Expect SET to edge lower today as risk sentiment is dampened by overnight losses in global stock markets and as oil prices tumbled below US$40, which might drag down energy shares. Except for Manufacturing PMI for China, which expanded for the first time in 17 months in July, other economic data from the US and Japan were all downbeat, renewing global growth concerns. Locally, while the four consecutive months of increases in consumer prices indicate signs of progress for economic recovery, the plunge in foreign direct investment in 1H16, aside from other factors, reflects more of the structural problem of the Thai industry that still relies on low-technology products.
Local issue
Consumer prices up four-straight months. According to the Commerce Ministry, consumer prices, based on 450 products and services, inched up 0.1% YoY in July, marking the fourth-consecutive month of increase. Core inflation was 0.76% YoY. Consumer prices in the first seven months contracted 0.07% YoY, with core inflation at 0.73%. The ministry expects the figures to continue rising resulting from the government’s stimulus measure and the country’s economic recovery. It also maintains its FY16 inflation forecast at 0-1%, based on an economic growth forecast of 2.8-3.8%. (Bangkok Post)
Consumer prices up four-straight months. According to the Commerce Ministry, consumer prices, based on 450 products and services, inched up 0.1% YoY in July, marking the fourth-consecutive month of increase. Core inflation was 0.76% YoY. Consumer prices in the first seven months contracted 0.07% YoY, with core inflation at 0.73%. The ministry expects the figures to continue rising resulting from the government’s stimulus measure and the country’s economic recovery. It also maintains its FY16 inflation forecast at 0-1%, based on an economic growth forecast of 2.8-3.8%. (Bangkok Post)
Comment: With progressive signs of recovery we believe the target is achievable.
FDI plunged to lowest level in over decade. Foreign direct investment (FDI) in 1H16 plummeted by more than 90% YoY to US$347mn, the lowest figure since 2005. The huge dip was owing to the structure of Thai industry, which is producing low-technology products while Thai wages are rising, global economy is lackluster, and there is policy uncertainty in Thailand. (Bangkok Post)
Comment: The figure should see more improvement in 2H16, along with the expected improving state of the global and domestic economies.
MEA to accelerate & expand power line underground project. The Metropolitan Electricity Authority (MEA) says the stated agency is still progressing on the 127-km power line underground project initiated earlier this year with a total investment budget of Bt48.7bn, which expects to completely bury by 2020 sooner than 2025 previously anticipated. In addition, MEA plans for a second phase covering power lines on a several further streets with a total length of 134.3km, which expects construction to start in 2017. (Bangkok Post)
Comment: These would directly benefit CTW, who manufactures and distributes power cable & wire, and ARROW who produces electrical wiring conduit.
2-week deadline for rail development plan. Deputy Prime Minister Somkid Jatusripitak has told authorities to finalize in two weeks the commercial development plan for potential areas along the four high-speed train lines including Bangkok-Nakhon Ratchasima, Bangkok-Hua Hin, Bangkok-Chiang Mai, and Bangkok-Rayong sections. (Bangkok Post)
Global issues
US Treasury yields rose on Monday from Friday's multi-week lows as Microsoft Corp launched the fifth largest corporate bond offering of all time, drawing appetite away from safe-haven US government debt, and on profit-taking. Benchmark US 10-year Treasuries prices were last down 14/32 to yield 1.5077%, after touching a more than two-week low in yield of 1.450% Friday. (Reuters)
US Treasury yields rose on Monday from Friday's multi-week lows as Microsoft Corp launched the fifth largest corporate bond offering of all time, drawing appetite away from safe-haven US government debt, and on profit-taking. Benchmark US 10-year Treasuries prices were last down 14/32 to yield 1.5077%, after touching a more than two-week low in yield of 1.450% Friday. (Reuters)
