SET down as Thai protests, outbreak spook foreign investors
The Stock Exchange of Thailand (SET) Index closed at 1,544.28 on Thursday, down 7.59 points or 0.49 per cent. Transactions totalled THB78.14 billion with an index high of 1,553.90 and a low of 1,543.75.
In the morning session, Krungsri Securities expected the day’s index to fluctuate between 1,540 and 1,560 points after the US Federal Reserve signalled it would taper its quantitative easing programme this year in response to the economic recovery.
Krungsri said the index would come under pressure from the outflow of foreign funds and ongoing anti-government protests in Thailand.
“However, hopes of the lockdown being eased as domestic Covid-19 cases stabilise will help boost the index,” it said.
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The 10 stocks with the highest trade value today were HANA, PSL, KBANK, B, KCE, PTTGC, PTT, TU, CBG and BCH.
Other Asian indices were down with one exception: Japan’s Nikkei Index closed at 27,281.17, down 304.74 points or 1.10 per cent. China’s Shanghai SE Composite Index closed at 3,465.55, down 19.73 points or 0.57 per cent, while the Shenzhen SE Component Index closed at 14,487.36, up 33.25 points or 0.23 per cent. Hong Kong’s Hang Seng Index closed at 25,316.33, down 550.68 points or 2.13 per cent. South Korea’s KOSPI Index closed at 3,097.83, down 61.10 points or 1.93 per cent. Taiwan’s TAIEX closed at 16,375.40, down 450.87 points or 2.68 per cent.
Central bank to test-drive digital currency next year
The Bank of Thailand (BOT) plans to develop and test its Retail Central Bank Digital Currency (Retail CBDC) in a real-life environment in the second quarter of 2022.
The pilot test will initially be conducted on a limited group under the BOT before it is expanded to the public, retail stores,banks and non-banking facilities, said Vachira Arromdee, assistant governor of BOT’s Financial Markets Operations Group.
BOT also released a study on the implications of Retail CBDC on the Thai financial sector as well as results of a public survey on the development of the currency. This study was based on “The Way Forward for Retail Central Bank Digital Currency in Thailand” published on April 2 this year.
The results of the study and feedback from the survey are being used to determine guidelines for the pilot test. The key points are summarized as follows:
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1. Implications of Retail CBDC on the Thai financial sector
Studies show that for the design and development of Retail CBDC to have the maximum potential, the CBDC must not adversely eaffect monetary policy transmission, financial institutions, or overall financial stability.
In this regard, the following characteristics are key: the CBDC shall be cash-like and non-interest-bearing; intermediaries such as financial institutions shall be the distributors of CBDC to the public; and conditions or limits for converting CBDC shall be established.
These guidelines are to ensure that the CBDC does not compete with deposits or cause runs on financial institutions, and preserves the role of intermediaries in collecting deposits and providing credit as well as managing liquidity in the overall financial system.
The BOT predicts that the public’s demand for Retail CBDC will gradually rise over time and that CBDC could become an alternative payment option in the future.
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2. Survey results
Feedback collected via a public survey and focus group discussions show that most respondents agree with the BOT’s approach to Retail CBDC development and view the currency as a beneficial infrastructure open to access and competition, with the potential to foster greater development of a safe financial innovation in the future.
Respondents also agree that the CBDC design guidelines can help mitigate any negative impacts on the Thai financial sector.
Some respondents further advised the BOT to focus on promoting consumers’ knowledge and understanding of the benefits and uses of CBDC, particularly on how it differs from current electronic payment options.
3. Pilot test plans
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Based on the study and survey results, the BOT has established guidelines for the pilot test under two tracks, as follows:
1) Foundation Track: To test and evaluate the usage of CBDC in conducting cash-like activities within a limited scale, such as accepting, converting, or paying for goods and services. This phase of testing is expected to begin in the second quarter of 2022.
2) Innovation Track: To test and evaluate how CBDC can be further developed for innovative use cases, by allowing participation from the private sector and technology developers. The BOT is currently in the process of considering the format and criteria for participation.
