It looks like the SET index is waiting for the large institutional fund managers to get back from the beach before it makes a next move.

The SET index was trading sideways above the 1550 level for the week. Four-month chart pattern shows a bearish rising wedge. However, we would not pay much attention on the rising wedge as the SET trade is supported by some encouraging economic news. 

A decline in the 10-year Thailand government bond yield to the level near 52-week low raises some concern as the action means that the pros are taking money off the table and putting it into the bond market. The strategy is known as the “flight-to quality” or “risk off” trade. Just a reminder, government bond yields are good indicators of how strong the stock market is.

A decline in the 10-year Thailand government bond yield could also be due to the “carry trade”. The rising Thai Baht-Euro exchange rate, and widening of the yield spread between the 10-year German Bund (yielding 0.88%) and Thailand government bond (yielding 3.47%), could prompt currency traders to short (sell) the EUR, convert into Thai Baht, and buy the Thailand government bonds with higher yields. 

No one knows with certainty if the THB/EUR exchange rate will continue to move higher or not. In early September, however, the big European and Wall Street institution fund managers ($100+ billion funds) will be back from the beach (vacation). These people, who usually are behind the trading curve (meaning “late”), will decide whether the EUR should be traded next. My bet is that the EUR is heading lower and the SET index is heading higher.