The dollar rebounded on Monday after its poorest weekly performance in three months the previous week, helped by gains against the yen, which pulled back from Friday's three-week highs after the BOJ eased policy less aggressively than expected. The dollar index rose 0.2% to 95.755. Against the yen, the dollar rose 0.3% to ¥102.325, recovering from a three-week low. (Reuters)
USA
Wall Street shares closed mixed on Monday as the S&P500 and DJIA were dragged down by energy stocks after crude prices dropped below US$40, before settling at US$40.06. Exxon and Chevron were the biggest drags. However, big tech names Apple and Alphabet lifted the Nasdaq to its highest close in over a year. (Reuters)
The US manufacturing sector in July expanded at a slower pace than in the previous month. The ISM’s index of national factory activity fell to 52.6 from 53.2 in June. The reading was just below economists’ expectations of 53.0. A reading above 50 indicates expansion in the manufacturing sector and a reading below 50 indicates contraction. (Reuters)
Earnings are now expected to decline 3% for 2Q16, according to Thomson Reuters data, an improvement from a 3.7% drop on Friday and a 4.5% decline expected on 1 Jul. (Reuters)
The chance of a Federal Reserve interest rate hike by year-end dropped to about 35%, according to CME Group's Fedwatch, down from more than 50% last week. (Reuters)Europe
European shares closed lower on Monday, dragged down by energy shares following a sharp decline in crude oil prices and bank shares such as UniCredit and Raiffeisen that performed poorly in a Europe-wide stress tests. (Reuters)
Asia
Japan's negative rates whack big banks: Mitsubishi UFJ Financial Group (MUFG), Japan's biggest lender, said its Mar-to-Jun quarterly profit skidded nearly a third as the BOJ's negative interest rates slashed returns on loans without coaxing firms to ramp up new borrowing and stoke growth. (Reuters)
Japan's negative rates whack big banks: Mitsubishi UFJ Financial Group (MUFG), Japan's biggest lender, said its Mar-to-Jun quarterly profit skidded nearly a third as the BOJ's negative interest rates slashed returns on loans without coaxing firms to ramp up new borrowing and stoke growth. (Reuters)
Japanese manufacturing activity shrank in July at a slower pace than the previous month but new export orders contracted the fastest in more than 3-1/2 years, in an indication that recent yen gains are hurting exporters. The IHS Markit/Nikkei Japan Final Manufacturing PMI rose to 49.3 in July, versus a preliminary 49.0 and a final reading of 48.1 in June. But the headline index remained below the 50 threshold that separates contraction from expansion for the fifth month. (Reuters)
PM Shinzo Abe's cabinet is likely to approve a ¥28tn (US$273bn) stimulus package today, though direct fiscal spending will total only about ¥7tn. (Reuters)
China stocks fell to a near one-month closing low on Monday as investor sentiment was hit by regulators' crackdown on speculation as well as a fresh wave of IPOs. China's securities watchdog has recently tightened rules over hedge funds, limited shadow banking business of mutual fund houses and is drafting rules aimed at curbing money flows from banks into the stock market through wealth management products. (Reuters)
China's manufacturing activity expanded for the first time in 17 months in July as output and new orders increased. The Caixin/Markit Manufacturing PMI rose to 50.6, beating market expectations of 48.7 and up from 48.6 in June. The reading breached the 50-point neutral level separating expansion of activity from contraction for the first time since February 2015. (Reuters)
Commodities
US crude tumbled below US$40 per barrel on Monday for the first time since April, as oil prices settled down nearly 4% on heightened worries of a crude glut despite peak summer fuel demand. US crude futures plumbed US$39.86, its lowest since April 20, before settling at US$40.06, down US$1.54 (-3.7%). Brent crude closed down US$1.39 (-3.2%) at US$42.14 a barrel. (Reuters)
Gold was little changed on Monday as the dollar weakened after investors cut expectations for a US interest rate hike in the near term following much slower-than-expected US economic growth. Spot gold was up 0.2% at US$1,353.29 an ounce. Bullion hit US$1,355.10 on Friday, its highest since July 12. US gold futures for December settled up 0.2% at US$1,359.60 per ounce. (Reuters)
Source: aws.co.th / settrade.com
