns over the global trade war continued to depress investor sentiment throughout the week, leading to volatile trade in equities. Strong US job figures, however, provided support for the US market, with the Nasdaq closing at an all-time high.

Locally, market participants are speculating on listed companies’ operating results as the second-quarter earnings reporting season begins.

The SET index moved in a range of 1,617.51 and 1,649.66 points before closing yesterday at 1,643.52, up 1.8% from the previous week, in moderate turnover averaging 44.96 billion baht a day.

Foreign investors were net sellers of 5.62 billion baht, while brokerage firms sold 2.1 billion and retail investors 1.6 billion.

Institutional investors were net buyers of 9.32 billion baht.

Oil prices were headed for their worst weekly decline in five months as investors fear rising US-China trade tensions will hurt the global economy and oil demand. Libya’s plan to restore production affected by clashes with militias also weighed on sentiment. Brent crude dropped 6.9% on Wednesday to US$73.40 and was on track for a 5% drop for the week.

China said it was “shocked” after the US announced plans for fresh tariffs on US$200 billion worth of additional products as soon as September. The move comes just days after the two countries imposed tit-for-tat tariffs of $34 billion on each other’s goods.

The European Commission estimates the 19-country euro zone will grow by 2.1% this year, down from 2.4% last year, amid trade tensions with the United States and rising oil prices.

Singapore will seek compensation for all costs incurred if Malaysia cancels a planned multibillion-dollar high-speed railway between the two countries. Prime Minister Mahathir Mohamad said he would cancel the signature project of his predecessor Najib Razak as part of a plan to rein in worrisome public debt. Foreign investors sold 180 billion baht worth of Thai equities in the first six months of 2018, sparked by heightened external concerns. The value of foreign equity holdings stood at 4.85 trillion baht as of June 30, or 29.7% of total SET capitalisation, down from 30.8% at the end of 2017.

Foreign fund outflows in short-term Thai bonds are expected to persist given the baht’s depreciation, but inflows in long-term debt securities are poised to continue because of the higher investment return compared with the 10-year US Treasury note, says the Thai Bond Market Association.

The Bank of Thailand has moved to curb the baht’s rapid retreat against the US dollar as the local currency hit a nine-month low. The central bank has been sporadically selling dollars to smooth out the baht’s movement after it depreciated at a faster pace, lowering foreign reserves, said governor Veerathai Santiprabhob.

The Commerce Ministry is raising its export growth forecast to 9% this year from 8%, citing the global economic recovery and the government’s close cooperation with exporters to tackle obstacles and drive shipments.

The cabinet this week approved a draft bill on the land windfall tax — a levy on inflated property prices driven by transport infrastructure projects. It would apply to both individual and corporate owners for commercial purposes and condominium projects worth more than 50 million baht every time ownership is transferred from the time transport infrastructure construction starts until the project’s completion.

The SEC is conducting a public hearing on allowing securities companies to extend credit to investors to buy mutual fund units and debt instruments and also place those securities as collateral, aiming to enhance purchasing power for margin accounts.

Debt funding, such as bond issuance from commercial developers, is expected to increase in the medium term because of several large mixed-use projects in the pipeline, which could cause higher leverage and oversupply if economic growth weakens, says Fitch Ratings.

The developer Supalai Plc (SPALI) plans to take over SET-listed M.K. Real Estate Development Plc, with the latter’s properties and businesses including a warehouse, golf course and land bank seen as a way to help Supalai expand.

The SET-listed cosmetics company Beauty Community Plc (BEAUTY), seeking to restore investor confidence after concerns about future performance sent shares plunging, said its board had approved a share buyback programme, to a maximum of 950 million baht, for financial management purposes. No companies have picked up bid documents so far for a second planned auction of 1800- and 900-megahertz spectra licences. Interested firms have until Aug 7 to pick up bid documents.

Kasikornbank has adjusted its business strategy in an attempt to expand QR code payment use as the digital channel slowly gains ground. Collaboration with large corporate business partners that distribute daily consumer goods and services is a key strategy to increase the use of QR code payment, said president Kattiya Indaravijaya.

Coming up: China will release official second-quarter GDP data on Monday, with the US releasing June retail sales the same day. Britain will release May unemployment figures on Tuesday and June inflation data on Wednesday. New Zealand will announce second-quarter inflation on Tuesday, and US Federal Reserve chairman Jerome Powell will deliver his semi-annual testimony before a Senate panel.