Thai shares look set to trade lower today taking a cue from sharp losses on Wall Street on Friday and in line with most global equities as investors brace for uncertainty sparked by Britain’s vote to leave the EU last week. We expect risk assets to remain under great pressures for at least the next two to three weeks. Please see our report “Post-Brexit vote investment” today. Most local factors today are negative as well. Exports slipped again in May. Food processers worry about the looming La Nina phenomenon that could bring excessive rainfall and floods. Bad loans of SMEs continue to climb.
Local issue
Exports slipped in May. The Commerce Ministry reported Thai exports declined 4.4% YoY in May to US$17.6bn while imports inched up 0.5% YoY to US$16bn, resulting in a trade surplus of US$1.54bn. Exports fell for a second consecutive month, owing to a slowdown in the global economy and low prices for farm products and oil. Meanwhile, 5M16 exports decreased 1.9% YoY to US$86.9bn, however, the ministry is reiterating its export growth target of 5% this year. (Bangkok Post)
Exports slipped in May. The Commerce Ministry reported Thai exports declined 4.4% YoY in May to US$17.6bn while imports inched up 0.5% YoY to US$16bn, resulting in a trade surplus of US$1.54bn. Exports fell for a second consecutive month, owing to a slowdown in the global economy and low prices for farm products and oil. Meanwhile, 5M16 exports decreased 1.9% YoY to US$86.9bn, however, the ministry is reiterating its export growth target of 5% this year. (Bangkok Post)
Food makers concerned about La Nina. The Thai Food Processors Association (TFPA) is concerned about the looming La Nina phenomenon that is expected to bring in excessive rainfall and floods that would negatively impact the food processing industry. TFPA expects the value of the food processing industry to grow by 2.5% this year to Bt180bn, reversing from 2% contraction last year, as the weaker baht helps drive exports. (Bangkok Post)
Petroleum bills pass amid opposition. The government-sponsored petroleum bill and petroleum income tax bill sailed through their first reading in the National Legislative Assembly (NLA), amid strong opposition from energy reform activists due to an ambiguity in the bills. Members of the NLA voted 152 against five and 154 against two to pass the revised Petroleum Act and the revised Petroleum Income Tax Act, respectively. (Bangkok Post)
KTB (Bt16.30; BUY; 16 AWS TP Bt20.00) has set aside a 30% YoY increase in loan loss provision for 5M16 to cushion against rising non-performing loans (NPLs). According to the bank’s president Vorapak Thanyawong, bad loans for SMEs continue to climb, though at a slower pace, and setting aside higher provision would serve as a buffer for the bank amidst this sluggish economy. (Bangkok Post)
Comment: We maintain our FY16 earnings estimate for the bank at Bt29.2bn, up 2.4% YoY. Note that KTB will hold its 2Q16 earnings preview session on 5 Jul.
Global issues
Britons voted in a referendum on Thursday to leave the European Union by 51.9% to 48.1%. Most people in Scotland and Northern Ireland voted to remain while England and Wales opted to leave, raising questions over the future of the United Kingdom they all belong to. The pro-Brexit side drew support from millions of voters who felt left behind by globalisation and blamed EU immigration for low wages and stretched public services. (Reuters)
Britons voted in a referendum on Thursday to leave the European Union by 51.9% to 48.1%. Most people in Scotland and Northern Ireland voted to remain while England and Wales opted to leave, raising questions over the future of the United Kingdom they all belong to. The pro-Brexit side drew support from millions of voters who felt left behind by globalisation and blamed EU immigration for low wages and stretched public services. (Reuters)
Federal Reserve Chair Janet Yellen is scheduled to speak at an event in Portugal on Wednesday and investors will want to know how she sees the so-called Brexit changing the outlook for the US economy and interest rates. (Reuters)
US Treasury prices jumped on Friday on safe-haven buying after Britain's vote to leave the EU. Benchmark 10-year notes ended up 1-14/32 in price to yield 1.58%, only slightly higher than a record low 1.38% reached in July 2012. The yield closed on Thursday at 1.73%. (Reuters)
Sterling edged off lows against the US dollar on Friday, recovering slightly from a 10% plunge to its weakest in 31 years following Britain's vote to leave the EU, on reassuring statements from central banks. Sterling was last down 8.1% against the dollar, at US$1.3662, after touching its weakest since before the 1985 Plaza Accord of US$1.3228. Traders said Bank of England chief Mark Carney's comments that the central bank stood ready to provide extra support helped sterling recover. (Reuters)
