THAILAND SET

SET Index Advanced For The Second Straight Week As Thai Institutional Investors Might Have Already Started Window Dressing

Witawat (Ed) Wijaranakula, Ph.D.
Fri Mar 24, 2017

Related Ticker: iShares MSCI Thailand Capped ETF (NYSEARCA:THD)

The SET index gained another 1.06% for the week, to close on Friday at 1,573.51, led by big cap favorite stocks, including Charoen Pokphand Foods PCL (SET:CPF), PTT PCL (SET:PTT), Airports of Thailand PCL (SET:AOT), and PTT Exploration and Production PCL (SET:PTTEP), up 7.21%, 3.03%, 2.58% and 2.5%, respectively, despite the strengthening baht and tumbling crude oil prices. 

The index broke out the 1,572 resistance level and is bumping into the symmetrical triangle chart pattern trendline resistance, but could break out of that if institutional investors keep on buying, especially at the end of the quarter, known as window dressing. According to the SET market data, retail investors continue to be net sellers while Thai institutional investors are net buyers.

The USD/THB lost another 0.83% for the week to close on Friday at 34.55, after retesting the 34.50 level. The U.S. Dollar index (DXY), essentially the USD/EUR exchange rate, closed at 99.44 on Friday, down another 0.67% for the week. The markets are now split as to whether President Trump will still be able to pass any of his bills, including those for tax reform and infrastructure, after Speaker of the U.S. House of Representatives Paul Ryan's health care bill, backed by the Trump administration, was pulled on Friday. Concerns were already mounting last week that Trumpís massive spending cuts and the Fed rate hike will put more stresses on the U.S. economy. 

The yield of Thailand 10-year government bonds was unchanged for the week, at 2.78% on Friday. The yield spread between the Thailand 10-year bond and the benchmark U.S. 10-year Treasury Note, yielding at 2.4% on Friday, widened to 0.38 percentage points. The spot gold price jumped another 1.48% for the week, to close at U.S. $1,248.50 per ounce on Friday, while the Japanese yen appreciated 1.27% against the U.S. dollar.

The Commerce Ministry of Thailand said on Wednesday that Thai February exports fell 2.8% year-on-year, less than the forecast of 4% but imports surged 20.4% from a year earlier, missing economists' forecast for a 12.6% rise. The trade surplus came in at US$1.61 billion, also missing the forecast of US$2.4 billion. The strong baht could have contributed to the surge in February imports but it seems not to have hurt Thai exports yet.

The WTI crude spot price tumbled 2.72% for the week, closing at $47.97 per barrel on Friday, while the Brent crude spot price was down 1.24% for the week to close at $51.12 per barrel, after a bearish EIA weekly report. WTI crude prices dipped below the 200-day SMA on Tuesday following a research note from Goldman Sachs saying that 2017-19 is likely to see the largest increase in history for mega projects' production, as the record 2011-13 capex commitment yields fruit, meaning a possible record for non-OPEC production growth in 2018. 

The crude price got some support on Thursday after a Reuters report saying that in February, the Saudis cut about 300,000 barrels per day, or bpd, of crude oil exports to the U.S. in line with OPEC's agreement to reduce supply. TransCanada Corp. (NYSE:TRP) announced on Friday that the U.S. Department of State signed and issued a Presidential Permit to construct the Keystone XL Pipeline, which would bring more than 800,000 bpd of heavy crude from Canada's oil sands in Alberta into Nebraska.

Short positions in WTI crude oil futures contracts held by producers or merchants are on the rise again and totaled more than 677,811 contracts as of March 21, 2017, about 25,619 contracts away from a record high, according to data from the U.S. Commodity Futures Trading Commission, or CFTC. Crude oil producers could take short hedge positions to lock in a future selling price to protect against a falling crude oil price. Some banks also require producers to hedge against future price risks as a condition for lending.

The EIA weekly U.S. oil inventory report on Wednesday showed that domestic crude supplies increased by 4.95 million barrels to an all-time high of 533.11 million barrels, excluding the Strategic Petroleum Reserve, in the week ending March 17, compared to the S&P Global Platts forecast for a stockpile increase of 2 million barrels. The American Petroleum Institute, or API, inventory data on Tuesday showed a U.S. crude inventory increase of 4.5 million barrels. 

Separately, the EIA said the weekly U.S. crude oil production increased 20,000 bpd for the week ending March 17, to 9.129 million bpd. U.S. crude oil output increased 112,000 bpd to an average of 9.109 million bpd in March, compared to a February average of 8.997 million bpd. Output has fallen about 5.12% from the peak level of 9.60 million bpd in June 2015. Houston-based oilfield services company Baker Hughes Inc. said on Friday that the U.S. oil rig count rose another 21 to 652, compared to 316, when the rig count hit the low on June 6, 2016.

THAILAND SET INVESTMENT RESEARCH

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