Expect the SET to rise today tracking gains on Wall Street on Friday and positive openings in regional markets this morning after G20 finance ministers agreed to cope with the potential impact of the Brexit by actively working to support global growth. Strong US economic data renewed economic policy divergence between the US and the rest of the major economies, particularly the Eurozone, Japan and China. Local factors today are mostly neutral to negative. There is still no concrete solution for the legal dispute related to BOI’s tax privileges. The potential delay in the national broadband project would delay potential revenues of companies who desire to do this project and the country’s overall ICT development.
Local issue
BoI called to correct tax privilege policy. The Finance Ministry has suggested that the Board of Investment (BoI) grant investment privileges on a project basis instead of its current practice of approving one privilege for several projects for a single company, after there was a legal dispute between the Revenue Department and NMB-Minebea Thai Ltd, a Japanese electronic component and parts manufacturer, on such BoI net-off issue. (Bangkok Post)
BoI called to correct tax privilege policy. The Finance Ministry has suggested that the Board of Investment (BoI) grant investment privileges on a project basis instead of its current practice of approving one privilege for several projects for a single company, after there was a legal dispute between the Revenue Department and NMB-Minebea Thai Ltd, a Japanese electronic component and parts manufacturer, on such BoI net-off issue. (Bangkok Post)
Comment: The court ordered NMB to pay back-taxes to Thailand’s revenue department as the tax base of the revenue department and BOI are different. NMB negotiated with the government and agreed to pay the back-tax under the court order. But it may be reimbursed later for the benefits of the new investment company. This makes it a benchmark for other companies in the same network in Thailand’s stock market such as CPF and STANLY. CPF will have to pay in 2Q16 and we believe the burden to be approximately Bt400-600mn. In 2Q16, CPF is expected to report an excellent net profit from the uptrends in chicken and swine businesses as well as a recovery in the shrimp business and we expect the impact from the tax issue on the bottom line to be insignificant for the whole year and it is a one-time effect. We maintain our BUY recommendation on CPF (TP AWS Bt37). Meanwhile, STANLY is expected to have added tax burden of as low as Bt18-38mn, which is insignificant compared to the company’s full-year net profit (Bt1.4bn per annum). It should also be insignificant to its fundamentals.
National broadband project might be delayed. Information and Communication Technology (ICT) Ministry said Thailand's Bt15bn national broadband construction project is facing further delay to at least the end of next year, as officials are unable to complete the terms and conditions for an auction seeking broadband equipment suppliers. (Bangkok Post)
Comment: This would delay potential revenue to companies who desire to do this project like FORTH (Bt7.90).
Tourism revenue to beat FY16 target Tourism Authority of Thailand (TAT) said the country’s tourism industry should continue its momentum in 2H16 and stimulate FY16 revenue to approximately Bt2.57tn, beating its target of Bt2.41tn. In particular, TAT estimated 2H16 tourism income from foreign tourists and domestic travel will be around Bt1.33tn. (Bangkok Post)
Comment: Thai’s tourism industry remains on its upbeat, and it is one of the key factors, apart from government’s spending, which is expected to drive the country’s economy.