USA
Wall Street shares suffered their largest selloff in 10 months on Friday after Britain's decision to leave the EU caught traders by surprise. Markets wrongly bet that the "Remain" camp would prevail in Britain's referendum, but sold off sharply as the results showed otherwise. The S&P500 lost all the year's gains and suffered its largest decline since late August last year. Financial stocks led the decline with a 5.4% drop - the largest for the sector since November 2011. (Reuters)
Wall Street shares suffered their largest selloff in 10 months on Friday after Britain's decision to leave the EU caught traders by surprise. Markets wrongly bet that the "Remain" camp would prevail in Britain's referendum, but sold off sharply as the results showed otherwise. The S&P500 lost all the year's gains and suffered its largest decline since late August last year. Financial stocks led the decline with a 5.4% drop - the largest for the sector since November 2011. (Reuters)
Final US 1Q16 GDP data are due to be released tomorrow (+1.0% forecast vs +0.8% prior). (Reuters)
New orders for manufactured durable goods in May decreased US$5.3bn or 2.2% to US$230.7bn. This decrease, down following two consecutive monthly increases, followed a 3.3% April increase. (US Commerce Department)
University of Michigan’s Sentiment Index was 93.5 in the June 2016 survey, below the 94.7 in May, and last June’s 96.1. Consumers were a bit less optimistic in June due to rising concerns about prospects for the economy. While no recession is anticipated, consumers increasingly expect a slower pace of growth in the year ahead. (University of Michigan)
Europe
European shares plunged on Friday, dragged down by heavy losses among banking stocks as Britain's vote to leave the EU sent shockwaves across global markets. Sterling hit a 31-year low and the slide in stocks wiped about €650bn (US$726bn) from the market value of Europe's listed shares. (Reuters)
European shares plunged on Friday, dragged down by heavy losses among banking stocks as Britain's vote to leave the EU sent shockwaves across global markets. Sterling hit a 31-year low and the slide in stocks wiped about €650bn (US$726bn) from the market value of Europe's listed shares. (Reuters)
Asia
Japan to take necessary steps to stem yen rise: Japanese PM Shinzo Abe instructed Finance Minister Taro Aso to watch currency markets "ever more closely" and take steps if necessary, in the wake of Britain's historic vote to leave the EU. (Reuters)
Japan to take necessary steps to stem yen rise: Japanese PM Shinzo Abe instructed Finance Minister Taro Aso to watch currency markets "ever more closely" and take steps if necessary, in the wake of Britain's historic vote to leave the EU. (Reuters)
China's PMI data will be released on Friday (NBS manufacturing forecast 50.0 vs May actual 50.1 vs Caixin forecast May 49.2). (Reuters)
Commodities
Oil prices tumbled 5% on Friday after Britain's vote to leave the EU spurred massive risk aversion and a rally in safe havens like the US dollar that threatened to cut short a three-month-long recovery in global oil markets. Brent crude settled down US$2.50 (-4.9%) at US$48.41 a barrel. It had fallen 6% earlier to US$47.54. US crude fell US$2.47 (-5.0%) to settle at US$47.64, its largest one-day decline since February. (Reuters)
Oil prices tumbled 5% on Friday after Britain's vote to leave the EU spurred massive risk aversion and a rally in safe havens like the US dollar that threatened to cut short a three-month-long recovery in global oil markets. Brent crude settled down US$2.50 (-4.9%) at US$48.41 a barrel. It had fallen 6% earlier to US$47.54. US crude fell US$2.47 (-5.0%) to settle at US$47.64, its largest one-day decline since February. (Reuters)
Gold soared as much as 8% to its highest in more than two years on Friday after Britain delivered a shock vote to leave the EU, sending investors scurrying for protection in bullion and other assets perceived as lower risk. Spot gold peaked at US$1,358.20 per ounce and was up 4.9% at US$1,317.20 for the day. US gold futures for August delivery settled up 4.7% at US$1,322.4 per ounce, off an early high of US$1,362.60 an ounce. (Reuters)
The price of copper and other industrial metals fell on Friday as worries about economic growth rose following the British vote to leave the EU, and as the dollar soared. Three-month copper on the London Metal Exchange slid as much as 4% before trimming losses to close down 1.7% at US$4,698 a tonne. (Reuters)
Source: aws.co.th / settrade.com