The BOT will assess all results and associated risks from the pilot test, to ensure that Retail CBDC is beneficial to the public, business sector, and country as a whole, and does not undermine economic and financial stability in the future.
The price of gold dropped by THB50 in morning trade on Thursday.
AGold Traders Association report at 9.23am said the buying price of a gold bar was THB28,050 per baht weight and selling price THB28,150, while gold ornaments cost THB27,545.72 and THB28,650, respectively.
At close on Wednesday, the buying price of a gold bar was THB28,100 per baht weight and selling price THB28,200, while gold ornaments cost THB27,591.20 and THB28,700, respectively.
The spot gold price on Thursday morning was moving around US$1,781 (THB59,450) per ounce after Comex gold on Wednesday dropped by $3.40 to $1,784.40 per ounce amid a slowdown in trading just before the US Federal Reserve was to reveal results of its Federal Open Market Committee board meeting for July. The New York gold market was also closed for trading prior to the release of the minutes of the key meeting.
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The Hong Kong gold price meanwhile dropped by HK$10 to $16,580 (THB71,034) per tael, the Chinese Gold and Silver Exchange Society reported.
Foreign fund outflows, anti-govt protest expected to constrain SET
The Stock Exchange of Thailand (SET) Index fell by 2.09 points or 0.13 per cent to 1,549.78 on Thursday morning.
Krungsri Securities predicted that the day’s index would fluctuate between 1,540 and 1,560 points after the US Federal Reserve signalled it would reduce its quantitative easing programme this year as the economy is recovering.
It also predicted that the outflow of foreign funds and ongoing anti-government protests in Thailand would pressure the index.
“However, hopes that the lockdown would be eased as domestic Covid-19 cases stabilise would help boost the index,” Krungsri Securities said.
It recommended selective buying of the following companies’ shares as an investment strategy:
▪︎ Hana, KCE, TU, CPF, GFPT, Asian, EPG and NER, which benefit from a weakening baht.
▪︎ PSL, TTA and RCL, which would benefit from a rise in the freight rate.
▪︎ AOT, CPN, CRC, HMPro, AAV, BA, Mint, Centel, Amata and WHA, which would benefit from the country reopening.
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The SET Index closed at 1,551.87 on Wednesday, up 7.65 points or 0.50 per cent. Transactions totalled THB81.90 billion with an index high of 1,557.08 and a low of 1,545.33.
The baht opened at 33.32 to the US dollar on Thursday, weakening from Wednesday’s closing rate of 33.30.
The Thai currency is likely to move between 33.25 and 33.40 during the day, Krungthai Bank market strategist Poon Panichpibool said.
The baht could be volatile as exporters continue to sell the dollar while investors short-sell the Thai currency as the Covid-19 situation has almost reached its worst point yet.
Poon said the baht was likely to fluctuate and weaken due to the Covid-19 crisis and the rising dollar, amid demand for safe-haven assets and the Federal Reserve’s decision to reduce quantitative easing this year.
He expected the key resistance level would be between 33.40 and 33.50 to the US dollar as exporters are waiting to offload the dollar.
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Meanwhile, he said, the key support level would be around 33.00 to the dollar, which is the price range importers are waiting for before they make purchases.
Oil extends slump after surprise jump in U.S gasoline stockpiles
Crude futures extended the longest slide in five months after a surprise increase in U.S. gasoline inventories that signaled fuel demand may be under threat as Covid-19s delta variant menaces the economic recovery.
West Texas Intermediate dropped by almost 1% on Wednesday, the fifth straight daily decline. Domestic gasoline stockpiles inventories climbed by 696,000 barrels, the first increase in more than a month, according to data released by the Energy Information Administration on Wednesday. Meanwhile, crude stockpiles declined by a larger-than-forecast 3.23 million barrels.
“The surprise gasoline build is certainly weighing on the market,” said Matt Sallee, who helps manage about $8 billion at Tortoise.
