Emerging markets gain as US rate worries recede

Emerging markets gain as US rate worries recede

It’s Golden Week for Chinese tourists ... and for the Thai businesses that cater to them.
It’s Golden Week for Chinese tourists ... and for the Thai businesses that cater to them.

Recap: Disappointing US jobs data and minutes of the September Federal Reserve meeting triggered speculation that US interest rates will not rise until sometime next year, prompting capital flight back to emerging markets last week. Thai shares surged past 1,400 points, a level not seen since August.

The SET Index moved in a range of 1,353.73 and 1,415.53 points, and closed at 1,411.33, up 4.83% from the previous week, in heavy trade averaging 46.36 billion baht a day. Foreign investors were net buyers of 5.16 billion baht, brokers bought 9.24 billion and institutional investors 353.93 million. Retail investors were net sellers of 14.75 billion baht.

Big movers: Despite the market uptick, two new SET entrants faced disappointment. Origin Property (ORI) closed 1.1% below its 9-baht IPO price on Wednesday but recovered to 9 baht at week's end. Thaifoods Group (TFG) dropped 2.05% from its 1.95-baht IPO price on Thursday and ended at 1.84 on Friday.

EMC was the top loser, sliding 16.1% to 0.26 baht. Top gainer TSTE jumped 36.3% to 12.40 baht. JAS led in trading volume, gaining 11.9% to 5.65 baht. Leading in value were JAS, adding 2.7% to 5.50 baht; PTT, up 10.6% to 272 baht as world oil prices revived; and ADVANC, rising 4.4% to 236 baht.

Newsmakers: The International Monetary Fund (IMF) cut its global growth forecasts, citing weak commodity prices and a slowdown in China. It forecast the world economy would grow at 3.1% this year and 3.6% next year, down from forecasts of 3.3% and 3.8% in July. It predicted growth in China would slow to 6.8% this year and 6.3% in 2016. The biggest hit to growth is emerging economies where the IMF cut its forecast to 4% in 2015 from 4.2%, due to a sharp slide in commodity prices.

Minutes of the Federal Reserve's September meeting showed central bankers thought the US economy was close to warranting a rate increase but decided to wait for evidence that the global economic slowdown was not knocking the US off course.

The World Bank cut its growth forecasts for developing economies in East Asia and the Pacific but allayed fears of a hard landing for China. It forecast China's GDP would grow by 6.9% this year, 6.7% next year and 6.5% in 2017. GDP rose 7.3% in 2014. The forecasts were slightly lower than the bank's projections in April. For developing economies in East Asia-Pacific, average growth is forecast at 6.5% this year, 6.4% next year and 6.3% in 2017. This is down from 6.8% actual growth in 2014.

The Bank of Japan held off on expanding stimulus, even as slumping exports and falling oil prices threaten its rosy projection that the economy is on track to hit the 2% inflation target next year.

Trade ministers of 12 countries including the US and Japan reached a deal on the most sweeping trade liberalisation pact in a generation. The Trans-Pacific Partnership (TPP) will cover 40% of world economic activity.

A Bank of Thailand spokesman said the country's trade competitiveness would not be substantially affected by the TPP since the country already had free trade agreements with almost all of the countries within the TPP except the US and Mexico. He said Thailand could even benefit from less protectionism in the US, as well as a general increase in regional exports.

The Thai Finance Ministry will offer BoI-style incentives to investment projects that have not applied for Board of Investment privileges provided they can get started within six months, pending cabinet approval. The government is also considering special extra privileges for BoI-approved ventures that can get started in six months.

The World Bank sees no light at the end of the tunnel for the Thai economy. It said growth would come in at 2.5% this year, down from the previous 3.5% forecast. It slashed its 2016 GDP growth view to 2% from 4%.

Thailand's consumer confidence index fell to 72.1 points last month from 72.3 in August, marking the ninth consecutive monthly fall and reaching the lowest reading since May 2014.

The Golden Week national holiday has lifted the number of leisure travellers from Greater China to Thailand by 30% year-on-year, with arrivals at Suvarnabhumi airport reaching 17,096 a day.

Deputy PM Somkid Jatusripitak has put on hold a draft Trade Competition Act proposal meant to regulate giant firms and state-owned enterprises. The existing Trade Competition Act has been in effect for 16 years and not a single business has ever been successfully prosecuted for anything.

Mr Somkid urged faster progress on three electric railway projects in Bangkok this year, specifically Hua Lamphong-Bang Khae and Bang-Sue-Tha Phra (Blue line), Lat Phrao-Samrong (Yellow line) and Kae Rai-Min Buri (Pink line).

The head of the Tourism Authority of Thailand (TAT) wants to raise the contribution of domestic tourism to overall tourism revenue to 40% from the current 30% over the next four years, saying the industry would suffer less volatility if it could count on more domestic tourism.

Deputy PM Prajin Juntong said he would not oppose state-owned TOT seeking a court ruling on whether it has the right to keep its 900MHz spectrum, instead of handing it over to the regulator to be auctioned off.

Three real-estate associations have asked the government to quickly decide on measures to stimulate the property market, as some buyers have delayed taking delivery of homes after the government announced plans for new measures.

Coming up this week: Listed Thai banks begin to report their third-quarter results to start the new earnings season.

Property stimulus measures are expected to go to the cabinet tomorrow. On the SET, the switchboard cable and telecom tower maker SCI Electric Plc (SCI) will make its trading debut at an IPO price of 5.90 baht. Due the same day are China's trade data for September and the euro zone ZEW business expectations survey.

US retail sales for September will be released on Wednesday.

Stocks to watch: Bualuang Securities advises keeping an eye on stocks that will be targets of foreign investor buying. They include TUF, CPF, SAPPE, CBG, ICHI, SAWAD, MTLS, LHBANK, EA, EGCO, MINT, SCCC, AMATA, BEAUTY and KAMART.

Technical view: Thanachart Securities puts support at 1,400 points with resistance at 1,420. SCB Securities puts support at 1,400 and resistance at 1,430.

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