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Greek drama and Chinese rout push shares down

Greek drama and Chinese rout push shares down

Recap: Greece's debt default weighed on global stock markets last week ahead of yesterday's referendum. The start of this week promises to be choppy as US investors return from a long weekend and markets weigh the results of the Greek vote.

In Asia, Chinese stock markets continued their free-fall — Shanghai is off 28% in the past two weeks —as government measures to shore up equities failed to stop margin traders from unwinding positions at a record pace. In Thailand, concerns over disappointing second-quarter bank earnings due to additional provisions triggered sell-offs in the sector.

The SET Index traded in a range of 1,485.50 and 1,516.93 points, and closed at 1,489.59 points, down 1.9% on the week, in trade averaging 42.18 billion baht a day. Foreign investors were net sellers of 5.74 billion baht, institutional investors sold 2.57 billion and brokers sold 500.71 million. Retail investors were net buyers of 8.82 billion baht.

Big movers: The fine china tableware manufacturer Home Pottery (HPT) more than doubled its 1-baht IPO price on its MAI debut last Monday, closing at 2.64 baht. It led in volume for the week and closed on Friday at 3.00 baht.

U City (U) was last week's top loser, sliding 20% to 0.04 baht. Top gainer DIMET rose 47.2% to 10.60 baht. Leading in turnover were KBANK, dipping 9.75% to 180.50 baht; SCB, down 22.6% to 125.00 baht; and TASCO, up 7.7% to 23.70 baht.

Newsmakers: Moody's Investors Service downgraded Greece's government bond rating to Caa3 from Caa2 and said a further downgrade was possible depending on the government's willingness and ability to reach agreements with its creditors.

The US economy is estimated to have bounced back to an annual growth rate of around 2.5% in the second quarter, from a contraction of 0.2% in the first quarter, and the labour market is approaching full employment, Federal Reserve vice-chairman Stanley Fischer said.

The euro zone manufacturing Purchasing Managers' Index (PMI) reached a 14-month high of 52.5, higher than the lacklustre readings from Germany and France, the region's two biggest economies.

Chinese factory activity expanded slightly in June, though not as much as expected, official surveys showed, suggesting the economy may be starting to level out as support measures take hold. The official manufacturing PMI for June was 50.2, unchanged from May, while the services PMI climbed to 53.8 from 53.2.

Japanese industrial output fell in May at the fastest pace in three months, adding to fears the economy may have contracted in the second quarter. The 2.2% decline compared with a 1.2% increase in April.

Thailand's economic recovery in May continued at a slow and fragile pace despite two successive interest-rate cuts, while global economic uncertainty and the local drought pose further downside risks to growth, says the Bank of Thailand. As a result, it said, annual growth may fall short of the 3% forecast.

Thailand has entered "technical deflation" after consumer prices fell in June for the sixth straight month. The Commerce Ministry said prices based on 450 products and services contracted by 1.07% year-on-year, due mainly to low energy prices.

The Fiscal Policy Office (FPO) will cut its 2015 growth forecast again this month due to weaker-than-expected exports in May, the lowest rainfall in a decade and tepid domestic consumption, but the revision is unlikely to be below 3%. The FPO's current growth forecast is 3.7%, based on exports expanding 0.2% in 2015.

Thailand's exports could contract by as much as 3.5% this year if their value averages less than US$18.7 billion a month for the next six months, say exporters. Thai National Shippers' Council (TNSC) chairman Nopporn Thepsithar said a 2% contraction was now a best-case scenario.

The name of the new central bank governor to succeed Prasarn Trairatvorakul will be submitted for cabinet approval between July 7 and 14, said Finance Minister Sommai Phasee. The two contenders are Veerathai Santiprabhob, a member of the Monetary Policy Committee, and Supavud Saicheua, the managing director of Phatra Securities.

Kasikornbank (KBANK) said its credit costs rose 16 basis points quarter-on-quarter to 120 bps in the second quarter, a function of higher loan-loss provisions, and could reach 150 bps in the second half. It also raised its non-performing loan (NPL) forecast to between 2.7% and 2.8% of total credit at year-end from 2.26% at the end of March.

KPN Group Corporation, a property firm controlled by the Narongdej family, is set to become a 30% shareholder of SET-listed developer Prinsiri Plc (PRIN) under a share swap approved by the latter's board. The stake of the current major shareholder, the Kovitchindachai family, would be reduced to 16% from 40% under the deal, expected to close in October.

Siam Cement Group (SCG) has paid 1.5 billion baht to acquire 80% of Tin Thanh Packing Joint Stock Co (Batico) in Vietnam, through SCG subsidiary TC Flexible Packaging Co (TCFP). Batico is one of Vietnam's top five packaging producers, making 230 million square metres of packaging per year including value-added flexible packaging.

Krung Thai Bank (KTB) says it will focus on profit improvement after surpassing Bangkok Bank (BBL) as the country's largest lender by assets and deposits in the first quarter of this year. The bank aims to nearly double its net profit to 60 billion baht by 2018, said president Vorapak Tanyawong.

Coming up this week: Markets today will digest the results of the referendum in Greece, where banks say they will run out of money tomorrow.

The Markit US Services PMI for June is due today.

Minutes of the June 16-17 Fed meeting will be released on Wednesday.

China will release June inflation data on Thursday and June loan growth figures on Friday. Japan's consumer confidence index is also due on Friday.

Stocks to watch: Asia Plus Securities recommends dividend plays such as ADVANC, INTUCH, SENA, TVO and TTW; those that benefit from public investment, including CK and STEC; laggards such as BLA; and those expected to show Q2 results such as TASCO and IRPC.

Thanachart Securities has a buy recommendation for stocks expected to report strong Q2 earnings such as PTTGC, BCP, AOT, BLA and SAMART. It also recommends accumulating dividend stocks such as INTUCH and TRUEIF, and construction stocks CK, STEC, SEAFCO and BTS.

Technical view: Bualuang Securities sees support at 1,480 points with resistance at 1,540. Thanachart Securities puts support at 1,480 points and resistance at 1,520.

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