The report followed an industry-funded American Petroleum Institute tally on Tuesday that saw a 1.16-million decline in crude inventories with supplies at the Cushing, Oklahoma, hub dropping by 1.74 million. The group also pegged the drop in gasoline stockpiles at almost 2 million.
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Crude surged during the first half of the year as vaccination rollouts increased confidence about the pace of economic recovery. But the rally was knocked off course in recent weeks amid signals in the U.S. and China suggesting the spread of Covid-19’s delta variant may be hurting energy demand.
Despite the daily slump, there were positive signs emerging from the shape of the oil futures curve. Brent’s nearest timespread widened to a backwardation of 48 cents Wednesday. That structure – where the nearest contracts are more expensive than those at later dates – has started to indicate a stronger market in recent days, after slumping to an 11-week low on Monday.
WTI for September delivery rose 0.2% to $66.75 a barrel at 11:33 a.m. in New York. Brent for October settlement gained 18 cents to $69.21 a barrel.
There were also more positive signs emerging from the shape of the oil futures curve. Brent’s nearest timespread widened to a backwardation of 48 cents Wednesday. That structure – where the nearest contracts are more expensive than those at later dates – has started to indicate a stronger market in recent days, after slumping to an 11-week low on Monday.
“The $100-a-barrel predictions we saw earlier in the summer were rendered completely inaccurate as Asian demand continues to be muted,” said Jay Hatfield, chief executive officer of Infrastructure Capital Management. “Delta notwithstanding, an overall stockpile decline indicates some positive long-term fundamentals for oil.”
Published : August 19, 2021
By : Syndication Washington Post, Bloomberg · Ari Hawkins
Japan faster vaccine rollout is good news for the economy
Japan vaccine drive was slow to get going, but its on track now to beat the current U.S. inoculation rate within weeks — good news for an economy thats endured one virus emergency after another.
If the current pace is sustained, Japan will have 51% of its people fully vaccinated by Sept. 12. As soon as Sunday, the country should hit the 40% target that Prime Minister Yoshihide Suga set for month’s end, meeting a key milestone ahead of schedule amid widespread criticism Japan hasn’t done enough to rein in Covid-19 cases.
With vaccines being delivered more quickly than expected, an economic recovery seen accelerating mid-autumn could gather more momentum, say economists including Yuichi Kodama at Meiji Yasuda Research Institute. Much also depends on whether Japan can now bring a record wave of the virus to heel and scale back emergency guidelines.
“Vaccinations should have a big impact,” Kodama said. “Since case numbers should decline as more people get inoculated, we’re likely to see various restrictions lifted. And once that happens we should see consumer spending rebound.”
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Japan managed to avoid a recession last quarter largely because shoppers shrugged off government warnings on the virus, but activity levels in Tokyo are still far lower than in New York and London, according to Apple Mobility Trends data.
A decision Tuesday to widen the latest state of emergency to more prefectures and keep it in place longer could cause consumers to retrench. Japan yesterday found about 20,000 new virus cases and recorded 47 more Covid-19 deaths, bringing the total to almost 15,500.
Suga on Tuesday said he expects 60% of the population to be fully vaccinated by the end of next month and plans to distribute enough doses to inoculate 80% of eligible people by early October. The vast majority of Japanese seniors have already gotten all their shots, but the overall rate is only about 38%.
Vaccination and growth rates are linked, which is a big reason the International Monetary Fund last month forecast 7% growth for the U.S. and U.K., where more than half the people are fully vaccinated, compared with a 2.8% expansion for Japan.
Conditions could improve more quickly than expected if Japan can keep delivering around 1.4 million jabs a day, the average over the last month, according to Bloomberg calculations based on government figures for completed vaccinations.
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“The key is to suppress the rate of contagion and keep the vaccine progress going,” said economist Keiji Kanda at Daiwa Institute of Research. “We’d be able to get the service sector back on the recovery path.”
The spread of the delta variant makes the recovery path harder, though, according to Haruka Sakamoto, a public health researcher at the University of Tokyo.