5% GDP target aimed for 2017-2021 The 12th National Economic and Social Development Plan has set ambitious target of 5% annual GDP growth and per capita income of US$8,200 (around Bt286,500), up from a current US$6,000. The secretary general of NESDB said this 12th plan will particularly focus on strengthening Thailand’s competitiveness, reducing income inequality, and creating a safety net for aging population. (Bangkok Post)
Global issues
The BOJ is expected to ease monetary policy at its meeting ending 29 Jul, according to a majority of economists polled by Reuters, to boost anemic inflation. The government is also crafting a massive spending package worth about ¥20tn (US$188.09bn). (Reuters)
G20 statement: Members of the G20 major economies have prepared to actively cope with the potential economic and financial impact of the Brexit decision but hope Britain and the EU can actively form a close partnership. (Reuters)
Yields on long-dated US Treasury debt slipped on Friday although the outlook remained upbeat given generally solid US economic data over the last few weeks that support expectations of at least one interest rate hike this year. US 30-year bond prices rose 12/32 in price to yield 2.283%, down from 2.301% late on Thursday. (Reuters)
The dollar rose to a more than four-month high on Friday as positive US data and weak readings from overseas prompted investors to re-evaluate the likelihood of a rate increase from the US Federal Reserve while other central banks are seen cutting rates or adding stimulus. The dollar index rose 0.5%, touching a high of 97.487, its highest since 10 Mar. (Reuters)
USA
Wall Street shares finished higher on Friday, posting the fourth straight positive week for the market, boosted by strength in telecom and utility stocks and better-than-expected manufacturing data, building on upbeat data from earlier in the month. Gains were limited by weakness in reports from industrial companies including General Electric. (Reuters)
Wall Street shares finished higher on Friday, posting the fourth straight positive week for the market, boosted by strength in telecom and utility stocks and better-than-expected manufacturing data, building on upbeat data from earlier in the month. Gains were limited by weakness in reports from industrial companies including General Electric. (Reuters)
Sharpest rise in US manufacturing production since October 2015: IHS Markit reported that its Flash US Manufacturing PMI came in at 52.9 in July, up from 51.3 in June, pointing to a solid improvement in overall business conditions. The headline index continued to recover from its post-crisis low seen in May, with the latest reading the strongest since October 2015. (IHS Markit)
Europe
European stock markets slipped on Friday, weighed down by falls at Spanish bank Banco de Sabadell’s profit warning, though British mobile operator Vodafone gained after its earnings update. (Reuters)
Asia
Japan's exports fell less than expected in June in a sign that overseas demand could be recovering from persistent weakness. The 7.4% annual decline in exports in June was less than the median estimate for an 11.6% annual decline seen in a Reuters poll of economists, although it was the ninth consecutive monthly fall. Imports were down 18.8% on the year versus a forecast -19.7%. The trade balance hit a surplus of ¥692.8bn versus a ¥494.8bn surplus seen in the poll. (Reuters)
Japanese manufacturing activity shrank in July at a slower pace than the previous month but new export orders contracted at the fastest in more than 3-1/2 years, an indication recent yen gains are hurting exporters. The IHS Markit/Nikkei Japan Flash PMI edged up to 49.0 in July versus a final reading of 48.1 in June. The headline index remained below the 50 threshold that separates contraction from expansion for the fifth month. The index for new export orders fell to a preliminary reading of 44.0, which would be the lowest level since December 2012 if confirmed in revised data. (Reuters)
Downward pressure on the Chinese economy remains fairly large but it should be able to expand more than 6.5% this year, Bai Chongen, a policy adviser to the central bank and professor at Tsinghua University said on Sunday. The Chinese economy expanded 6.7% in 1H16 after growing a twenty-five year low of 6.9% in 2015. (Reuters)
Commodities
Oil prices settled lower on Friday, losing 4% on the week, after the fourth weekly rise in the US oil rig count added to worries about a global crude glut. Crude futures were already down on fears of more Iraqi supply before a report by energy services firm Baker Hughes showed US oil drillers added 14 rigs last week to bring the total rig count to 371. Brent crude futures settled down 51 cents (-1.1%) at US$45.69 a barrel. For the week, Brent lost 4%. US crude futures closed down 56 cents (-1.3%) at UD$44.19. It fell 3.8 percent on the week. (Reuters)
Gold prices fell on Friday, reflecting tension between a global backdrop of easier interest rates and the chance of US monetary policy being tightened before the end of the year. Spot gold was down 0.6% at US$1,323.16 an ounce on course for a weekly decline of about 1%. US gold futures settled down 0.6% at US$1,323.4. (Reuters)
Source: aws.co.th / settrade.com
