The Thailand SET began a sell-off on Wednesday after consolidating at around the 1,570 level earlier in the week after the Commerce Ministry said that Thai exports are expected to grow only about 1% this year, and not the 4% previously forecasted. This came on the heels of the announcement on Tuesday by the director of Macroeconomic Policy, Bank of Thailand (BOT), Don Nakornthab, that Thailand's economy likely contracted in the first quarter, from the previous three months, but growth is expected to return in the April-June quarter. 

The National Economic and Social Development Board (NESDB) is scheduled to announce Thailand's first-quarter GDP figures on May 18. Growth in the fourth quarter was 2.3% year-on-year, and 1.7% quarter-on-quarter on a seasonally adjusted basis.

Despite the early sell-off and some mixed earnings results from the 10 listed banks, the Thailand SET still managed to bounce back on Friday to close at 1,555.46, down 0.73% for the week, but up 3.86% year-to-date. Siam Commercial Bank's [TH:SCB] first quarter net profit was flat but beat expectations, while Kasikornbank’s [TH:KBNK] net profit rose 3.87% from a year earlier. Banks are seeing a fall in lending and non-performing loans (NPLs) are on the rise.

The USD/THD exchange rate gained 0.7% from last week to close at 32.577 baht per dollar, while the 10-year Thailand Government bond yield tumbled 5.26% to an intraday low of 2.52% on Thursday, before bouncing back to close at 2.57% on Friday, down 3.38% for the week. One may want to pay attention to this bond yield red flag, as the 10-year Thailand Government bond yield just hit a new 52-week low on Thursday. 

From a historical perspective, the 10-year Thailand Government bond yielded as low as 2.41% on December 18, 2008 when Prime Minister Abhisit Vejjajiva was sworn-in as Thailand's 27th prime minister. The sinking bond yield could be a sign of a flight-to-safety bid, or speculation about more rate cuts by the BOT. 

The data from the BOT showed that capital inflows into the Thailand bond market from April 1-16 totaled U.S. $492 million, while the equities market registered inflows worth U.S. $204 million from April 1-20, as reported by the Bangkok Post. Thailand government bonds are still attractive as about U.S. $3.5 trillion worth of euro-zone government bonds and Japanese bonds, with maturities longer than a year, are trading with negative nominal yields.

From our technical viewpoint, a potential “three inside up” candlestick formation which signals a trend-reversal, is now emerging. The first long bearish candlestick and second candlestick, which goes all the way up to the midpoint of the first candlestick, are in place. To confirm the “three inside up” candlestick formation, the third candlestick needs to close above the first candlestick’s high or 1,562.32.

The 1,600 level remains the near-term projected price after the falling wedge breakout, determined by adding the width at the top of the pattern to the point of breakout. Let’s hope that there is no rising wedge breakdown event as the Thailand SET may have to head back to revisit the 1,505 and 1,491 levels.