“The delta variant can cause infections even after two doses of vaccine,” Sakamoto said. “The government’s expert panel has been discussing the need for masks and social distancing even after 70% of the population has been vaccinated.”
Keeping the current pace also isn’t a given, according to Kenji Shibuya, Director of the Soma COVID Vaccination Medical Center in Fukushima and a former senior scientist at the World Health Organization.
Japan is nearing an inoculation rate where other countries have started to hit a wall, supply bottlenecks could slow deliveries, and the drive could start to meet more resistance from young people, who are less scared of the virus.
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“They don’t think Covid is a serious disease,” Shibuya said. “There should be some social incentive for them to get vaccinated.”
Published : August 19, 2021
By : Syndication Washington Post, Bloomberg · Yuko Takeo, Paul Jackson
Stocks slid as the Federal Reserve signaled that a decision on a reduction of its bond-buying program could happen in 2021. Treasurys and the dollar were little changed.
The S&P 500 extended losses into a second day after minutes of the Federal Open Market Committee’s July gathering said most officials agreed last month they could start slowing the pace of asset purchases later this year. While the record shows they don’t yet have agreement on the timing or pace of tapering, most had reached consensus on keeping the composition of any reduction in Treasury and mortgage-backed securities purchases proportional.
“The minutes reflect a Fed that is prepared to accelerate its taper timeline to perhaps the next few months,” said Sean Bandazian, an investment analyst at Cornerstone Wealth. “There is still reason to believe we will see volatility throughout areas of the market with high sensitivity to interest rates.”
Fed Chair Jerome Powell will have an opportunity next week to delve into the policy and economic outlook, during the Jackson Hole symposium — the central bank’s most prominent annual conference.
Earlier Wednesday, St. Louis Fed President James Bullard said he would like to see the tapering of the asset-purchase program done by the first quarter of 2022. Several other officials, including Robert Kaplan of Dallas and Esther George of Kansas City, have urged the central bank to begin removing stimulus as soon as the September meeting. Chair Powell and Vice Chairman Richard Clarida have suggested they would like to see further progress before considering a move to taper.
In late trading, Robinhood Markets Inc. — the pioneer of commission-free trading apps — sank after reporting its first results since going public.
Elsewhere, oil dropped below $65 a barrel for the first time since May 24 as new waves of covid-19 threatened fuel demand.
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Some of the main moves in markets:
Stocks
– The S&P 500 fell 1.1% as of 4 p.m. EDT
– The Nasdaq 100 fell 1%
– The Dow Jones industrial average fell 1.1%
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– The MSCI World index fell 0.6%
Currencies
– The Bloomberg Dollar Spot Index was little changed
– The euro was unchanged at $1.1710
– The British pound rose 0.1% to $1.3756
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– The Japanese yen fell 0.2% to 109.80 per dollar
Bonds
– The yield on 10-year Treasurys was little changed at 1.27%
– Germany’s 10-year yield declined one basis point to -0.48%
– Britain’s 10-year yield was little changed at 0.57%
Commodities
– West Texas Intermediate crude fell 2.7% to $64.78 a barrel
– Gold futures were little changed
Published : August 19, 2021
By : Syndication Washington Post, Bloomberg · Rita Nazareth, Lu Wang
Weighing inflation and the labor market, Fed debates when to scale back support for the markets
Federal Reserve officials are sharpening their discussions for when to start scaling back support for the markets, reflecting optimism that the labor market and broader economic recovery will continue gaining steam.
For months, economists and Wall Street have been eager for any signs about when the Fed will begin to “taper” or slow down its $120 billion a month in asset purchases. Fed leaders have said they need to see “substantial further progress” on inflation and job growth before slowing their sprawling bond-buying program, which helps stimulate the economy and makes borrowing easier by holding down long-term rates.
Fed Chair Jerome H. Powell has repeatedly said that there will be plenty of warning before the Fed starts to unwind its asset purchases. Minutes released Wednesday from the Fed’s July policy meeting offered some insight into policymakers’ thinking.
