Expect the SET to trade lower today after the Federal Reserve kept interest rates unchanged but left the door open for a rate increase this year as it appeared less concerned about near-term risks. As a result rate hike concerns have returned. Financial markets responded differently. While the US Treasury market braced for a rate hike in favour of long-dated notes, the FX market and gold markets viewed the other extreme end as witnessed by the weakness in the US dollar and rising gold prices. However, Japan’s PM Abe’s hefty US$265bn stimulus package should provide support for global equities, particularly in Asia. Local factors today are mostly positive. Less contraction in June exports with robust increases in auto exports, production and domestic sales are very encouraging.
Local issue
Signs of recovery in export. According to the Commerce Ministry, exports in Jun dropped 0.1% YoY to US$18.1bn while imports in Jun dropped 10.1% YoY to US$16.2bn, resulting in a trade surplus of US$1.96bn. Though exports fell for a third-straight month, the contraction was the lowest in three months compared to declines of 4.4% in May and 8% in Apr, which indicates some signs of recovery in the country’s shipments. The improved export was particularly boosted by cars and car parts, hard-disk drives, and gold. (Bangkok Post)
Signs of recovery in export. According to the Commerce Ministry, exports in Jun dropped 0.1% YoY to US$18.1bn while imports in Jun dropped 10.1% YoY to US$16.2bn, resulting in a trade surplus of US$1.96bn. Though exports fell for a third-straight month, the contraction was the lowest in three months compared to declines of 4.4% in May and 8% in Apr, which indicates some signs of recovery in the country’s shipments. The improved export was particularly boosted by cars and car parts, hard-disk drives, and gold. (Bangkok Post)
Robust data on auto output and sales in June. Federation of Thai Industries (FTI) reported automobile production in June surged 18.6% YoY (+6.82% MoM) to 179,875 units. Domestic car sales in June improved 9.5% YoY (flat MoM) to 66,049 units, while the export of finished cars edged up 39.4% YoY (+7.5% MoM) to 107,025 units with value soaring 63.6% to Bt57.46bn. For the first six months, automobile production increased 6.2% YoY to 993,380 units, while car export was up 3.25% YoY to 594,823 units with the value increasing 14.35% YoY to Bt319.09bn. Domestic car sales were flat YoY at 368,630 units. (FTI)
Comment: Automotive figures are getting better each month. We rate the automotive sector NEUTRAL with a positive outlook. We will be monitoring the upcoming figures to see whether they remain supportive over the next month and whether FTI considers revising up the production target, we will then consider re-rating.
Indonesia is boosting sugar imports from Thailand following a free trade agreement between the two countries, but Australia could erode the Thai advantage if a similar deal is sealed. Indonesia has seen an increase in raw sugar imports from Thailand since the raw sugar import duty from ASEAN producers was cut to 5% in 2015. The share of Thai raw sugar out of the total raw sugar imported to Indonesia, had risen to about 60% in 2015/16, from 30-40% in 2013/14. (Reuters)
Comment: Apart from the prevailing global sugar deficit, this should have a positive impact on sugar prices and Thai sugar producers like BRR and KSL.
Global issues
The US Federal Reserve left interest rates unchanged on Wednesday. It said that near-term risks to the US economic outlook had diminished, opening the door for a potential near-term hike. The central bank also noted that inflation expectations were on balance little changed in recent months, and gave no firm indication of whether it would raise rates at its next policy meeting in September. (Reuters)
The US Federal Reserve left interest rates unchanged on Wednesday. It said that near-term risks to the US economic outlook had diminished, opening the door for a potential near-term hike. The central bank also noted that inflation expectations were on balance little changed in recent months, and gave no firm indication of whether it would raise rates at its next policy meeting in September. (Reuters)
The spread between shorter-dated and long-dated US Treasury yields contracted on Wednesday after the Federal Reserve said near-term risks on the US economy had abated, leaving the door open to raise interest rates later this year. The yield difference between US 5-year and 30-year Treasuries briefly narrowed to just under 110 basis points, which was its tightest level since Mar 2015 as traders favored longer-dated bonds which will fare better than shorter issues if the Fed increases short-term rates and inflation remains tame. (Reuters)
The Japanese yen weakened against the dollar on Wednesday after Japan's PM Abe unveiled a surprisingly large US$265bn stimulus package to reflate the world's third-largest economy. The yen was last down 0.92% at ¥105.64 per dollar. (Reuters)
USA
Wall Street shares finished lower on Wednesday after the Federal Reserve left interest rates unchanged but opened the door to a possible rate increase later this year.
