Take a breather

Expect the SET to trade in a tight range, with positive bias. While weak US non-farm productivity data reduced expectations for the US Federal Reserve to hike rates soon, it also suggests US corporate profits may continue to decline despite strong US non-farm payrolls last week. However, a hunt for yield in Asia should continue which should support equities, particularly those with high dividend yields. Locally, the releases of 2Q16 earnings of listed companies in our universe so far have been in line or better than our expectations, which is very encouraging. Meanwhile, the University of the Thai Chamber of Commerce (UTCC) revised up its GDP forecast, reflecting another more optimistic view towards the economy.

Local issue 

UTCC projects 3.3% economic growth. The University of the Thai Chamber of Commerce (UTCC) revised up its forecast for FY16 GDP growth to 3.3%, from prior 3%. The move was made as the economy has shown positive signs, thanks to accelerated investment by the government and political stability after the referendum. UTTC also expects 2Q16 economic growth to surpass 1Q16’s 3.2%, boosted by various stimulus measures and a robust tourism industry. (Bangkok Post)

Comment: The revised figure somewhat indicates that the outlook in the remaining periods looks more promising and the country’s economy is recovering.

New tax incentives for SMEs approved. The cabinet yesterday approved tax incentives for owner-operated SMEs whom register as juristic persons and pay the correct amount of tax. Such tax schemes include a corporate tax deduction of 60% of expenses from 1 Jan 2017, a reduction of specific business tax to 0.01% from 2%, exemptions for corporate income tax and VAT, and a reduction of property transfer fees to 0.01% from 2%. The incentives will be effective until 31 Dec 2017. (Bangkok Post)

Low-income mortgages mostly rejected in 1H16. The Housing Finance Association said fully half of mortgage applications were rejected during the first six months of the year, up marginally from the first six months of 2015. Low-income earners, in particular, are struggling to obtain housing loans under weak economic conditions. (Bangkok Post)

Comment: With mitigation of drought effect and economic recovery, along with various supporting schemes from the government, we expect to see an improvement in 2H16.

BCP (Bt35.75; BUY; AWS TP Bt40.50) reported a 2Q16 net profit of Bt2.4bn, surging from a low-base in 1Q16 of Bt47mn but declined 13% YoY. (SET/Bloomberg)

Comment: The result was in line with our estimate at Bt2.2bn as well as the Bloomberg consensus estimate at Bt2.3bn. We maintain BUY recommendation and TP. Please see our report today.

Global issues 

Longer-dated US Treasury prices edged higher on Tuesday as a weak report on US non-farm productivity suggested the economy may not be growing as quickly as anticipated, prompting investors to cut long-term inflation expectations. Benchmark 10-year Treasury notes rose 6/32 in price to yield 1.588%. The 30-year bond gained 21/32 in price to yield 2.286%. (Reuters)

The dollar weakened on Tuesday on a downbeat US non-farm productivity report. The dollar index fell 0.24% to 96.174. The greenback was 0.53% weaker against the yen at ¥101.88. The British pound fell for the fifth day in a row on Tuesday after a BOE policymaker said that more QE was probably necessary if Britain's economic decline worsens. (Reuters)

USA
Wall Street shares hovered near record highs on Tuesday as weak oil prices offset gains in healthcare and technology stocks. The S&P500 and Nasdaq edged up to all-time highs before a decline in oil dulled the gains. (Reuters)

US worker productivity fell for the third straight quarter in 2Q16, suggesting corporate profits may continue to decline and wage growth may remain sluggish. Worker productivity, which measures hourly output per worker, dropped at a 0.5% annual rate in 2Q16, extending the longest decline since 1979. Productivity fell at an unrevised 0.6% rate in 1Q16. In 2Q16, productivity decreased at a 0.4% rate YoY, the fastest pace of decline in three years. (Reuters)

Next data in focus: US corporate profits declined 5.3% in 2015 due to the impact of a strong US dollar and lower oil prices, before seeing an 8.1% rebound in 1Q16 according to government data. Corporate profits data for 2Q16 will be published later this month. US GDP rose at a 1.2% annual rate in 2Q16 following a 0.8% rise in 1Q16. The estimate for 2Q16 GDP growth could be revised slightly up after a report on Tuesday showed wholesale inventories increased 0.3% in June. (Reuters)

Europe
European shares rose strongly on Tuesday, rising for a fifth straight session, helped by well-received earnings reports from reinsurer Munich Re and telecoms group Altice. (Reuters) 

Asia

Japan's core machinery orders surprisingly rose 8.3% MoM in June in a sign that capital expenditure is starting to recover. The rise in core orders, which are regarded as an indicator of capital spending in the coming six to nine months, compared with economists' estimate of a 3.1% increase. Year-over-year, the core orders fell 0.9% in June, versus the estimate of a 4.2% decline. Manufacturers surveyed by the Cabinet Office forecast that core orders will rise 5.2% in 3Q16 after falling 9.2% in 2Q16. (Reuters)

China's factory price deflation moderated further in July, with prices falling at their slowest pace in two years, taking pressure off the central bank to cut rates as policymakers turn their focus to structural reforms and ballooning credit. The PPI fell 1.7% YoY in July, smaller than June's 2.6% decline. (Reuters)

Chinese CPI rose 1.8% YoY in July, compared with a 1.9% increase in June, and matching this year's low hit in January. Economists had expected a 1.8% gain. Consumer inflation has remained well below China's official target of around 3% in 2016. (Reuters)

Commodities
Oil prices fell 1% on Tuesday, extending losses in post-settlement trade after preliminary data showed a surprise US crude stockpile build last week. The market also lost the previous day's upward momentum as speculation fizzled that oil producers would embark on talks on price cooperation. After the market closed, API reported US crude stockpiles rose by 2.1mn barrels last week. Analysts had expected a 1.0mn-barrel drawdown. WTI futures settled down 25 cents (-0.6%) at US$42.77 a barrel. Brent crude settled down 41 cents (-0.9%) at US$44.98 a barrel. It slid to US$44.76 after the API numbers. (Reuters)

The price of gold rose on Tuesday as the dollar edged lower against a basket of currencies and concerns over the global economic outlook trumped some expectations that the Fed could raise interest rates this year. Spot gold was up 0.5% at US$1,341.71 an ounce. US gold futures for December delivery were up US$6.50 an ounce at US$1,347.80. (Reuters)

Source: aws.co.th / settrade.com