Thai shares look set to start the week with gains trailing global bourses after disappointing US GDP data released on Friday cut the chance of a Fed rate hike in the next few months and eases fears of capital flow out of emerging markets. Although BOJ’s less-than-expected stimulus steps underwhelmed investors, hope remains for PM Abe’s hefty fiscal expansions. Locally, BOT’s upbeat economic growth projection in 2Q16 is particularly encouraging. The government’s new round of renewable energy bids adds to a positive tone.
Local issue
BoT upbeat on 2Q16 growth. A senior officer of BoT said overall economic growth in 2Q16 is expected to surpass 3.2% in 1Q16. The growth should be mainly from domestic demand factors, especially public spending, tourism, and private consumption. NESDB will announce the country’s Apr-Jun economic reading on 15 Aug. (Bangkok Post)
Comment: This somewhat signals Thailand’s economy is recovering and the public spending has been bearing fruits as the state expected.
Government to open renewable power bids. The Energy Regulatory Commission (ERC) announced that it would open bids for investors to develop renewable power plants with a combined generating capacity of 1,000 MW, total worth Bt60bn, with bidding to take place by year-end. The projects include 1) 36 MW biomass power plants in the three southernmost provinces, 2) 400 MW biomass and biogas power plants nationwide, 3) 400 MW solar farms under the state agencies investment, 4) combined 50 MW opened for industrial waste power, and 5) combined 130 MW of power produced from metropolitan waste. (Bangkok Post)
Comment: Firms who should benefit include 1) EPC contractors: GUNKUL (Bt5.50; BUY; AWS TP Bt6.51), DEMCO, TPOLY 2) potential power producers: TPCH (Bt18.50; BUY; AWS TP Bt24.16), BWG.
Hopes for Thai fashion products. According to the Thailand Development Research Institute (TDRI), the export value of Thai fashion products is expected to reach Bt1tn a year in the next five years as the country remains on course to compete globally. Such a target is well above the current export value of Bt620bn for fashion goods. TDRI’s president said Thailand’s fashion industry should penetrate more into Asean countries where their economies are on the rise. (Bangkok Post)
Global issues
Dismal US GDP data cuts Fed rate hike bets: Fed funds rate futures are pricing in only around a 30% chance of a rate hike by December, compared to about 50% early last week, after disappointing 2Q16 US economic growth data. (Reuters)
Dismal US GDP data cuts Fed rate hike bets: Fed funds rate futures are pricing in only around a 30% chance of a rate hike by December, compared to about 50% early last week, after disappointing 2Q16 US economic growth data. (Reuters)
US Treasury prices jumped on Friday as disappointing US GDP caused traders to scale back expectations for a Fed rate hike in the next few months. Benchmark 10-year Treasury notes were up 17/32 in price for a yield of 1.451%, the lowest since July 12. The two-year Treasury yield was down 5.5 percentage points at 0.663%, its lowest in over a week. (Reuters)
The dollar dropped on Friday on weak 2Q16 US GDP data, while the Japanese yen soared after the BOJ's stimulus plans underwhelmed investors. The dollar index dropped 1.22% to 96.566, the lowest level since 5 Jul. (Reuters)
USA
Wall Street shares ended mixed on Friday, with the DJIA falling but the S&P500 and Nasdaq rising, as gains in tech heavyweights Alphabet and Amazon offset losses in energy shares. Alphabet, the internet company and also a parent company of Google, posted strong quarterly revenue growth. Meanwhile online retailer Amazon.com gave an upbeat forecast for 2Q16. (Reuters)
Aggregate 2Q16 earnings of S&P500 companies are now expected to fall 3.7%, worse than a 2.8% decline predicted on Thursday, according to Thomson Reuters I/B/E/S. (Reuters)
The US economy grew far less than expected in 2Q16 as inventory investment fell for the first time in nearly five years, but a surge in consumer spending pointed to underlying strength. US GDP in 2Q16 grew at a 1.2% rate, coming in below expectations for a rise of 2.6%. 1Q16 GDP growth had been revised down to 0.8% from 1.4% growth in previous report. Excluding inventories, the economy grew at a 2.4% rate. Inventory accumulation by businesses fell by US$8.1bn in 2Q16, the first drop since 3Q11, down from a US$40.7bn increase in 1Q16. As a result, inventory investment subtracted 1.16 percentage points from GDP growth in 2Q16 (Reuters)
US consumer spending surged: Consumer spending, which makes up more than two-thirds of US economic activity, increased at a 4.2% rate - the fastest since 4Q14 and accounting for the rise in GDP growth in 2Q16. (Reuters)
Europe
European shares rose on Friday helped by some encouraging company updates and financial stocks before the release later in the day of the results of Europe-wide stress tests. (Reuters)
EU banks are broadly resilient to stress conditions in 2016: The results of the 2016 health check of 51 banks across the EU were released by the European Banking Authority (EBA) on Friday. Moody's says EU banks are broadly resilient to EBA's severe scenario in 2016 stress tests, marking a significant improvement upon the results of the EBA's test in 2014. (Reuters)
Asia
Japanese household spending fell 2.2% YoY in June in price-adjusted real terms, government data showed on Friday. That compared with the median forecast for a 0.3% decline. (Reuters)
Japanese household spending fell 2.2% YoY in June in price-adjusted real terms, government data showed on Friday. That compared with the median forecast for a 0.3% decline. (Reuters)
BOJ disappoints: The BOJ announced a modest increase in purchases of ETFs on Friday, but maintained its base money target at ¥80tn (US$775bn) as well as the pace of purchases for other assets including Japanese government bonds. The BOJ also kept negative interest rates unchanged at minus 0.1%. (Reuters)
Activity in China's manufacturing sector unexpectedly shrank slightly in July from the previous month, an official survey showed on Monday. The official PMI stood at 49.9 in July, compared with the previous month's reading of 50 and just below the 50-point mark that separates growth from contraction on a monthly basis. Analysts polled by Reuters predicted a reading of 50.0. (Reuters)
Commodities
Oil prices steadied on Friday after touching three-month lows during a week-long selloff fueled by a persistent global supply glut, bringing the monthly decline to nearly 15%, the biggest monthly loss in a year for US crude. Brent October contract rose 30 cents to settle at US$43.53. US crude futures rose 46 cents (+1.0%) to settle at US$41.60 a barrel. (Reuters)
Gold rose to its highest level in nearly three weeks on Friday after much slower-than-expected US economic growth weighed on the dollar, and was on track for a second monthly gain in a row. Spot gold was up 1.4% at US$1,353.44. US gold settled up 1.3% at US$1,349 per ounce. (Reuters)
Source: aws.co.th / settrade.com