Wall Street shares finished lower on Wednesday after the Federal Reserve left interest rates unchanged but opened the door to a possible rate increase later this year.
Better earnings expectations: After several results released, particularly Boeing, S&P500 companies' aggregate earnings are now expected to decline 3.0% for 2Q16, compared with the 3.5% decline expected a day ago and 4.5% contraction earlier in the month, according to Thomson Reuters I/B/E/S. (Reuters)
Europe
European shares rose on Wednesday with the market underpinned by well-received earning updates from companies including Peugeot and LVMH, while Deutsche Bank fell after a poor update. (Reuters)
Asia
Abe to compile US$265bn stimulus: Japanese PM Shinzo Abe said on Wednesday his government would compile a stimulus package of more than ¥28tn (US$265bn and nearly 6% of GDP) to reflate the flagging economy. The amount exceeds initial estimates of around ¥20tn, includes ¥13tn in fiscal measures. Details of the package will be announced next week. (Reuters)
Abe to compile US$265bn stimulus: Japanese PM Shinzo Abe said on Wednesday his government would compile a stimulus package of more than ¥28tn (US$265bn and nearly 6% of GDP) to reflate the flagging economy. The amount exceeds initial estimates of around ¥20tn, includes ¥13tn in fiscal measures. Details of the package will be announced next week. (Reuters)
Japan's government said on Wednesday it will raise the minimum wage by 3% this fiscal year as part of a stimulus package intended to strengthen domestic demand and address criticism that economic policy has left behind many low-income earners. (Reuters)
China stocks closed sharply lower on Wednesday as investors sold off after officials warned of asset bubbles, without being more specific. Investors have been already worried that regulators were preparing to restrict China's vast retail wealth management sector from buying stocks. Wealth management products are one of the biggest sources of shadow banking activity in China and invest in a variety of things, including equities. (Reuters)
Commodities
Oil prices tumbled 3% on Wednesday, with US crude futures hitting three-month lows, as US crude and gasoline stocks surged on weak demand during the peak summer driving season. WTI crude futures settled down US$1 (-2.3%) at US$41.92 a barrel. Brent futures fell US$1.40 (-3.1%) to settle at US$43.47 a barrel. The EIA said crude stockpiles soared 1.7mn barrels last week, instead of falling 2.3mn barrels as forecast. Gasoline inventories rose 452,000 barrels, compared with analysts' expectations for a 40,000-barrel increase. (Reuters)
Oil prices tumbled 3% on Wednesday, with US crude futures hitting three-month lows, as US crude and gasoline stocks surged on weak demand during the peak summer driving season. WTI crude futures settled down US$1 (-2.3%) at US$41.92 a barrel. Brent futures fell US$1.40 (-3.1%) to settle at US$43.47 a barrel. The EIA said crude stockpiles soared 1.7mn barrels last week, instead of falling 2.3mn barrels as forecast. Gasoline inventories rose 452,000 barrels, compared with analysts' expectations for a 40,000-barrel increase. (Reuters)
Gold extended its climb above US$1,330 an ounce on Wednesday after the Fed left interest rates unchanged as expected and the dollar pared gains against a basket of major currencies. Spot gold was up 0.9% at US$1,331.20 an ounce. US gold futures for August delivery settled up 0.45% at US$1,326.70. (Reuters)
Source: aws.co.th / settrade.com
