Hawkish fed tone rattles asia, But only briefly
Recap: Hawkish signals from the US Federal Reserve of a faster pace of policy tightening next year weighed on Asian stock markets last week. Most recovered late in the week after investors concluded the reaction had been overdone. Anticipation of a year-end spending spree by consumers lured by tax breaks kept the Thai bourse steady.
The SET index moved in a range of 1,514.68 to 1,530.21 points before closing on Friday at 1,522.51, down 0.3% from the previous week, in modest turnover averaging 48.86 billion baht a day. Foreign investors were net sellers of 5.2 billion baht and institutional investors sold 2.04 billion. Retail investors were net buyers of 4.7 billion baht and brokers bought 2.5 billion.
Big movers: MAX led in volume, losing 9.1% to 0.10 baht. Leading in turnover were PTT, down 1.6% at 363 baht; BANPU, up 1.1% to 18.70 baht; and CPALL, up 2.9% to 61.75 baht. Top gainer CIMBT surged 57.3% to 1.62 baht and top loser BAT-3K tumbled 22.6% to 130 baht.
Newsmakers: The US central bank, as expected, raised interest rates by 25 basis points, to between 0.5% and 0.75% and signalled a faster pace of increases in 2017 in light of the incoming Trump administration's promises of tax cuts, more spending and deregulation.
- Encouraging economic data from China included a 6.2% rise in industrial output in November, while retail sales rose 10.8% year-on-year in nominal terms, up from 10% in October. Fixed-asset investment, a gauge of infrastructure spending, rose 8.3% in the first 11 months of the year.
- China's outbound investment in November rose 76.5% from a year earlier to US$15.7 billion as firms continued to invest abroad amid a slowing economy and weakening yuan.
- A survey showed business activity across the 19-nation euro zone growing at a relatively strong pace thanks to an upturn in manufacturing. The purchasing managers' index held at 53.9 points in December, the same as in November.
- Germany's economy ended 2016 on a strong footing, with a key index suggesting growth accelerated in the fourth quarter. IHS Markit said its composite PMI was at 54.8 after a reading of 55 in November, capping the strongest three-month period since the second quarter of 2014. That indicates economic growth picked up from the 0.2% pace recorded in the third quarter.
- Japanese manufacturers' sentiment improved for the first time in six quarters to a one-year high, as falls in the yen and a pickup in overseas growth brightened prospects. The central bank's "tankan" survey noted upbeat spending plans, reinforcing expectations that the central bank will hold off on expanding stimulus for now. The index of business sentiment rose to +10 from +6 three months ago and the highest since December 2015.
- The Asian Development Bank trimmed its economic growth forecast this year for developing Asia to 5.6% from 5.7% due to a slight slowdown in India. It kept its regional forecast for next year unchanged at 5.7%.
- Global oil markets will swing from surplus to deficit in the first half of 2017 as Opec and other producers follow through on an agreement to cut supply, according to the International Energy Agency.
- Indonesia's central bank held its benchmark interest rate steady at 4.75%, as expected, and said it would remain alert to the risk that capital flows into the country could be reversed. Bank Indonesia also held its two other rates, which act as the floor and ceiling of the overnight interbank money market, at 4% and 5.5%, respectively.
- The Thai cabinet approved the much-awaited shopping tax break, a short-term measure to stimulate year-end consumption. The government expects the festive tax break will spur 20 billion baht of spending from Dec 14-31 and add 0.2 percentage points to GDP growth.
- The Central Bankruptcy Court approved the debt rehabilitation plan for Sahaviriya Steel Industries Plc (SSI). The plan includes a debt-to-equity swap of up to 91.9%.
- Advanced Info Service (AIS) plans to spend at least 40 billion baht for network expansion in order to maintain its lead in a nearly stagnant mobile market.
- Asahi Glass is acquiring a 58.8% stake in the chemical maker Vinythai (VNT), the SET-listed polyvinyl chloride producer and joint venture of Solvay and PTT Global Chemical Plc (PTTGC), for 10.4 billion baht.
- Krungthai Bank (KTB) says it aims to bring down its gross bad loan ratio to be on par with its peers by 2018 to improve asset quality and lower its loan-loss provision burden.
- Kasikornbank has appointed senior executive vice-president Pipit Aneaknithi as the bank's fourth president, in charge of overseas business, effective from Jan 1.
- Krungthai Card Plc (KTC) wants to lengthen the average maturity of its debt to seven years from five in a bid to lock in low rates before the interest trend reverses. KTC plans to issue new bonds worth 16-17 billion baht next year, of which 10 billion are revolving bonds and the remainder are new ones.
Coming up this week: Thailand will release November automobile sales data tomorrow. The Bank of Japan meets the same day.
- The Bank of Thailand's Monetary Policy Committee is expected to leave its benchmark rate of 1.5% untouched when it meets on Wednesday.
- The transport provider Ama Marine Plc (AMA) begins trading on the MAI (IPO price 9.90 baht) on Thursday. The Philippine central bank meets the same day, and the US will release final third-quarter GDP figures.
- The dessert cafe chain After You Plc (AU) begins trading on the MAI (IPO price 4.50 baht) on Friday.
Stocks to watch: Finansia Syrus Securities has buy recommendations for CK, SEAFCO, PYLON, SCC and SCB as they are expected to benefit from infrastructure spending. The broker also sees year-end shopping tax breaks as a boon for BEAUTY, BIG, HMPRO, ROBINS, FN, MC and KTC.
Tisco Securities recommends CK, STEC, UNIQ, SEAFCO, ILINK and LOXLEY on expectations of a boost from infrastructure work. It also recommends stocks expected to have at least a 30% upside gain next year -- ANAN, CK, JWD, NYT, SEAFCO, TPIPL, TTCL and UNIQ; and high-dividend plays -- ADVANC, ASP, BTSGIF, INTUCH, LH, MC, NYT, QH and TCAP.
Technical view: Tisco Securities sees support at 1,500 with resistance at 1,540 points. Bualuang Securities puts support at 1,503 and resistance at 1,545.