Last week, foreign investors were net sellers of stocks worth about US$2.26 billion in all Asia emerging markets (India, Indonesia, Malaysia, the Philippines, South Korea, Taiwan, Thailand and Vietnam). Taiwan suffered the most with foreign sale of $987 million, followed by South Korea’s $887.8 million and Thailand’s $270.5 million.

Selling spree came after return of emerging market concern due to:

1 Worries over likely acceleration in inflation and current account deficits in emerging-market countries after WTI crude price surged by 12.8 per cent in four consecutive weeks to US$77 per barrel, a 4-year high;

2 US Dollar Index’s appreciation by 1.7 per cent in five straight days and US 10-year bond yield’s sharp rise by 10.5 bps to a 7-year record high of 3.185 per cent from strong US economic figures – ISM, US employment and Fed chairman’s statement;

3 Fed Chairman Jerome Powell’s saying on October 2 surprised emerging markets and strengthened US dollar, stating “Interest rates are still accommodative, but we’re gradually moving to a place where they’ll be neutral,” “We may go past neutral. But we’re a long way from neutral at this point, probably,” and “The practical way we can navigate between moving too fast and moving too slow is to move gradually.”

These concerns will disturb emerging markets consistently in 4Q18 with USD and crude prices as the key impact factors.

If both rise continuously, there could be concerns over attacks on EM currencies again.

Thailand is expected to weather limited impact due to its status as a safe haven. But we need to be careful of market sentiment which could pressure the SET Index.

Other factors to follow-up are: 1) US President Donald Trump’s twitter on the Fed’s US rate hikes and crude price direction; 2) Interview of regional Fed chairmen; and 3) FOMC Minutes which will be released on October 18. Most FOMC members are expected to support gradual US rate hikes. – Prakit Sirivattanaket, Vice President, Kasikorn Securities

VIEW ON PROPERTY

The Bank of Thailand’s planned regulations on property loans will have direct impacts on the property sector, particularly developers who earn a high proportion of their incomes from high-rise units (condominiums) as most of the buyers do so for investment purpose or as a second residential unit, and depend on loan: ANAN and LPN.

The regulations are expected to take effect from January next year.

Property developers selling high-priced residential projects at over Bt10 million/unit usually have customers with strong financial status and most of them pay cash. We expect limited impact on property developers like LH, our top pick. Another top pick QH should not greatly affected as its incomes mainly come from low-rise projects with prices ranging from Bt3-Bt7 million.

The other one is AP which could see limited impact from the BOT regulation. Although AP has high-rise residential projects, a certain portion of its sale comes from foreigners who pay by cash.

Their stock prices have dropped and now is a chance to accumulate these stocks, given their attractive dividend yields. – Research Department, Trinity Securities