ECB rate cut a tonic for emerging market stocks

ECB rate cut a tonic for emerging market stocks

Recap: Asian shares were buoyed last week by speculation about asset reallocation to emerging markets after the European Central Bank (ECB) cut its policy rate to stave off deflation risk.

The SET Index moved in a range of 1,565.08 and 1,586.93 points and closed at 1,584.32, up 1.45% from the previous week, on average daily turnover of 55.6 billion baht. Foreign investors were net buyers of 6.61 billion baht and brokers bought 1.05 billion more than they sold. Institutions were net sellers of 3.16 billion and retail investors pulled 4.50 billion out of market.

Big movers: LDC Dental (LDC), the first dental services firm listed on the MAI, soared 200% above its 1.50-baht IPO price to 4.50 on its opening day. It hit the 30% ceiling on its second day to 5.83 baht easing back on Friday to 4.90 baht.

Top gainer DIMET rose 98% to 4.94 baht and top loser DTCI shed 23.6% to 18 baht. N-PARK led in volume, unchanged at 0.06 baht. The top three in trading value were TRUE, losing 3.5% to 11.10 baht; TTA, adding 4.3% to 24.40 baht; and TPIPL, gaining 16% to 18.90 baht.

Newsmakers: The pace of growth in the US services sector rose in August to its highest level since 2008. The Institute for Supply Management (ISM) services index rose to 59.6 from 58.7 in July.

The ECB cut its main refinancing rate to a record low of 0.05% from 0.15% to ward off a deflation threat. It also cut the bank deposit rate to -0.2% from -0.1% as a further incentive for banks to lend. The central bank also plans to start buying asset-backed securities and covered bonds in October, in an amount expected to be up to 700 billion euros.

The government of Ukraine and pro-Russian rebels signed a ceasefire on Friday, the first step toward ending a conflict in eastern Ukraine that has caused the worst standoff between Moscow and the West since the Cold War ended.

The University of the Thai Chamber of Commerce (UTCC) reported that the Consumer Confidence Index rose to 80.1 in August, the highest in 13 months. Factors cited for the improvement in August were increased political stability and the improving economic outlook.

Banks are expected to speed up offerings of sub-debt Basel III tier 2 capital instruments after the SEC announced that it would allow banks to offer such instruments to retail investors. Previously they could be offered only to institutional investors and high net worth clients. The regulation aims to strengthen banks' capital as many of their subordinated notes are scheduled to expire next year. The Tier 2 instruments under Basel III will have a floor conversion price of 50% of the banks' common stock price at the offering period, and will also apply to additional tier 1 instruments with a condition that holders must convert them into common shares if the banks face financial problems.

The Office of the Attorney-General (OAG) refused to indict former prime minister Yingluck Shinawatra for dereliction of duty in failing to deal with corruption and losses in her government's rice-pledging scheme, citing insufficient evidence. It called for a joint panel with the national Anti-corruption Commission (NACC) to be established to reinvestigate the case, with no timeframe to complete the work.

Thailand's consumer finance market is about to heat up as MAI-listed Aira Capital teams up with the Japanese consumer lender Aiful to set up a retail loan business. With a client base mainly of low-income earners, the new venture will compete directly with Aeon Thana Sinsap, a local unit of Japan-based Aeon Group, and EasyBuy, a unit of the Japanese consumer lender Acom.

Bangkok Land (BLAND) reaffirmed its readiness to hold an IPO for the Impact Growth REIT with an underlying value of up to 20 billion baht. The property fund will acquire freehold assets of Impact Muang Thong Thani including Impact Arena, Impact Exhibition Centre, and Impact Forum, with expected returns ranging from 6.60% to 6.84% for the first year.

Ratchaburi Electricity Generating Holding Plc, the country's largest private power producer, is poised to develop three power plants in Myanmar with a combined capacity of 3,300 megawatts. President Phongdit Photchana said the projects would take six or seven years to complete.

Khonburi Sugar Pls (KBS) said revenue and net profits this year would be flat because of the postponement of a power plant project and because global sugar prices are dropping amid an oversupply. Mitsui group is about to increase its stake in KBS to 16.7% via a warrant exercise.

♦Thai Union Frozen Plc (TUF) has acquired 100% of the French company MerAlliance, a leading European smoked salmon producer with annual sales of US$220 million (7 billion baht). The deal is expected to close in the next quarter.

Berli Jucker Plc (BJC) plans to open 205 B's Mart convenience stores in Vietnam by the end of 2018 at a cost of 1 billion baht. The new outlets would bring the chain's total to 300.

DTAC CEO Jon Eddy Abdullah surprisingly resigned after just three and a half years at the helm. Vice-chairman and former CEO Sigve Brekke will serve as interim CEO. The search for a replacement is expected to be finished by year-end. Mr Abdullah's resignation comes at a difficult time for DTAC, which has struggled with poor performance and intensifying competition in the mobile business. Sources indicated the outgoing CEO had conflicts with top management of Norwegian parent Telenor and said Mr Brekke had a better understanding of Thailand.

Coming up this week: Japan will release revised second-quarter GDP figures tomorrow, after a preliminary reading showed a 6.8% contraction because of the impact of the new sales tax.

Thailand's new cabinet will hold its first meeting tomorrow.

Financial markets in Taiwan, South Korea and China are closed today for the mid-autumn festival. Hong Kong will also be closed tomorrow.

China will release August lending data on Wednesday.

CCN-Tech Plc (CCN), an IT services and systems integration company, will make its debut on the MAI on Thursday. It sold its IPO shares at 1.25 baht each. The Thailand Consumer Confidence Index for August will be released the same day.

Stocks to watch: Asia Wealth Securities has buy recommendations on GUNKUL and DRT, while Asia Plus Securities and Phillip Securities recommend TUF. Bualuang Securities has buy recommendations on CPN and KSL. Its other top picks for September are BJCHI, BMCL, CK, LPN, MALEE and MC.

Technical view: Thanachart Securities sees support at 1,570 and resistance at 1,592. Bualuang sees support at 1,570 and resistance at 1,594.

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