Overall, most Fed officials said they felt that, as long as the economy kept growing as expected, “it could be appropriate to start reducing the pace of asset purchases this year,” according to the meeting minutes.
Some Fed officials believed it would be “prudent” for the Fed to get ready to scale back the purchases “relatively soon,” especially if high inflation proves “to be more persistent than they had anticipated.”
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Still, others emphasized that there was “considerable uncertainty” around the labor market, supply chain issues, and the long-term influence the pandemic will have on the economy.
“Those participants stressed that the Committee should be patient in assessing progress toward its goals and in announcing changes to its plans on asset purchases,” the minutes stated.
The meeting minutes don’t name any Fed officials. But since the Fed’s July meeting, a growing number of policymakers have given their own opinions about when the central bank should start dialing back the asset purchases. Some have said the drawdown could begin this fall, thanks in part to encouraging job gains from June and July.
“We’ve had two months in a row where we’ve created more than 900,000 jobs and the unemployment rate dropped by half a% to 5.4 percent,” Boston Federal Reserve Bank President Eric Rosengren told CNBC on Monday. “If we get another strong labor market report, I think that I would be supportive of announcing in September that we are ready to start the taper program.”
As a group, the Fed’s policy board will pick up their discussions at their next meeting in September. But in the meantime, much depends on the coronavirus public health crisis – and any repercussions for the economic recovery.
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The spread of the delta variant has started a new phase of the pandemic and prompted some parts of the country to reimpose mask mandates and other restrictions. Consumer confidence plunged in the first half of August as the delta variant spread, according to a survey released last week by the University of Michigan. It’s too soon to tell whether hiring or consumer spending will suffer as a result.
Meanwhile, prices are on the rise, and they’re expected to keep climbing until supply chains can catch up with consumer demand. While Fed leaders have been waiting to see progress in the job market, some at the Fed argue that bar has already been met when it comes to inflation. (The Fed is responsible for both stable prices and maximum employment.)
Some Fed leaders have said that if the taper starts in the next few months, it could be wrapped up by next summer. That timeline suggests that Fed leaders could be ready to raise interest rates in late 2022 or 2023, since the taper would probably be complete before rates rise. (The Fed slashed rates to near zero at the beginning of the pandemic and are nowhere near considering a rate increase.)
There’s also open debate on how the Fed should structure and pace the taper. The monthly asset purchases are made up of $80 billion in Treasury securities and $40 billion in mortgage-backed securities. Surging home prices have some economists arguing that the Fed should reduce its purchases of mortgage-backed securities more quickly.
Others disagree, saying the mortgage securities aren’t meaningfully driving the hot housing market and that the two categories of asset purchases should be cut back at the same rate.
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“I think that Treasury and [mortgage-backed security] purchases affect financial conditions in very similar ways,” Powell said last month. “There may be modest differences in terms of contribution to housing prices. But it’s not something that’s big.”
Surge in Covid-19 cases will pull down earnings of listed firms, analysts predict
The turnover of Stock Exchange of Thailand (SET)-listed companies is expected to drop by about 40 per cent in the second half of this year from the first half due to the surge in Covid-19 cases, according to Asia Plus Securities (APS).
Therdsak Thaveeteeratham, a senior analyst with APS, said the second-quarter net profit of 501 listed companies, accounting for 96 per cent of market capitalisation, stood at 269.18 billion baht, up 116 per cent compared to 124.27 billion baht in the same period last year.
He explained that the second-quarter net profit was higher than expected due to large companies’ extra profit and low-profit margin in the previous year.
“Listed companies’ first-quarter net profit of 258.03 billion baht combined with that of the second quarter adds up to 527.21 billion baht for the first half of this year,” he said.
“Based on this, APS expects listed companies’ net profit for the entire year to stand at 845 billion baht or 73.60 baht per share.”
However, he believes listed firms’ turnover in the second half will drop by about 40 per cent compared to the first half if daily Covid-19 infections continue going beyond 20,000.
He said other securities companies are also expected to cut their forecast because the Bloomberg Consensus’ prediction of per-share earnings at 85.43 baht was too high.
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