Caution ahead of Fed and BOJ meetings

Thai shares look set to trade in a narrow range today following a mixed performance on Wall Street overnight as investors braced for policy actions from the Fed later in the day and the BOJ on Friday. While the Fed is widely expected to stand pat, market players are focusing on the magnitude of stimulus measures from the BOJ. Oil prices were also mixed; US crude futures dropped further while Brent edged up. Locally, while contractors will enjoy more work to bid after the Cabinet gave the green light for the Bt44.2bn Red Line projects, the MOF’s plan to raise excise taxes may be counterproductive to the economic growth target.

Local issue
Red Lines approved. The cabinet yesterday gave the nod to construction of the Light Red Line (Bang Sue to Hua Mark) and Dark Red Line (Bang Sue to Hua Lamphong) worth a combined Bt44.16bn. The projects are part of the government’s 20 infrastructure projects. The State Railway of Thailand (SRT) is expected to call bids in August and construction is planned to commence in February. (Bangkok Post)

Comment: Opening bidding for the projects will benefit the big four contractors (ITD, CK, STEC and UNIQ) the most as they are qualified by SRT. ITD and UNIQ are the operators of the existing route Bang Sue-Rungsit and might have a slight cost advantage in new bidding. However, other operators from abroad might come to join the bidding and add competition.

The existing telecom regulator (NBTC) plans to forward the new schedule for spectrum reallocation to the successor. There will be no more spectrum auctions under the current commission whose term will end in October next year. Under the allocation plan, there will be three spectrum bands waiting for auction: 2.6 GHz, 1800 MHz and 700MHz. (The Nation)

Comment: NBTC planned to auction the 45MHz on the 700MHz currently used by television channels for reallocation for telecom service in 2020. It would take a long time to negotiate 2.6 GHz spectrum allocation with MCOT too. We believe there would be no auction until September 2018 when CAT Telecom’s concession expires. DTAC (Bt31.25, Hold, AWS 16TP Bt31.00) will suffer the most from prolonged spectrum allocation since it lost in both the 1800 MHz and 900MHz auctions.

Mulling excise tax increase. Prime Minister Prayut Chan-o-cha confirmed his government will raise excise taxes to increase tax-based revenue by at least one-third, citing that the government must take care of the poor and the elderly and provide for health care and public education, and to correspond with trade rules by the World Trade Organization and free trade agreements. (Bangkok Post)

Global issues
US Treasury held firm on Tuesday as the Federal Reserve began a two-day meeting that may produce clues on the timing of a rate hike. The benchmark 10-year Treasury yield was down 1 basis point at 1.565%, while the 30-year yield slipped about half a basis point to 2.283%. The two-year yield, which is sensitive to the view on Fed policy, was little changed at 0.762% after reaching 0.7780%, its highest since the Brexit vote. (Reuters)

The yen reached more than one-week highs against the US dollar on Tuesday on reduced expectations of how much new stimulus authorities will inject into Japan's ailing economy. The yen gained 1.7% against the dollar to ¥103.995, its highest since 14 Jul, before falling back to ¥104.64, up 1.08% on the day. (Reuters)

USA
Wall Street shares closed mixed on Tuesday as investors braced for the Federal Reserve’s interest rate decision and the result season shifted into a high gear. The US central bank began a two-day meeting and while it is not expected to raise US interest rates, investors will be watching for hints about when it might make a move. (Reuters)

Investors presume better-than-consensus earnings estimates: Almost a third of the way into 2Q16 reports, S&P500 companies overall are expected to see earnings dip 3.5%, not as bad as the 4.5% dip predicted at the start of the month and the 5.0% contraction in 1Q16. (Thomson Reuters I/B/E/S)

New US single-family home sales rose more than expected in June, reaching their highest level in nearly 8-1/2 years, the latest sign that the housing market was gathering momentum. New home sales increased 3.5% to 592,000 units last month, the highest level since February 2008, from May's upwardly revised sales of 572,000 units. Economists had forecast new home sales, which account for about 9.6% of the housing market, rising to a rate of 560,000 units last month. (Reuters)

US consumer confidence held steady in July. The Conference Board said its consumer index was 97.3 this month after a reading of 97.4 in June. Economists had expected the index to drop to 95.9 in July. (Reuters)

The US government is expected to report on Friday that the economy grew at a 2.6% annual rate in 2Q16, accelerating from the 1.1% pace logged in 1Q16, according to a Reuters survey of economists. (Reuters)

Europe
European shares rose on Tuesday bolstered by gains in major healthcare and consumer goods stocks, partly offsetting persistent concerns over the region's banking system. (Reuters)

Asia
Financial markets are focused on uncertainty over the magnitude of monetary and fiscal stimulus due from Japan and how the government will cooperate with the BOJ in stimulating the economy. (Reuters)

The Chinese economy still faces relatively big downward pressure, said China's Politburo, a top decision-making body of the ruling Communist Party. Authorities will continue to implement proactive fiscal policy and prudent monetary policy. China will keep the yuan exchange rate stable, and will also guide reasonable growth in credit and social financing. (Reuters)
 

Commodities
US crude prices fell on Tuesday, hitting three-month lows, as worries over a gasoline glut outweighed expectations of US crude stock declines, while Brent erased early losses to settle higher due to its better fundamentals versus US crude. WTI settled down 21 cents (-0.5%) at US$42.92 a barrel. Brent rose 15 cents (+0.3%) to settle at US$44.87 a barrel. (Reuters)

Gold rose on Tuesday as the dollar fell, but remained hemmed into a range at the start of a two-day US Federal Reserve policy meeting. Spot gold was up 0.4% at US$1,319.96 an ounce. US gold futures for August delivery settled up US$1.30 (+0.1%) at US$1,320.80. (Reuters)

Source: aws.co.th / settrade.com