Thai shares look set to trade in a tight range on downbeat Chinese and European factory data that raise global growth concerns. In addition, upbeat US factory data coupled with the release of today’s crucial US non-farm payrolls report might be enough for the Fed to justify a rate hike as soon as this month. Local factors today are slightly positive. The two straight month increase in consumer prices in May indicates the Thai economy is on track for a gradual recovery. The government’s latest aggressive tax incentive to accelerate private investment in 2H16 is very likely to be successful alongside the government’s infrastructure investment that will come during the period.
Local issue
Consumer prices rose for two-consecutive months The Commerce Ministry reported yesterday that headline CPI index based on 450 products and services inched up 0.46% YoY and 0.56% MoM in May. The increases were largely attributed to higher fruit and meat prices, owing to widespread drought. Meanwhile, May core inflation, which excluded food and energy prices, was up 0.78% YoY and 0.05% MoM. (Bangkok Post)
Consumer prices rose for two-consecutive months The Commerce Ministry reported yesterday that headline CPI index based on 450 products and services inched up 0.46% YoY and 0.56% MoM in May. The increases were largely attributed to higher fruit and meat prices, owing to widespread drought. Meanwhile, May core inflation, which excluded food and energy prices, was up 0.78% YoY and 0.05% MoM. (Bangkok Post)
Inflation rate remains on track Bank of Thailand governor Veerathai Santiprabhob said headline inflation is still on track, which should reach the central bank’s inflation targeting policy by year-end. Specifically, BoT estimates FY16 headline and core inflation to be 0.8% and 0.9%, respectively, whereas the Commerce Ministry forecasts inflation will rise to 0-1%. Mr. Veerathai further said BoT’s monetary policy based on flexible inflation targeting remained appropriate. (Bangkok Post)
Private sector urged to invest in 2H16 The Finance Ministry encouraged the private sector to start serious investments in 2H16 as the government will be commencing mega infrastructure investments by that period of time. The move also corresponded to the recently approved double tax deduction, allowing projects that are not required to complete this year to get tax incentive, in a bid to spur investments from private sector to inject money into the country’s economy. (The Nation)
ADVANC (Bt162.50, BUY, AWS 16TP Bt195.00)’s long-term corporate credit rating was downgraded by S&P to BBB+ from A- given the debt-funded substantial payment that the company has committed to make to secure the 900MHz spectrum license. (Bangkok Post)
Comment: Leverage should gradually ease as ADVANC makes profit from the 4G business.
JAS (Bt4.68) subsidiary, JASMBB, was fined Bt199mn for failing to pay the first instalment of a 900MHz licence upfront fee. The final fine is higher than the Bt131mn proposed by the NBTC panel. JAS has to pay the regulator by 16 Jun. It can appeal against the fine. (The Nation)
Comment: Combined with the confiscated Bt644mn deposit JAS placed before the first auction round, the total loss will be Bt843mn or Bt0.19 per share.
PTTEP said that it would cooperate with its partners to bid for the Bongkot gas field that it is currently operates, but indicated that it might not contest for the other major gas block currently run by US oil giant Chevron. The National Energy Policy Council chaired by Prime Minister Prayut Chan-o-cha resolved on Monday for the government to put to bid the two major petroleum blocks whose concessions will expire in 2022-2023. The Erawan (main operator: Chevron) and Bongkot (main operator: PTTEP, holds 44.445%) gas fields have combined production of 2.2bn cubic feet per day, or 76% of the output in the Gulf of Thailand. Direct negotiations will be held with Chevron and PTTEP if there are no interested bidders. (The Nation)
Comment: Bongkot gas field represents approximately 22% of Thailand’s natural gas supply and approximately 20% of PTTEP’s total revenues. The re-auction will be a concern on future revenue uncertainty and send bad sentiment to PTTEP’s investment.
