Mixed Fed rate signals spook stock investors

Mixed Fed rate signals spook stock investors

Recap: Global stock markets edged down last week after the US Federal Reserve suggested that an interest-rate increase was still possible before the end of this year. The news triggered a substantial sell-off by foreign investors in emerging markets in Asia.

The Thai market also corrected early last week before a rally on Friday, after weaker-than-expected US third-quarter GDP figures suggested a fragile recovery and reduced the possibility of a December rate hike.

The SET Index traded in a range of 1,387.75 and 1,431.86 before closing on Friday at 1,394.94, down 1.5% from the previous week, in trade averaging 45.19 billion baht a day. Foreign investors were net sellers of 6.75 billion baht and retail investors were net buyers of 10.59 billion. Institutional investors were net buyers of 369.29 billion and brokers sold 4.75 billion baht.

Big movers: Top loser SAMTEL fell 12.2% to 17.70 baht, followed by SAMART, down 9% to 20.40 baht, and TIPCO, off 6.4% to 22.10 baht. JAS led in volume and was second in turnover at 10.55 billion baht. Leading in turnover were PTT, losing 2.5% to 275 baht; JAS, up 2.7% to 5.65 baht; and KBANK down 0.5% to 172.50 baht.

Newsmakers: The Federal Reserve left its benchmark rate unchanged, as expected, but put a December rate hike firmly in play with a statement that downplayed the impact of global economic turbulence on the US economy.

Japan's core consumer prices fell 0.1% in the year to September, keeping inflation far from the Bank of Japan's 2% target. While the decline was mostly due to slumping energy costs, the central bank will remain under pressure to do more to revive growth.

The Finance Ministry projects the Thai economy will grow 3.8% next year, driven by 3.7 trillion baht worth of public spending and higher tourism revenue. Public consumption is expected to rise by 3% and government investment by 8%.

The government this week will outline its plans to deal with illegal, unreported and unregulated (IUU) fishing, in a bid to meet an EU deadline in December, when trade sanctions could be applied if progress is not seen. Measures will include a vessel monitoring system to track trawlers of 60 gross tons and up, as well as legalising the status of migrant workers on trawlers.

Prime Minister Prayut Chan-o-cha affirmed the government's support for the 4G auctions planned by the National Broadcasting and Telecommunications Commission (NBTC). It will auction 1800 MHz licences on Nov 11 and 900 MHz licences on Nov 12. The 900 MHz auction had been in doubt after state-run TOT threatened to sue the regulator over use of the frequency. However, it appears to have backed off after the NBTC offered to let TOT use some of its 2.3 GHz spectrum for 4G wireless broadband.

The Treasury Department said official land appraisals were 80% completion and should be finished by year-end. New appraisal prices in Bangkok for 2016-19 are estimated to be 15.8% higher compared with 2012-15, with land plots along new mass transit lines experiencing the largest increases, of 75% on average.

The Export-Import Bank lowered interest rates on loans for investors in special economic zones and will also offer short-term credit.

The chairman of the Thai Bankers Association (TBA) said non-performing loans (NPLs) were expected to peak at just over 3% of credit outstanding by the end of 2016, reflecting the delayed impact on credit of the economic slowdown. NPLs were 2.8% as of Sept 30 this year, up from 2.4% in the second quarter.

Following the lifting of international sanctions on Iran, Deputy PM Somkid Jatusripitak will lead a delegation including 50 Thai companies to Iran in December to promote trade and investment. The mission will focus on rice exports as well as construction ventures.

The Bank of Thailand said it was considering investing in a broader range of asset classes to better manage its foreign reserves.

PTTEP said that it had begun producing oil at 20,000 barrels per day from two sites in Algeria and that the first sales would take place in the current quarter.

SAMTEL shares sank after reports spread that it had set up unauthorised trunk radio base stations and unlawfully requested special phone numbers in connection with its sponsorship of the Bike for Mom cycling event. The company said the reports were unfounded and it had never engaged in unlawful activity.

Airports of Thailand (AOT) said falling oil and construction material prices would reduce the cost of the second phase of the Suvarnabhumi Airport expansion by about 7 billion baht, to 55 billion. Bids for the project are expected to be called in the first quarter of 2016.

"Any ID", the first module of a national e-payment system, is scheduled to be put in place next month to allow people to use their ID cards to pay for goods and services with a 20-baht minimum. According to the Thai Bankers' Association (TBA), e-payments will allow the country to save 100 billion baht a year or almost 1% of GDP on cash transactions.

Tax breaks to stimulate property purchases are encouraging consumers to shop for completed units, which has motivated many developers to shift their focus to ready-to-move-in projects. The result has been a big drop in condo launches. The number of new condo units launched this year is now forecast at between 65,000 and 70,000, down 15% from last year and lower than previous forecasts of 75,000 to 80,000.

Coming up this week: Thailand's inflation figures will be announced today.

Fed chair Janet Yellen will deliver her semi-annual testimony before the US Congress, usually a market-moving event, on Wednesday.

The Bank of Thailand's Monetary Policy Committee (MPC) will meet on Wednesday and is widely expected to its policy rate at 1.5%.

The Thai consumer confidence index for October will be announced on Thursday.

Stocks to watch: Tisco Securities recommends companies that will report good Q3 earnings and have upside potential. They include AAV, BA, BJC, BJCHI, INTUCH, LPN, MLTS, ROBINS, SAWAD, SF, SPA, THCOM, WHA, THREL and TSE. Stocks that will benefit from infrastructure investment are CK, STEC, PYLON, SEAFCO, SCC and TPIPL.

Thanachart Securities recommends stocks with good Q3 earnings and growth potential, in particular SAWAD and BEAUTY. Construction stocks that will gain from state projects are STEC and CK. It also likes the leasing company stocks TISCI and KKP for their cheap valuations and high dividend yields, and the infrastructure funds DIF and JASIF.

Technical view: Capital Nomura Securities sees support at 1,375 and resistance at 1,403. Thanachart Securities sees support at 1,375 and resistance at 1,408.

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