Weak China outlook keeps shares on back foot

Weak China outlook keeps shares on back foot

Recap: Downbeat factory activity data in China cast a dark cloud over global stock markets as investors' concerns over the world's economic health mounted. However, economic stimulus measures to help low-income earners and SMEs shielded the Thai bourse.

The SET Index traded in a narrow range of 1,355.27 and 1,381.68 points before closing on Friday at 1,370.75, up 0.3% from the previous week, in moderate trade averaging 39.72 billion baht a day.

Foreign investors were net sellers of 2.65 billion baht and brokers sold 1.54 billion more than they bought. Institutional investors were net buyers of 3.68 billion baht and retail investors bought 514.89 million.

Big movers: NPK was the top loser, falling 15.3% to 23.50 baht. Top gainer CTW jumped 40.8% to 10.70 baht. AJD led in volume, jumping 21.1% to 1.49 baht. Leading in value were JAS, adding 6.7% to 5.60 baht; PTT, falling 3.35% to 260 baht; and KTB, down 1.7% to 17.70 baht.

Newsmakers: The European Central Bank said it might consider fresh policy measures soon to prevent deflation amid market alarm over economic fallout from China. The ECB also scaled back euro-zone growth projections, citing lower demand from emerging markets. It forecast growth in the 19 euro zone countries of 1.4% this year, down from 1.5% predicted in June, with inflation of only 0.1%.

US employers created 173,000 new jobs in August, fewer than expected, but unemployment fell to 5.1% after upward revisions to the June and July job figures. A jobless rate at a seven-year low gives more ammunition to Federal Reserve officials who are leaning toward raising rates at their Sept 16-17 meeting.

The US trade deficit in July shrank 7.4% from June to $41.86 billion, reflecting lower goods imports. The deficit with China continued to grow but at only 0.4% month-on-month to $31.58 billion.

Chinese factory activity shrank at its fastest rate in three years in August as domestic and export orders tumbled. The official manufacturing Purchasing Managers' Index (PMI) fell to 49.7 from 50 in July. New orders -- a proxy for domestic and foreign demand -- fell to 49.7 from 49.9. New export orders contracted for an 11th straight month.

Euro zone factory activity eased but only slightly from June's 14-month record as rising prices kept new orders in check. The final Markit PMI was 52.4, down from 52.5 in June.

The slowdown in China, volatile financial markets and tumbling raw-materials prices could lead to "a much weaker outlook" for global growth, the International Monetary Fund said. It urged wealthy countries to continue easy-money policies and "growth friendly" tax and spending programmes. Some emerging-market countries, meanwhile, should let their currencies fall substantially to support their exporters and economic growth.

Australia experienced the slowest economic growth in two years in the second quarter due in part to a sharp fall in export volumes, knocking the dollar to a six-year low. GDP expanded by 0.2%, down from 0.9% the previous quarter.

India's GDP expanded 7% year-on-year in the April-June quarter, down from 7.5% in the previous quarter.

New measures to help struggling Thai SMEs are yet to be concluded, but a Government House source says they are likely to include tax breaks and soft loans. The Government Savings Bank (GSB) will lend 100 billion baht at 2% rate to commercial banks, which will relend the money to SMEs at no more than 4%.

The cabinet approved three programmes worth 136 billion baht to help low-income earners in rural areas. The Bank for Agriculture and Agricultural Cooperatives (BAAC) and the GSB will provide seven-year loans to 59,000 Village Funds at 1 million baht each. The loans are interest-free for the first two years and subsidised after that. Meanwhile, the Interior Ministry will allocate 36.27 billion baht to 7,255 tambons for construction and repair projects, which must be completed in three months. Finally, state agencies and enterprises will be asked to accelerate budget disbursement for small projects worth less than 1 million baht each.

Headline inflation contracted by 1.19% year-on-year in August, the eighth straight month in the red. For the first eight months, headline inflation is down 0.9% due largely to a decline in non-food items and beverages, down by 1.95%.

Consumer confidence in August sank for an eighth straight month to a 15-month low. The Aug 17 Erawan shrine bombing, the weak economy and high household debt were all contributing factors. A survey by the University of the Thai Chamber of Commerce (UTCC) put the index at 72.3 points, down from 73.4 in July.

The 4G auctions for the 1800-megahertz spectrum in November are likely to involve only 25 MHz of bandwidth instead of 30 MHz due to regulatory restrictions, says the national telecom regulator.

Siam Cement Group (SCG) says it expects to miss this year's revenue target of 480 billion baht as the poor economic outlook is cutting consumers' purchasing power.

The shipper Thoresen Thai Agencies Plc (TTA) says it is closely monitoring the impact of the Chinese slowdown on its second-half performance and will adopt a cautious investment strategy and maintain cost-cutting to safeguard financial strength.

Central Plaza Hotel Plc (CENTEL) is maintaining its 2015 operating revenue target of 20 billion baht, to be driven mainly by the hotel business despite the Ratchaprasong bombing.

Coming up this week: The cabinet will vote tomorrow on a new stimulus package to help SMEs. Due the same day are China's trade balance for August, and Japanese and euro zone second-quarter GDP.

Chinese inflation and loan growth figures for August will be released on Thursday, followed by new industrial production and retail sales data on Sunday.

Stocks to watch: Tisco Securities' monthly top picks are AMATA, ANAN, AP, CK, DTAC, KBANK, PTTEP, STEC, TCAP and TPIPL. It also favours consumer lenders that will benefit from government economic stimulus such as THAINI, TK, ML and PL.

Bualuang Securities recommends stocks expected to be added to the FTSE (Mid Cap) index, effective Sept 18. They comprise CBG, IFEC, JASIF, KTC, PTG, TASCO, TRUEIF, U and BH. It also likes stocks with growth potential such as IFEC, which will book revenue from its 60MW power plant this year; TSR on expectation of a 30% surge in sales; and SF on a divestment of 50 rai from its land bank.

Technical view: Bualuang Securities puts support at 1,340 points and resistance at 1,400. Country Group Securities pegs support at 1,360 points with resistance at 1,400.

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