Global issues
Stock prices in major world markets, except Wall Street, fell on Wednesday on worrisome Chinese and European factory data. Global manufacturing activity remained stuck in a rut last month with factory output from Asia, Europe and the Americas barely improving as producers struggled to bring in new orders, surveys released on Wednesday showed. Recent speculation that the Federal Reserve will raise interest rates in the next few months and worries that a possible British exit from the EU have undermined global business confidence. (Reuters)
Stock prices in major world markets, except Wall Street, fell on Wednesday on worrisome Chinese and European factory data. Global manufacturing activity remained stuck in a rut last month with factory output from Asia, Europe and the Americas barely improving as producers struggled to bring in new orders, surveys released on Wednesday showed. Recent speculation that the Federal Reserve will raise interest rates in the next few months and worries that a possible British exit from the EU have undermined global business confidence. (Reuters)
The world economy will meander along at its slowest pace since the financial crisis for a second year in a row in 2016 as it is ensnared in a "low-growth trap", the OECD said on Wednesday, urging governments to boost spending. (Reuters)
The US dollar slipped on fresh doubts about a Fed interest rate rise in June and Japan's postponement of a sales tax increase which helped to boost the yen. The dollar index fell 0.5% to 95.413. The dollar fell to a two-month low against the yen. The greenback was down more than 1.0% at ¥109.51. (Reuters)
US Treasury bond prices ended lower on the late bounce in stock and commodity prices. The yield on US 10-year Treasury yield rose one basis point to 1.846% in late trading as traders shift their focus to Friday's non-farm payrolls and unemployment report. (Reuters)
USA
Wall Street stock prices rose slightly on Wednesday helped by a late recovery in oil prices and an encouraging economic report from the Federal Reserve. (Reuters)
US manufacturing sector expanded faster than expected in May. ISM's US manufacturing PMI was 51.3 in May rising from 50.8 in April. Economists had forecast the PMI for May at 50.4. (Reuters)
Europe
European shares fell on Wednesday on weak Europe and Chinese factory data while the travel sector came under pressure after the US issued a travel alert over the possibility of attacks in Europe this summer. (Reuters)
Eurozone manufacturing and service sector still slowed in May. Markit’s Eurozone final composite PMI fell to the lowest level in 3 months in May at 51.5, unchanged from the first estimate, from 51.7 in April.
Germany manufacturing sector expanded at the fastest pace in 4 months in May. Markit’s Germany manufacturing PMI came in at 52.1 in May, the highest since January, surging from 51.8 in April. However, the number was lower than the preliminary estimate at 52.4.
The ECB is widely anticipated to hold steady on monetary policy in its policy meeting later today. (Reuters)
Asia
Roiling tensions in the South China Sea are set to dominate Asia's biggest security summit starting in Singapore on Friday, exposing a rivalry between the US and China ahead of a landmark legal ruling by the Permanent Court of Arbitration in the Hague in a case brought by the Philippines. Manila is contesting Beijing's claim to maritime areas in Southeast Asia. The US will try to convince Asian countries to publicly support any positive decision for Manila. Meanwhile, China, which rejects the court's authority, will try to sway the countries to abstain from taking a public position. Thai PM Prayuth Chan-ocha's keynote opening speech will be closely scrutinised for hints on Thailand's strategic positioning. (Reuters)
China PMI figures were a mixed bag, with official figures showing marginal growth and unofficial data indicating a slowdown. China's official PMI for May was unchanged from April at 50.1, compared with a consensus forecast of 50.0. However, Caixin May manufacturing PMI came in at 49.2, against a consensus forecast of 49.3 and April’s 49.4, 15th month in contraction, suggesting the world's second-largest economy is still struggling to regain traction. (Reuters)
Japanese PM Shinzo Abe announced on Wednesday his decision to delay a scheduled sales tax increase by two-and-a-half years, shelving planned fiscal reforms due to growing signs of weakness in the economy. While the decision may help Abe win votes at an upper house election on July 10, it could fan doubts about his plans to curb Japan's huge public debt. (Reuters)
Commodities
Oil prices ended lower on Wednesday but recovered from the day's worst levels after OPEC sources said the group will likely consider a production curb at its meeting on Thursday in Vienna. Brent crude futures settled down 17 cents (-0.34%) at US$49.72 a barrel. US crude futures ended 9 cents lower (-0.18%) at US$49.01. (Reuters)
Oil prices ended lower on Wednesday but recovered from the day's worst levels after OPEC sources said the group will likely consider a production curb at its meeting on Thursday in Vienna. Brent crude futures settled down 17 cents (-0.34%) at US$49.72 a barrel. US crude futures ended 9 cents lower (-0.18%) at US$49.01. (Reuters)
Gold turned negative on Wednesday, as the dollar briefly pared losses following US manufacturing data and US equities came off their lows, while the market tried to assess how close the Fed is to raising interest rates. Spot gold was down 0.4% at US$1,210.31 an ounce. Gold shed around 6% in May, its biggest decline in six months. (Reuters)
Source: aws.co.th / settrade.com
