Thai shares are poised to trade lower today as worries over the Brexit implications and its adverse impact on the global economy set in all financial markets, bolstering demand for safe-haven assets at the cost of all the risky ones. US Treasury yields hit all-time lows in a fresh bond rally while the sterling fell to a new 31-year low. Locally, the joint public-private committee on business revised down their already conservative export target this year, probably reflecting a more pessimistic view after the Brexit vote. Meanwhile, TU has continued to acquire world-class seafood producers into its portfolio and it is now the largest lobster processor in North America.
Local issue
JSCCIB trimmed export forecast. The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) yesterday slashed FY16 export projection down to -2 to 0%, from its previous projection of 0 to 2%. However, the group maintained its GDP growth forecast at 3-3.5% in light of accelerated public expenditure and robust tourism expansion. (Bangkok Post)
Comment: Though the cut to the export forecast signaled their concerns over global economic uncertainty, the domestic outlook looks somewhat optimistic, especially government projects that would be a key catalyst to boost the economy.
Bt10bn credit guarantee for innovative SMEs approved. The cabinet yesterday approved a Bt10bn credit guarantee scheme for SME startups and innovative companies, offered by TCG. Borrowers’ projects are required to receive approval from technology-related agencies, and cannot have assets exceeding Bt200mn. The move is made to encourage banks to lend to SME startups and those with innovations. (Bangkok Post)
Comment: Another measure to support and improve the SME sector. Despite a time horizon until being fruitful, we believe this is a good starting point.
BoT eases curbs on overseas investment and capital. The Bank of Thailand will allow qualified Thai companies and individuals to invest directly in overseas securities and derivatives without intermediaries from 20 Jul, as part of the Capital Account Liberalization Master Plan. The central bank has also relaxed rules on corporate treasury centers, permitting to mobilize funds through the issuance of foreign-currency-denominated instruments in both Thailand and abroad, from 28 Jul. (The Nation)
Comment: These would offer more flexibility and efficiency in financial liquidity management.
TU (Bt21.60; BUY; AWS TP Bt25.00) announced that it will acquire a majority stake in lobster processor Les Pecheries de Chez Nous (Chez Nous), New Brunswick, Canada from Mr. Francois “Frankie” Benoit, owner and CEO, acquired by Tri-Union Frozen Products (TUFP) in USA, a subsidiary of TU. The deal is to be done and the price announced in August 2016. The deal will be funded from TU’s working capital. The acquired company had C$50mn in sales in 2015. With this acquisition, TU becomes one of the largest suppliers of North Atlantic in the United States. (SET)
Comment: TU continues to acquire world-class seafood companies. This is a positive for the company’s progress. We reiterate BUY with a target price of Bt25.00.
Global issues
Benchmark 10-year US Treasury yields hovered near record lows touched in early trading on Tuesday on uncertainty surrounding the economic fallout from Brexit and the prospect of a dovish Federal Reserve until at least late 2017. US 10-year Treasury notes were last up 21/32 in price to yield 1.389% after touching a record low of 1.377%. (Reuters)
The Japanese yen rose almost one percent against the euro and dollar while sterling fell to a new long-term low on Tuesday as currency markets priced in more signs of economic stress stemming from the Brexit vote. Sterling sank to a more than two-and-a-half-year low against the euro, a 31-year low of US$1.3112, and its weakest level in broader trade-weighted terms in more than three years. (Reuters)
China should prepare itself for military confrontation in the South China Sea, an influential Chinese paper Global Times said on Tuesday, a week ahead of a 12 Jul decision by The Permanent Court of Arbitration at the Hague on a dispute there between China and the Philippines. (Reuters)
USA
Wall Street shares lost ground on Tuesday following surprisingly big gains last week as investors faced continued uncertainty on Brexit, which ignited worries about a global economic slowdown, and tumbling oil prices weighed on energy shares. Weak US and China economic data added to the market nervousness. (Reuters)
New orders for US factory goods fell in May on weak demand for transportation and defense capital goods. The new orders declined 1.0% after two straight months of increases. May's drop was in line with economists' expectations and followed a 1.8% increase in April. (Reuters)
Inventories of factory goods dipped 0.1%. Inventories have declined in 12 of the last 13 months. Leaner inventories suggested the worst of the manufacturing downturn was probably over. (Reuters)
Europe
European shares fell on Tuesday, weighed down by losses among mining stocks, while the Italian bank Monte dei Paschi plunged to a fresh record low on continued worries about its capital strength. (Reuters)
Asia
China’s services sector saw activity rise to an 11-month high in June but a composite measure of activity including manufacturing fell to a four-month low. The Caixin/Markit PMI for June rose to 52.7 from 51.2 in May. However, the Caixin/Markit composite PMI fell to 50.3 in June, down from 50.5 in May and just above the neutral mark. The findings support concerns that strength in services will not be enough to backstop growth if manufacturing continues to decline. (Reuters)
China’s services sector saw activity rise to an 11-month high in June but a composite measure of activity including manufacturing fell to a four-month low. The Caixin/Markit PMI for June rose to 52.7 from 51.2 in May. However, the Caixin/Markit composite PMI fell to 50.3 in June, down from 50.5 in May and just above the neutral mark. The findings support concerns that strength in services will not be enough to backstop growth if manufacturing continues to decline. (Reuters)
Severe flooding from heavy rainfall across central and southern China over the past week has killed almost 130 people in 11 provinces and regions, damaged more than 1.9mn hectares of crops and led to direct economic losses of more than 38bn yuan (US$5.70bn), state media said on Tuesday. (Reuters) Comment: This would drastically affect China’s grain harvest this year, likely pushing up the prices of grain, especially rice.
A flurry of data from China in coming weeks is expected to show continued weakness in trade and investment, sluggish industrial output and another drop in foreign reserves, reinforcing views that Beijing will roll out more economic support measures soon. Weak factory surveys and heightened economic uncertainty following the Brexit have added to views that authorities will ramp up fiscal stimulus and ease monetary policy in coming months. (Reuters)
Japanese service sector activity deteriorated at the end of 2Q16 due mainly to the fastest decline in new orders in nearly five years. The seasonally adjusted PMI posted 49.4 in June, down from 50.4 in May, signalling a decline in output at Japanese services firms for the second time this quarter. The latest reading contributed to the weakest quarterly average since 1Q15. (Markit)
Commodities
Oil prices tumbled nearly 5% on Tuesday as investors worried that the Brexit would slow the global economy, making it unlikely energy demand will grow enough to absorb a supply glut. Brent futures settled down US$2.14 (-4.3%) at US$47.96 a barrel. US crude futures fell US$2.39 (-4.95) to end at US$46.60. (Reuters)
Gold prices rose for a fifth straight session and traded close to a two-year high above US$1,350, as weak China data and ongoing uncertainty following the Brexit vote triggered a fresh wave of demand for the safe-haven metal. Spot gold was up 0.4% at US$1,355.51 an ounce. US gold futures for August delivery settled up about 1.5% at US$1,358.70 an ounce. (Reuters)
Source: aws.co.th / settrade.com
